It’s fair to say that economist Claude de Baissac isn’t on everyone’s Christmas card list. Some find his analysis too astringent, his brand of “hard truths” very much of the “glass entirely empty, and having rolled out the door” type.
But, having spent his formative years between France, Mauritius and Reunion, and with a career spanning the World Bank, intelligence company Kroll, and doctoral studies in the US and the UK, De Baissac says his consultancy Eunomix “doesn’t have time” to shunt everything through a rose-tinted lens.
All of which is abundantly clear in his new paper, which has been widely circulated in the business fraternity, including by those with the ear of President Cyril Ramaphosa.
The paper, “Fifteen months to avoid defeat — a strategy of many small steps for Ramaphosa”, is an uncompromisingly scary diagnosis of where the country is today.
De Baissac begins by dissecting why Russian President Vladimir Putin failed to rapidly checkmate Ukraine’s Volodymyr Zelensky, then switches to South Africa, which, he says, has been fighting its own war for 15 years.
Eunomix forecasts that South Africa will be a failed state circa 2030 at the current pace of decline
— Claude de Baissac
“Among the countries not at war, South Africa has experienced the longest and most pronounced rise in fragility — dropping from the 25th to the 50th percentile rank in the Fragile States Index between 2006 and 2021. Eunomix forecasts that it will be a failed state circa 2030 at the current pace of decline,” he writes.
An economy, he says, is like a power plant. “To properly function, it needs inputs — capital, labour, technology — that are transformed by their combination into outputs: incomes, and the products and services they afford. Productivity is the measure of the efficiency of the use of inputs towards outputs. Growth is its outcome.”
Yet Eunomix’s benchmark index shows that South Africa fares poorly when it comes to inputs, such as savings and labour participation; poorly when it comes to generating income and alleviating inequality; and poorly when it comes to government spending, which it concludes is “too high, poorly and unfairly allocated”.
The result: annual GDP growth, which averaged 4.9% between 2005 and 2008, withered to 0.8% between 2015 and 2019. In turn, population growth outpaced economic growth, so GDP per capita has shrunk to what it was in 2005 — $12,000.
“South Africa has dropped from an upper middle-income to a middle-income country. At its current pace, the country is on its way to being further downgraded to lower middle-income status by 2030,” he writes.
To mitigate this, South Africa has become “the world’s largest welfare state, both in the share of social transfers in GDP and in the proportion of people it provides to”.
But providing grants to 18-million people hasn’t dented inequality, or led to higher living standards. “Most South Africans are inactive and face the prospect of remaining so forever, lacking the basic skills and economic opportunity to find work,” he says.
De Baissac reserves his most lacerating criticism for the ANC, an endangered organisation that “persists in pursuing a state-led model it can under no circumstances deliver”.
The party can’t even muster the basic discipline to save itself from itself, instead touting an indigestible purée of the ideological and the contingent. Rather than action, we have a never-ending series of indabas, lekgotlas and phakisas, coalescing in “surges of first responders and commitments to ‘never again’ until the next, worse emergency”.
While spelt out in vividly florid terms, much of this diagnosis won’t be new to anyone who’s been watching the soap opera play on repeat, like an episode of Generations, with one-dimensional characters you’d swear had died, re-emerging every so often having done nothing in the meantime.
But De Baissac, uncharacteristically, sees a silver lining — an “improbable window of opportunity” for Ramaphosa. Having been begged to stay rather than quit over the Phala Phala imbroglio, Ramaphosa is enjoying a tilt at the balance of power. This gives him a window to implement the only strategy he can, “15 months of many small things that could amount to something great”.
In other words, ditch the grandiose promises of bullet trains. Instead, appoint a crisis cabinet of just six clusters: finance and state-owned entities; economy and infrastructure; education and social services; home affairs; public safety; and foreign policy. (Foot-in-mouth liabilities such as Gwede Mantashe, Lindiwe Sisulu, Angie Motshekga and Bheki Cele would, presumably, be first for the cut.)
Actions taken should unlock ready-to-go public and private investments, projects and reforms that are currently held up by reluctant or incompetent ministers and civil servants
— Claude de Baissac
This crisis cabinet’s sole mission would be to “enact small, decisive policies currently in place but hobbled, and new policies that deliver fast”. Anything that doesn’t move the dial would be axed, and anything requiring new legislation would be shelved.
“Actions taken should unlock ready-to-go public and private investments, projects and reforms that are currently held up by reluctant or incompetent ministers and civil servants,” he writes.
It seems unlikely that Ramaphosa — who seems to be congenitally welded to consensus — will do anything so wildly unpopular in the ANC. Yet De Baissac argues he has no choice.
So why write this paper now?
“The solution isn’t to fix everything, but focus on what you can do,” he tells the FM. “It’s true that it takes 1,000 stitches to fix 1,000 wounds, and often you’re left with Frankenstein’s monster. But you know, that’s better than nothing — at least it’s alive. You can do cosmetic surgery later.”
De Baissac argues that business ought to launch a class action lawsuit against the ANC for destroying the economy. What would be the point, though — the ANC is already bankrupt?
“Yes, but you have to send a clear message to other political parties that if you implement destructive policies, there are consequences,” he says. “We must send shivers down their spine.”
That, indeed, would be a radical move. If our politicians are lazy, thoughtless and nonchalant about their constitutional obligations, it’s because they’ve never been held accountable for atrocious decisions. Now is the time.
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