Dawie Roodt explains how the ANC broke South Africa’s economy

The ANC has failed to keep pace with economic developments, resulting in the party trying to manage a 21st century economy using 20th century ideas. 

The South African economy has fundamentally shifted towards services, which now make up the largest share of economic activity in the country. 

However, the country’s dominant political force, the ANC, remains intent on implementing 20th century ideas that are based on economic activity being derived largely from agriculture and manufacturing. 

Efficient Group chief economist Dawie Roodt told the second annual BizNews Investment Conference that this is no longer fit for purpose and is one of the main reasons behind the country’s economic stagnation. 

Roodt said the ANC does not understand what makes a modern economy work and which policies are necessary to expand it. 

“The ideology of the ANC is stuck somewhere in the 1920s. Their ideology is based on Karl Marx’s labour value theory, which does not apply anymore because the majority of people do not work in factories,” Roodt said. 

The economy has become increasingly high-skilled and services-based, which requires a different way of thinking around how value is created. 

This is also something Donald Trump gets wrong, Roodt said, with the US President’s crusade to bring manufacturing back to America failing to understand that services drive economic activity and that few people want to work in factories. 

“Flowing from their ideology are their various policies. These policies are based on things like expropriation, centralisation, and redistribution, rather than creation and expansion,” Roodt said. 

Another major issue with the ANC is the party’s belief in cadre deployment, which Roodt explained has resulted in elevated incompetence within the state. 

This is because people are employed in the state and public companies based on their loyalty to the party and not on basic competence. 

An overarching characteristic of ANC rule has been corruption, with widespread looting of state resources resulting in significant capital and value destruction. 

“The result of that is what we have today in South Africa. We have a stagnant economy, declining service delivery, and a state in poor financial health,” Roodt said. 

Broken institutions

Roodt said the ANC’s misguided ideology can also be seen in the deteriorating quality of South Africa’s institutions, from national departments through to municipalities. 

Over the past decade, the party’s rule has also resulted in a steady deterioration in the rule of law in South Africa, hampering investment and economic growth further. 

“The ANC has all but destroyed some major and important institutions in South Africa. The local government authorities are probably the single most important institution that has been destroyed,” Roodt said. 

Local government is crucial for millions of South Africans, as it is the only touchpoint they have with the state and service delivery. 

If this sphere of government fails, then many South Africans will lose trust in the state and its ability to adequately deliver services. 

“The local authorities are the most important institution in South Africa and more than 70% of them got qualified audits in the last financial year,” Roodt said. 

“They have been destroyed. It looks like some places have been through war. The implosion of Johannesburg is a case example.” 

These authorities are also crucial for businesses to operate and employ people. Without basic services, businesses cannot operate. 

Many of these authorities are financially crippled, with significant outstanding debt owed to Eskom, water boards, service providers, and landlords. 

The lack of skills and capacity at a local level has resulted in many municipalities being unable to adequately collect the revenue needed to pay for the services they use. 

A similar situation has played out at South Africa’s state-owned enterprises, with periods of mismanagement resulting in deteriorating service provision and financial collapse. 

These public companies, such as Eskom and Transnet, are no longer in a position to invest heavily in local infrastructure and service delivery due to their substantial debt burdens and interest payments. 

“The reality is that the ANC destroyed the state-owned enterprises and local authorities,” Roodt said. 

In the past, public companies and municipalities were able to be self-sufficient and survive without bailouts from the National Treasury. This is no longer the case.