ISSUE 75 • APRIL 2015 BLUMENFELD | CASSIM | FEDDERKE | HARTZENBERG | HOVSHA | LEIMAN | MEYER PERKINS | SIMKINS | VIVIAN | WITTENBERG | REVIEWS | EGAN | SPENCE helen.suzman.foundation Director Francis Antonie Editor-in-Chief Francis Antonie Principal Sub-editor Chris Pieters Sub-editor Joshua Hovsha Board of Trustees Ken Andrew, Doug Band, Jane Evans, William Gumede, Nicole Jaff, Daniel Jowell, Temba Nolutshungu, Krishna Patel, Gary Ralfe, Mary Slack, Richard Steyn, Rosemary Smuts, David Unterhalter Design & Layout Alison Parkinson Photographs mediaclubsouthafrica Focus is published by The Helen Suzman Foundation, Postnet Suite 130 Private Bag X2600 Houghton, 2041 No 2 Sherborne Road Parktown, 2193 Email: [email protected] Website: www.hsf.org.za ISSN 1680-9822 Contributors Jesmond Blumenfeld Fuad Cassim Anthony Egan (Review) Johannes Fedderke Trudi Hartzenberg Joshua Hovsha Tony Leiman Amy Meyer Peter Perkins Charles Simkins Jack Spence (Review) Robert Vivian Martin Wittenberg CONTENTS Overview and Welcome 2 Francis Antonie A Hole-digger’s Guide to Redemption: Some Reflections on South Africa’s Long-running Quest for Economic Growth 4 Jesmond Blumenfeld Ten Things To Know About Inequality 14 Charles Simkins Wages in Post-Apartheid South Africa 27 Martin Wittenberg The Informal Economy and Sustainable Livelihoods 33 Joshua Hovsha and Amy Meyer Statistics South Africa: Behind the Scenes of Economic Statistics 38 Peter Perkins The Success of Knowledge Creation in South Africa: Relying on Virtue Alone Will Not Be Enough 46 Johannes Fedderke Bureaucrats Undermining Constitutional Democracy 60 Robert Vivian Conservation, Competition and Industrial Organisation in the South African Fishing Industry 69 Tony Leiman How Can Africa’s Regional Integration Agenda Reflect 21st Century Trade Developments? 75 Trudi Hartzenberg The Political Economy Growth and Reform in South Africa 81 Fuad Cassim Eulogy – Tribute to Professor Harry Zarenda 89 Fuad Cassim BOOK REVIEWS Showdown at The Red Lion: The Life and Times of Jack Mcloughlin, 1859-1910 by Charles van Onselen 90 Anthony Egan Mission to South Africa by Robin Renwick 93 Jack Spence The views expressed in the articles are those of the authors. They do not necessarily reflect the views of the Helen Suzman Foundation. 1 THE JOURNAL OF THE HELEN SUZMAN FOUNDATION | ISSUE 75 | APRIL 2015 The Economy This edition of Focus is dedicated to the memory of Prof. Harry Zarenda, who has passed away recently. Harry was a Research Fellow of the Helen Suzman Foundation. He was – as Johannes Fedderke points out – one of the most dedicated teachers of Economics. He deeply influenced many generations of students. He was a warm, generous human being, whose commitment to intellectual life was widely known and respected by both his colleagues and students at Wits. His generosity was not confined to helping students when they got themselves into financial difficulties, but also extended to an extraordinary generosity of spirit. As a teacher, he took FRANCIS ANTONIE is enormous pains over his students, and never sought rewards beyond what the Director of the Helen he understood to be his duty as a teacher. Fuad Cassim, in his eulogy to Suzman Foundation. He is a graduate of Wits, Harry, speaks about his commitment to and passion for putting people Leicester and Exeter first. He was, as Fuad says, a true mensch. Universities. He was awarded the Helen The articles in this edition of Focus are written by former colleagues who all wished Suzman Chevening to memorialise Harry’s memory by writing on their current research interests. Fellowship by the UK foreign Office in Jesmond Blumenfield reflects on South Africa’s long running quest for economic 1994. From 1996 to growth. He reviews the various initiatives post-1994, beginning with the RDP 2006 he was senior and GEAR, and he goes on to consider ASGISA, the New Growth Path and economist at Standard the National Development Plan. He concludes with a discussion of SMEs and Bank; thereafter he highlights the great irony in South Africa’s hitherto disappointing search for was director of the growth – that SMEs are a primary source of output and employment growth. Graduate School of Policy makers should take careful note of his observations. Public and Development Management at Wits Charles Simkins identifies ten things that one should know about inequality. He University. He is the begins by noting that one must be willing to grapple with large normative issues founding managing when thinking about inequality, and he reminds us of William Blake’s famous director of Strauss & Co. epigram that “one law for the lion and the ox is oppression.” How then are we to conceive of inequality and what sort of policy interventions are both desirable and necessary? He also argues, importantly, that the distribution of income is more primary, than the distribution of wealth. Again, policy makers would do well to consider the point Simkins raises in his discussion about inequality. Martin Wittenberg reviews the story of wages in post-apartheid South Africa. His concluding observations are that the evidence suggests that real transformation in the labour market is still some way off. Wittenberg offers two observations which may very well impact on future policy interventions: First, that while the union movement has become more representative of higher income working individuals, it seems likely that as the ANC becomes more alienated from median workers the more instability we are likely to see. And, secondly, that persistent wage inequality may very well raise the pressure for additional legislative interventions, perhaps of a populist type, in the not-too-distant future. 