Get off the fence or face a ten-year disaster – Gordhan

The ANC leadership must get off the fence and act against state capture and corruption if it is to prevent a serious economic disaster from which it could take South Africa up to ten years to recover.

This was the message of former finance minister Pravin Gordhan and his deputy Mcebisi Jonas at a boisterous public debate at the University of Johannesburg on Wednesday.

Gordhan said there are currently “too many fence sitters waiting to see which way things are going to go. The time is now for them to take a decision about where you stand. We must not allow the fact that we have a business going on on the side, or that we think we will get more business opportunities from the state, to keep us quiet. If we keep quiet, we are going to slump into a ten-year disaster. It may take us five to ten years to recover from the disaster we are actually heading towards.”

Jonas also did not pull punches in his address and said South Africa is quickly becoming the world capital of corruption and state capture. “South Africa is facing a defining moment – politically and economically. “Sometimes most of the debates that are going on tend to miss the urgency of acting against the problems we are facing…. we have to confront the reality that we are increasingly becoming globally, the capital of corruption and state capture.”

White monopoly capital

Much of the debate centered on white monopoly capital.

Jonas said there has been significant structural change over the past 25 years.

“In the mid 1980s around 93% of JSE shares were owned by four giant companies, all owned by white South Africans and they controlled economic activity in the mining, finance, industrial, agriculture and retail sectors.

“Since then, the structure of capital has change significantly. Today, some of the largest segments of what is called white monopoly capital have globalised. Primary listings of many companies have moved to foreign exchanges and have massive investments elsewhere in the world. In many cases their international interests have surpassed their interests in South Africa.

“This means our large conglomerates have exported capital and means that private capital in our economy is now significantly foreign owned.”

Jonas said just under 40% of JSE-listed companies and just under 50% of Top40 shares are foreign owned, which he flagged as a big risk to South Africa.

“Much of the capital lumped into the category of white monopoly capital is highly mobile, financialised and international. Globally, this foreign based big capital is driven by short-term focus and its ownership tailored to highly liquid markets. This seriously limits our ability to draw this capital into national development projects. Given the low level of our domestic savings and the current level of government indebtedness, we must accept that the scale of this capital is a real threat to our national sovereignty.”

Jonas said economic transformation is not only about increasing black ownership of large listed JSE corporations and reducing the shareholding of local and international white investors. “That is not necessarily transformation. Even if this is accomplished without disruptions such as capital flight, it will not reduce inequality. In fact, it could possibly increase inequality.”

He said the solution lies in the development of new productive capabilities in which blacks have significant shareholding on a mass scale. “We need to shift government policy from the redistribution of existing assets to linking redistribution to increased production outcome in order to have sustained economic impact.”

In response to a heated question related to the white ownership of the economy, Gordhan acknowledged that the South African economy is a highly concentrated one. “We all agree that key sectors of the economy, whether it is land, big or medium companies, are historically and currently predominantly owned by the white population. We all agree that in restructuring the economy the national demographic must be represented in ownership and management of the economy.”

However Gordhan said the question is “how do we get there in a way that we do not destroy the economy in the process of getting there.”

He said various practical interventions to stimulate entrepreneurship should be top priority to achieve this.

“We have to come up with solutions, not slogans (in reference to Bell Pottinger’s creations) to actually give our own people new opportunities and not become racists in the process.”

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