By Prof William Gumede

INTRODUCTION

Good afternoon and thank you for inviting me. I’m very happy to be here. I don’t particularly like speaking just before lunch because I know people are often thinking about lunch more than anything else.

I deliberately did not bring a presentation, but I have two documents that I will share, which I think will be of interest. One of them is a critique of the budget I was asked to prepare by one of the ANC groups in February. I requested that they make part of it publicly available, so I can pass that on.

Speaking after everyone else, I don’t want to repeat what has already been said. For me, this event has been very energising, and I want to emphasise the importance of having discussions like this about the economy and interrogating ideas openly.

Since 1994, it has been quite rare to have public discussions about the economy. We often talk about politics and the state, but we almost never have open debates about economic matters. That is very important, especially now, because we are potentially facing an economic disaster.

Why do I say that? On the 1st of August, there is a U.S. tariff deadline. While we’ve been discussing the economy generally, we need to look at it in the context of that deadline and what it could mean for our economy if we don’t secure a deal.

Unfortunately, so far, our government and most of the ANC have either not engaged with the U.S. or have engaged incorrectly. A few weeks ago, Lesotho even declared its economy a disaster because of the impact of these tariffs. That is something we must consider carefully, particularly since I don’t think we will meet the deadline.

I have suggested to some of our key stakeholders that perhaps the only way forward is to request an extension. Another critical point is that civil society, non-state actors, and businesses must also engage with the U.S. on this matter.

It is very important to understand that society is not only about politics, the state, or political parties. Civil society, business, and intellectuals are all part of the state. We need to view the state as more than just the government.

A few years ago, I was commissioned to write a report on state capacity around 2009 or 2010, and I suggested that we need to reimagine how we think about the state. It should not be seen only as government institutions. The state also involves business, civil society, and other non-state institutions.

When we look at the state this way, it changes our perspective. It means we can have co-delivery from business, professionals, and civil society. This is a broader, more inclusive way of seeing the state rather than the narrow, conventional view.

If we understand the state as being beyond just government or politicians, then it becomes very important for civil society to engage with the United States. For example, just a few days ago, I was in a closed session with U.S. officials, and I realised how critical it is for non-state actors like us to engage and to offer ways for the U.S. to work with us, especially if they are not getting what they need from our government. Without such engagement, there is no meaningful conversation. If we, as non-state actors, do nothing, we leave a vacuum.

Coming back to that report, just as an anecdote, in 2009 my state capacity report was rejected. One cabinet minister read it and became very angry. I will not name names, but this reflects something Christopher mentioned earlier: we are often too ideological, and that may be one of the reasons we have not achieved the growth we need.

Ideological rigidity has undermined economic growth in our country. When we are so rigidly ideological, it limits our imagination. It narrows our capacity to think outside the box, to consider new ideas, and to innovate.

GOVERNMENT OF NATIONAL UNITY AND DIVERSITY-LED GROWTH

Let me get to my presentation. I will start with the Government of National Unity because we are facing a crisis. We are already in an economic crisis, and it could become worse unless we address the U.S. tariff deadline. I believe the Government of National Unity provides a structure that allows us to deal with the crisis more effectively.

Imagine if we still had a monopoly ANC government; this crisis would have been even worse. At least now we have a Government of National Unity. There are several reasons why it is important. For the first time, it brings together diverse ideas, and I want to emphasize diversity because I believe our economic growth and opportunities lie in our diversity.

We must think about diversity-led economic growth, diversity-led democracy building, and diversity-led nation building. Diversity is the key factor that differentiates our country, and it is something we must emphasise. Our economic growth depends on it. One of the reasons we have not achieved stronger economic growth is because we have not leveraged our diversity.

Sadly, many people believe diversity is an obstacle to development and growth. That is completely wrong. Diversity is actually the foundation of economic growth. Because we have marginalized and underemphasized it, we have experienced lower growth.

Diversity is not only important for the economy but also for building democracy. Democracy cannot be a narrow project driven by only one political group. It must be a diverse platform. The same applies to nation building. Nation building is not a project for one group alone; it must be diversity-based.

Our nation-building project is also in crisis, and one reason is that we have not made diversity the centre of that project. Diversity drives growth, strengthens democracy, and builds a nation. The idea that one party, one group, or one segment of society can bring prosperity is simply not true. Diversity is our opportunity.

Even in terms of international relations, diversity is a strength. For example, our diverse Government of National Unity gives us the ability to engage with the U.S. more effectively. If the U.S. has a problem with the ANC, other parts of the GNU can engage with them, and other parts of society can do the same.

It would have been worse if non-ANC members had not engaged with the U.S. I promise you that. I would encourage civil society groups to engage with the U.S. as well.

