After the Bell: The Harvard report on SA, and the flickering hope of being surprised

What is the value of an academic study that tells you what you already know? This was my first, and rather unkind, reaction to the Harvard Growth Lab’s most recent report on South Africa.  

The report is an extensive and detailed look at SA’s problems, compiled with contributions from many of the 50 employees at the Growth Lab, headed by perhaps the most respected development academic out there, Ricardo Hausmann. The report is about 270 pages long and is a summary of nine academic papers based on two years of research. It’s acute in its observations and its proposed solutions are profound. 

The problem is that at a certain point when the reasons for economic underperformance become especially horrible, isolating the key issues becomes something of an exercise in stating the bleeding obvious. And South Africa is well into that period.  

For example, the report focuses on two main issues: state capacity and spatial exclusion. I’ll come back to the spatial exclusion issue, which is very interesting, but state capacity is at the heart of the report. The paper finds that perhaps the two most beloved programmes of the government are the two biggest problems. No surprise there. 

So, just take a guess what those are. A wild guess. Go on. I’m betting most independent-minded South Africans would get there in one: tenderpreneurs and cadre deployment. These two pillars of ANC policy are the key problems resulting in collapsing state capacity, which is itself the “predominant driver of SA’s weakening economic performance and is at the heart of intensifying macroeconomic stress”.  

I think there is value in this conclusion, even though it’s so patently transparent, for several reasons. First, it’s useful that the criticism comes from outside the South African political system because it is a bit less easy for the ANC to pin on an “agenda” label and toss it under the mat.  

Second, it’s important that it comes from experts in development who can make interesting comparisons with what other countries facing similar issues have done — for example, electricity generation in SA and Chile.  

For decades, Chile relied on gas piped from Argentina for its electricity supply but one of Argentina’s ongoing economic crises led to the supply suddenly being cut off. Chile responded by liberalising its electricity market, the opposite of SA’s decision to maintain government control of electricity supply and commission huge new coal-fired plants.  

By encouraging private sector investment in the sector and allowing shortages to be addressed through price movements rather than supply disruption, the report concludes, “Chile was able to resolve these challenges permanently in less than five years while avoiding blackouts, South Africa has faced severe load shedding and continues to see the crisis worsen after more than 15 years.” 

The report says “preferential procurement” has been a critical component of state collapse in the electricity system and at municipal government level. Amen. It cites an IMF report that preferential procurement raises government costs for goods and services by 20% — 3% of GDP — and has expanded the opportunities for patronage. 

The “tenderpreneur economy”, it says, to the surprise of precisely nobody who has been paying attention, has benefitted “an exceedingly narrow few at the expense of the rest of society”. It should be scrapped for state-owned enterprises, the report says. 

As for cadre deployment, the report is much more unequivocal, if that’s possible. 

“The deeper causes of the crisis can be traced to political gridlock, ideological choices, overburdening through preferential procurement rules, and political patronage,” it says. 

“Building up and protecting capacity entails moving away from cadre deployment and replacing this with a different organising principle. An example would be broader civil service reform that changes the appointment of civil servants especially for more technical positions into a more merit-based system rather than one that is overly influenced by politics.” 

Good enough, but in the meantime, what happens to all the ANC’s incompetent and destructive deployees? To this much more intractable issue, the report doesn’t have immediate answers, presumably because those answers would be even more unpalatable than the criticism placed on record already. 

What is interesting is how the report links together the fiscal crisis with the gradual and creeping problem of state collapse. They are of course interwoven, but it’s refreshing to have someone demonstrate how closely linked the two are.   

So, what will the government do? Will it take the report to heart and change its approach? Will we see a new dawn? My guess is absolutely not, but one lives in the flickering hope of being surprised. DM