2 THE ECONOMY Joshua Hovsha and Amy Meyer reflect on the Anthony Leiman considers the South African informal economy and sustainable livelihoods. They fisheries in the context of conservation, competition trace the origins of the informal economy to the and industrial organisation. Many of the conclusions Apartheid and pre-apartheid eras, and consider how are quite startling, and almost counter-intuitive. But marginalised men and women have had to survive this may be so only because we have been schooled through their participation in the informal economy. into believing that a greater diversity in terms of They highlight much of the current dissatisfaction numbers is the way forward. Leiman argues that of the existing regulatory environment which affects when access to fishing is fragmented, and fishing hawkers and informal business. They make the strong rights are insecure — and there does appear to be a plea that South Africa’s informal economy should secondary market in these fishing rights — then the be viewed and celebrated as a way to address past fishing industry itself is about to enter dire straights. economic marginalisation and discrimination. Trudi Hartzenberg considers the major challenges A starting point for addressing the problems of surrounding South Africa’s regional integration inequality is, of course, being in possession of the within the context twenty-first century trade hard data. This is a prerequisite before any policy developments. She stresses that regional integration initiatives can be launched which would address the has to be rules-based, transparent and predictable, and questions of inequality. Here, Peter Perkins’ account that there must be legal certainty around investment, of work ‘behind the scenes’ of economic statistics production, trade and work in Africa. Without these serves as a very useful and instructive reminder of certainties Africa will be severely disadvantaged as what goes on in keeping official statistics up-to-date the century proceeds. and relevant. Fuad Cassim brings us back to the questions of Johannes Fedderke tackles the problem of knowledge growth and reform in South Africa, where he creation in South Africa by posing an initial question introduces some lessons from India’s Licence Raj related to South Africa’s comparative international system. Cassim is concerned about the levels of status. He first considers South Africa in relation to distrust that exist between the private sector and the rest of Africa, where South Africa’s performance government. As he points out, a similar situation appears to be reassuring in a number of areas. But, prevailed in India. But through small, but significant as he points out, virtually all countries in Africa lie adjustments of the regulatory burden, significant considerably below South Africa in terms of GDP per growth of and participation in the Indian economy capita measures. The more appropriate comparative resulted. As with Blumenfield, Cassim highlights group are middle-income and upper-income the importance of small and medium businesses as countries with comparable levels of development. the greatest creators of jobs and creators of wealth Here, South Africa’s research performance is poor. in emerging economies. He has no doubt in the Fedderke considers various explanations including importance of allowing this sector of the economy the incentive mechanisms which do exist. But the to grow because of the impact that it can have on real problems lie in the incentive structures that the unemployment and social tensions in the country. national science bodies provide where, he argues, We have included Fuad Cassim’s tribute to Harry incentives are too weakly tied to research excellence. Zarenda immediately after this paper. Robert Vivian argues that bureaucrats are We end with two book reviews: Dr Anthony Egan’s undermining our constitutional democracy. He review of Prof. Charles van Onselen’s Showdown at takes as his starting point Magna Carta, whose the Red Lion: the Life and Times of Jack McLoughlin 800th anniversary the world celebrates — or should and Prof. Jack Spence’s review of Lord Robin celebrate — this year. He reviews the various Renwick’s Mission to South Africa. provisions or articles of Magna Carta and applies them to the South African condition. The Financial Services Board, should take special note of Vivian’s argument — but so should Parliament which as an institution, he argues, has failed.