Radical Economic Transformation will hurt South Africa’s ICT industry

Altron CEO Mteto Nyati has warned that radical economic transformation, which is being punted by President Jacob Zuma, can destroy South Africa’s economy.

Zuma has stated that radical economic transformation is “the only way to address the twin problems of poverty and land dispossession”.

Presidential hopeful Nkosazana Dlamini-Zuma supports this view, adding that the recent anti-Zuma marches were people showing they were against radical economic transformation.

Finance Minister Malusi Gigaba also supports radical economic transformation, but said it will be done within the constraints set out by National Treasury.

Many commentators believe terms like “radical economic transformation” and “white monopoly capital” are only used by ANC politicians to further their own interests.

What radical economic transformation is

Professor Andre Duvenhage, a political analyst at the North West University, said the origin of radical economic transformation comes from a “revolutionary tradition”.

In South Africa, the “national democratic revolution” consists of three phases:

  1. Political Transition – Control over the political system of regime.
  2. Radical Economic Transformation – The focus is on the ownership of the factors of production, like land, capital, labour, and entrepreneurship.
  3. Social Transformation – Social equity is the most important target in this phase.

The concept of a “national democratic revolution” is deeply rooted in communism and has been promoted by the South African Communist Party for decades.

Duvenhage said radical economic transformation in a local sense means the economy must be distributed equally along racial lines.

“This means 80% of the factors of production should be in the hands of black people, and the rest in the hands of Indians, coloureds, and white people,” said Duvenhage.

ANC does not know what radical economic transformation means

Leon Louw, the CEO of the Free Market Foundation, said the new finance minister does not know what radical economic transformation really means.

“When he [Malusi Gigaba] was asked by investors what radical economic transformation means, he could not answer. He effectively said he will come back one day and tell people what it is,” said Louw.

The reality is that no one knows what radical economic transformation refers to, and that it may be less profound than it sounds, he said.

“I think it is a desperate attempt by the ANC’s left wing to gain traction and to persuade black people that they should continue supporting it.”

ICT White Paper is an example

The National ICT Policy White Paper is highlighted as an example of the damage which ideas surrounding economic transformation can inflict.

The paper calls for changes in the telecommunications market, including the creation of a Wireless Open Access Network (OAN).

All unassigned high-demand spectrum – essentially LTE spectrum – will be set aside for the OAN.

Nyati said the White Paper is a subset of radical economic transformation, which is targeting South Africa’s telecommunications industry.

Louw said the ideas in the paper will effectively result in the nationalisation of the local mobile industry.

South Africans will then have to rely on bureaucrats to run South Africa’s telecoms and ICT sector, the way they run Eskom, the SAA, and the SABC.

Hurting the economy

Speaking on Classic FM, Nyati said radical economic transformation discussions have morphed into an “us and them” situation.

“You have people talking about white monopoly capital, clearly painting large companies as entities which are not required, or that should be attacked or destroyed,” he said.

He said the “us and them” situation is taking the country in the wrong direction, where we will end up “really destroying our economy”.

“The current businesses are an important asset for this country and we need to protect that.”

He said there is a need to create new opportunities, but warned that this process should not mess with what is working.

Nyati said what we are seeing now with “radical economic transformation” is the result of our leaders not learning from mistakes.

“They are taking us back to the poor policies and decisions which were implemented. They want us to go through this terrible route of learning the hard way, which is inexcusable,” he said.

Louw said radical economic transformation will involve increasing the size and function of the government and centralising power.

This is a formula for failure, which includes economic stagnation, unemployment, discontent, and political instability.

Now read: Prices in South Africa – 2007 vs 2017

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Radical Economic Transformation will hurt South Africa’s ICT industry