If the state is not taking action, civil society and business can step in. This is based on the 2009 state capacity report, funded by taxpayers, which argued that the state includes civil society, business, and other non-state actors.

Another key principle is pragmatism, which leads to growth. Over the last 30 years, the ANC has often followed ideologically driven economic reforms. Now, we need to look at pragmatism as the approach to drive growth.

This is one of the strengths of the Government of National Unity. It forces different groups, different parties and communities to work together and find a pragmatic middle ground. That is the value of the GNU; it compels people who may have been unwilling to collaborate to act pragmatically in the interest of the country.

PRAGMATISM VS IDEOLOGY IN DRIVING ECONOMIC REFORM

Pragmatism is essential when making policies and implementing economic reforms. If you look at history, many of the greatest economic reforms since World War II were based on pragmatism. Japan’s post-war policies were pragmatic. Singapore’s development was driven by pragmatic decisions. South Korea followed pragmatic policies. Even China, in the post-Deng period, experienced growth due to pragmatic approaches.

India provides another example. After 1990, under Prime Minister Manmohan Singh, the country shifted from ideologically driven reforms to pragmatism, laying the foundation for its significant economic growth.

Pragmatism is almost a philosophy, an ideology of its own. From a South African perspective, we need to base all our state initiatives, economic strategies, and even nation-building efforts on pragmatism, focusing on what works, what is practical, and what benefits everyone. Pragmatism that serves the collective interest must be central to any economic reform we pursue.

What we need to do is remove anti-growth policies. There are many of them, but I will not go through all. We need to start by recognizing that many people are not convinced about the importance of economic growth. I have spoken to many who do not believe in economic growth as a driver of development. Many within the ANC also hold this view.

This may sound surprising, but if you look at African liberation and independence movements since the end of colonialism, very few pursued economic growth as part of their agenda. Economic growth was often absent. In contrast, countries like Mauritius and Botswana adopted economic growth as a guiding philosophy, and the results are clear. Their outcomes differ significantly from countries that did not prioritise growth.

Some people wrongly believe that economic growth is a neoliberal or World Bank concept. Similarly, when we speak about models that focus on growth as the basis of development, some dismiss them as being inspired by external institutions like the World Bank. They are not enthusiastic about growth-led strategies.

This is why I argue that we must move away from rigid ideology and adopt pragmatism to achieve economic growth.

ANTI-GROWTH POLICIES: EXPROPRIATION WITHOUT COMPENSATION AND NHI BILL

Let me highlight two anti-growth policies. The first is the expropriation without compensation law. At the end of 2017, the cabinet asked me to lead an 18-month review of all state-owned land and property. I assembled a team, drawing on experts across disciplines from Wits University, and we produced a comprehensive report.

In early 2019, we handed the report to the cabinet, and it was adopted. In that report, I made very clear recommendations. I stated that if South Africa pursued any expropriation laws without compensation, it would harm the economy. I explained in the report that property rights are broad and fundamental.

Property rights include pension funds, intellectual property, bonds, institutional investments from both local and international investors, and more. Property rights form the foundation of a modern economy. When you undermine property rights, you undermine the entire economy.

In the report, I included three case studies to illustrate this point. Between 2017 and 2019, I also presented these findings to most political parties, their leadership, and their parliamentary caucuses to explain the significance of property rights.

The first case study was Algeria. After its independence, Algeria introduced expropriation laws without compensation. At that time, Algeria was a major agricultural exporter to Europe. However, after the law was enacted, Algeria’s economy collapsed. It took over 30 years for Algeria to recover, and even now, it remains the second-largest importer of food instead of an exporter.

Moreover, I argued that the economic damage caused by that expropriation law was a major contributor to Algeria’s civil war in the early 1990s. The war was rooted in a prolonged economic crisis, which began with that law.

The second case study was Tanzania, the next country to introduce such a law. The impact was severe. By the late 1970s, Tanzania experienced one of the highest inflation rates the world had seen at the time. In 1980, the Tanzanian government itself established a commission to investigate the crisis. That commission concluded that the primary cause of Tanzania’s economic collapse was the expropriation law without compensation. This was not an external assessment; it was a formal government inquiry, and its findings are publicly available today.

The third case study is Zimbabwe. After implementing similar expropriation policies, Zimbabwe faced catastrophic economic consequences, including hyperinflation, which became one of the highest recorded after Tanzania.

In that report, we made clear recommendations to the cabinet. I also explained to the non-GNU partners that they need to follow up because once a report is adopted by the cabinet, it becomes the cabinet’s duty to implement it.

We suggested two main actions to address land reform. First, surplus state-owned land should be made available as the primary means of land redistribution. Our review showed that most land in South Africa is owned by the state, and in many cases, the state is not even aware of all the land it owns. Making that land accessible to poor people would have a significant impact.

