Comment 24 August 2014 Progress by Cees Bruggemans words 1470 Progress can come in many guises and isnt always immediately recognized as such. South Africa has a few such contradictions today in its very complex make-up. A traditional sense of progress would be to be able to report growing levels of school attendance as percentage of the school-going age population, along with rising levels of school achievement (other than title inflation). Along with a fast growing economy, in terms of investment made, it would show evidence of high job creation and new labour absorption. Another metric would be rising levels of applied knowledge translated into higher labour productivity. This would primarily reflect improving technology, but also improving infrastructure and social services easing the work process and facilitating faster throughput. One consequence would be higher business profit levels, higher household income levels and higher tax revenues, making possible higher living standard levels and social delivery achievements. Also, stronger business balance sheets capable of carrying yet more investment leverage (though not quite Chinese style). And this spreading throughout a larger share of the population, until the larger part of society is so engaged, involved and benefitting. Such evidence of traditional progress keeps marking portions of SA society, as it does other countries. It is, however, recognized as the harder road travelled. Perhaps because such traditional progress has been relatively slow overall in SA, mostly because of public policy choices making it so, there remain many South Africans still very much outside its reach. Yet this does not dull the wish to be also so favoured. And thus we have found coming into being a parallel SA universe, so to speak, alongside this traditional global model, in which social and economic progress is also being achieved. This parallel SA model could be described as a shortcut, relying as it does on the simple expedient of demanding participation in progress, or whirling other magic wands to that effect. The traditional model tried to keep this parallel universe at bay via various stratagems. One was the trusted one of making promises, some of which turned out rather empty, delaying delivery but buying time. Another was to make a small down payment, for no counter effort, except to be there, qualify and collect. Such social grants today reach 1-in-3 South Africans, amounting to about R100bn annually, constituting about 4% of SA household consumption. But their generosity remains minimal, aimed to ameliorate the worst deprivation but well short of delivering middle class living standards or other elevated definitions of living wage levels. Three major groupings of people remain in SA society that are not adequately covered by these means or any other when measured against full middle class standards. Firstly, there are the unemployed and discouraged (7.6 million strong and 1/3 the labour force), with apparently zero own income to their name. Secondly, there are the informally deployed (4.4 million and 1/5 of the labour force), with minimal own income levels at their disposal, well short of full middle class standards. Thirdly, there are the worker elites, unionised and non-unionised, between them probably 6 million strong or 60% of the formally deployed labour force (1/4 of the total labour force) and still earning well below what an attractive SA middle class household would be enjoying. In crossing the remaining divides, in closing the gap with full middle class living standards, only a part of the third category identified here (worker elites) have mobilised the power to demand closure, with central bargaining arrangements extending the benefits thereof to yet a (much) larger footprint. These are the best organised, best positioned, most audaciously-led unions. I hesitate to call the numbers (out of a Cosatu membership of over 3 million, plus the extended reach of central bargaining extensions). But up to half to two-thirds SA 10 million formally employed labour could be so favoured, if in gradations (a top slice experiencing rapid real income gains, and lesser slices experiencing slower real gains by reason of differences in demanding power). The downside of these demand tendencies and their outcomes is to sacrifice work opportunities, as employers are encouraged to consider alternative ways of achieving production targets via less costly methods, invariably involving higher capital intensity as if SA is also a labour-short economy (like Aussie, which it patently isnt). This outcome is deplored most by especially established full middle class members who instead of only focusing on the joyful additions to their own prosperous midst see the horrific nature of the insider/outsider divide only steadily deepening, making it ever more difficult for the 1-in-2 outsiders to also reach the promised land of full insider rank. It has been noticeable how those most loudly engaged in demanding entry into full middle class ranks shrug their shoulders when asked about the fate of those remaining as low-income outsiders or rejoining their ranks on account of job availability shrinking against a rising population tide. Apparently, this is someone elses problem, be they business employers, the government as political overlord, or society in a general sense. But it isnt also THEIR responsibility, for theirs ONLY extends to their members. If this sounds remarkably like the language of a business monopolist (or at least his actions, for they are generally far too clever to get too explicit in an antagonistic society), this is probably not coincidental. For the very same economic rules apply, however difficult this is sometimes to fully grasp. The second grouping (the informally employed) has no market power by virtue of the nature of their skills and limited access to capital and technology. But they do have champions, in government and among many NGOs (non-government organizations). These have over time tried at least in some instances to impose rule-making benefitting this group (minimum wages, other benefits, social delivery, minimal taxation, exclusion from regulations) although other government regulation demands and other burdens (transport, urban location, municipal and other regulations), may have penalized some such smaller businesses harshest of all. Again, any imposed real income gains may on the margin have traded off with lost or foregone work opportunities. The first and largest grouping (unemployed and discouraged, with their dependents) effectively have only got political power, as many are prevented by slow growth and/or by imposed rules to gain employment opportunities foreclosed to them. So far this grouping has extended its alliance, to the extent of being politically engaged (actively voting), to the ruling government these past 20 years. And they have been rewarded by social delivery loaded in their favour (percentage of fiscal budgets) and through social welfare payments. However, cracks have opened up in this arrangement as higher political bidders have announced themselves, most noticeably the EFF (economic freedom fighters) this year, and the promise of a new hard-left workers party before the local elections of 2016. More higher bidders may join this fry in future, turning up the pressure on government to improve its game responsibly (favouring the traditional global model) or jettison this in favour of joining the shortcut bidding process, in part by putting more pressure on business employers to provide social services (housing, benefits) for their employees and otherwise share their assets (equity, land) with insiders and outsiders alike. Clearly, though , across the entire societal front, there is movement. There is the traditional global model central to the actions and progress of the established full middle class and those falling within its operational ambit, together a few million strong (and a decided minority in the larger SA population of 53 million). We have now apparently also an alternative shortcut model operating for working elites aspiring to full middle class rank in the shortest possible time. We have social champions working overtime for the informal deployed. And we are seeing the outline of a full scale political bidding war taking shape, aiming at the still very large group of economic outsiders, hitherto catered for in minimalist terms within the traditional global model, but possibly increasingly open to better terms from alternative higher shortcut bidders coming to the fore. With business employers in some sectors put under considerable obligation to provide social services traditionally offered by the state, and the full middle class encountering bigger burdens to accommodate some of the these demands being made, especially in the public sector, as well as having to accommodate even greater redistributive forces within its own ranks. Clearly, progress here cannot be captured under just one caption. It can have many names, different fathers, or so many will claim. It certainly constitutes change as SA society keeps evolving, its shape steadily taking on new contours. It is not, however, a growth oriented structure taking shape, but a redistribution-preoccupied one that is steadily coming into focus. Cees Bruggemans Consulting Economist Bruggemans & Associates Website bruggemans.co.za Email [email protected] Twitter @ceesbruggemans LinkedLn
Posted on: Sun, 24 Aug 2014 07:04:59 +0000
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