The second recommendation, which was more controversial, was to provide title deeds to people living in communal areas. This is critical because about two-thirds of all land in South Africa is held communally. People living on communal land cannot use it for commercial purposes. If you want effective land reform, this must be addressed, particularly in areas such as the North West and Eastern Cape.

To help the cabinet understand this concept, I presented an example from China. During the Deng reforms, China introduced a form of partial property rights. Farmers were given long leases that allowed them to use their land in property markets and for other purposes. This marked the beginning of China’s economic transformation.

That approach is one of the reasons why China’s system survived while the Soviet Union’s did not. China started with partial property rights and later expanded them, allowing individuals to own businesses and other assets. Those, too, are forms of property rights. We tried to make these recommendations as clear as possible to the cabinet by using global examples.

One of the first policies that should be removed is the expropriation without compensation policy, it is an anti-growth policy. Another is the current National Health Insurance (NHI) bill. In its current form, it is also an anti-growth policy that must be reconsidered. We need to find a middle ground, a partnership between the private sector and the public health sector, to address our healthcare challenges.

In 2009, I produced one of my first reports after returning home from abroad. It focused on Black Economic Empowerment (BEE). That report was based on an earlier study I conducted in 2002 for the Economist Intelligence Unit. They asked me to do a long-term analysis of empowerment programs in Africa since the end of colonialism. I reviewed programs in countries such as Ghana and Nigeria. That 2002 report is available online as part of the Economist Intelligence Unit’s annual publications.

REIMAGINING EMPOWERMENT FOR INCLUSIVE DEVELOPMENT

We need to shift towards alternative ways of achieving empowerment. The current structure of empowerment focuses too heavily on giving politically connected ANC and trade union leaders shares in existing companies. That approach is flawed. Instead, we should focus on bringing small businesses into supply chains and manufacturing. This integration would create real, broad-based empowerment.

Secondly, we need to align empowerment with skills development and employment. Empowerment should mean rewarding companies that hire young people, provide training, and contribute to education. It should also emphasise specific types of education, particularly STEM: science, technology, engineering, and mathematics, because these areas drive long-term economic growth.

Alternative ways of achieving empowerment must be considered. For example, if a mining company builds public infrastructure or housing, that is empowerment. Creating entirely new sectors in South Africa, industries that do not yet exist here but are needed globally, is even more important. That is empowerment in its truest form.

Consider the microchip industry, which is at the forefront of global development. If businesses in South Africa develop such sectors, they contribute to both empowerment and economic advancement. This requires reimagining what empowerment means. It should not be limited to a narrow focus on race. Naturally, because the majority of poor people in South Africa are Black Africans, development efforts will primarily benefit them. But empowerment must be defined by actions that create growth and opportunity rather than simply by allocating shares.

REFORMING THE STATE AND PUBLIC SERVICE PROFESSIONALIZATION

Now, regarding the state itself, we must also discuss the role of the state in economic reform. I served on President Ramaphosa’s task team between 2001 and 2003, which focused on professionalising the public service. Unfortunately, none of those recommendations were implemented.

The failure of our state is one of the reasons for our low economic growth. A weak state directly contributes to economic stagnation. To be practical, we recommended that reform should target the catalytic parts of the state, the areas that drive economic development. We cannot reform everything at once, so we must focus on the most critical entities: the economic institutions of the state and its infrastructure agencies.

Within national government departments, we need to identify which departments are essential to economic growth and prioritise reform there. We need to address this by introducing merit-based appointments in key areas, tackling corruption, and enforcing accountability. There are parts of the state we will not have the time to reform immediately, so in the short term, we should focus on the core institutions.

The same applies to state-owned entities. We should prioritise infrastructure-related entities, clean them up, make merit-based appointments, and fix procurement processes. We also need to address development finance institutions and ensure they function effectively.

Municipalities are another critical area. When we include municipalities in wage bill calculations, the numbers are enormous. We should identify the municipalities that are catalytic to economic growth, focus on reforming those first, and leave the others for later. Delivering tangible results in key municipalities would make a significant impact.

This approach also applies to state-owned entities. In 2010, I served as chief adviser to the Presidential Review Committee on State-Owned Entities. One of the recommendations in that report was to follow an approach similar to China’s reforms: focus on the economically important state-owned entities, make them as professional and efficient as possible, and delay dealing with the less critical ones until growth is achieved.

TACKLING CORRUPTION TO UNLOCK ECONOMIC GROWTH

Finally, corruption must be addressed seriously. People often underestimate the economic impact of reducing corruption. Our calculations show that if we could reduce corruption by just 5% to 10% even up to 20%, we could achieve an additional 3% to 4% economic growth. Comparisons with countries such as Indonesia demonstrate that even a modest reduction in corruption can produce substantial growth.

Thank you.