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Conversation with renowned South African Experts
Economic growth models in Africa

Can social market economy elements contribute to inclusive, sustainable growth in African countries? This was a key question in our conversation with two leading South African experts from renowned Hanns Seidel Foundation partners, recorded for a new podcast episode in the "Global Perspectives" series.

We interviewed Dr Jakkie Cilliers from the Institute for Security Studies and Marius Oosthuizen from the Gordon Institute of Business Science - Read the joint conversation here

 

Hanns Bühler:

Africa remains a continent with endless potential. It has rich natural resources and a geographical size which allow it to become an even more important actor on the global stage. Countries such as Ethiopia, Angola or Rwanda have in the past years been able to achieve high growth rates.

But in spite of this, the gap between the 54 diverse African countries and the rest of the world in regards to economic performance, income per capita and a number of other relevant indicators is increasing. And the effects of the Covid pandemic further promote this trend. Economic reforms often fail as a result of a lack of political will or of a lack of implementation capacities in the public sector. In some regions, especially in Southern Africa, ideological battles between market-oriented and socialist forces also hamper the implementation of sustainable economic policies.

The question of whether the economic policies on the African continent are sustainable is becoming all the more urgent. What must be done in order to release the potential of Africa and to foster economic growth?

The Hanns Seidel Foundation in South Africa supports partner organisations, such as the well-known Institute for Security Studies and the Gordon Institute of Business Science, in order to find answers to these important questions. And we also share experience on how Germany was able to lift itself out of poverty after World War II through the concept of the social market economy.

With Dr Jakkie Cilliers from the Institute for Security Studies and Marius Oosthuizen from the Gordon Institute of Business Science we have two brilliant and experienced South Africans with us today to discuss challenges, opportunities and necessary implementation steps for economic reforms in Africa.

Jakkie and Marius it is great to have you on board here at our podcast and I look forward to the exchange.

Jakkie Cilliers: Thanks, Hanns, nice to be here.

Marius Oosthuizen: Good day, colleagues, great to be with you.

Hanns Bühler:

Before we start, allow me to introduce both of you briefly to our listeners.

Dr Jakkie Cilliers is founder and chairperson of the Institute for Security Studies, a widely recognised continental think-and-do tank in Africa and a long-term partner of the Hanns Seidel Foundation on the continent. Dr Cilliers is currently heading the African Futures and Innovation project at the ISS and as such leads research on the long-term development on the continent.

It is a particular pleasure that Dr Jakkie Cilliers is joined by Marius Oosthuizen in discussing questions of South African economic policies and what role the topic “social market economy” could play. Mr Oosthuizen is the Director of the Centre for Leadership and Dialogue at the Gordon Institute of Business Science of the University of Pretoria. The institute is considered one of the best Faculties of Economics in Africa.

Foto: Jakkie Cilliers, ISS

Jakkie Cilliers, ISS

ISS

Let us start by looking at the continent as a whole. This will inevitably lead to generalizations, considering there are over 50 very different countries and regions.

Jakkie, you have been studying the economic development in Africa for many years. What, in your opinion, are the core challenges and obstacles for development - and which circumstances are needed for the successful implementation of economic reforms?

Jakkie Cilliers:

Thanks, Hanns, you indicated in your introduction that Africa is complex. It is indeed so. It includes 23 low-income countries, 23 lower-middle-income countries, 6 upper-middle-income countries and 2 high-income countries, the island states of Mauritius and Seychelles. It has 1.3 billion people, so very, very diverse. We have just concluded a modelling exercise where we looked at the impact of 11 different scenarios on each African country. So, we looked at the impact of advancing Africa’s demographic dividend, the impact of agriculture, manufacturing, the implementation of the African Continental Free Trade Area, and so on, on Africa’s long-term future. Generally, we are looking at about two decades into the future. Now, what is clear is that in the next one or two decades agriculture will remain the sector that, particularly for low- and low-middle-income countries, has the most potential for lifting Africans out of poverty and for reducing inequality and so on. But in the long-term, the implementation of free trade through the so-called African Continental Free Trade Area is critical and does better than any other scenario. Of course, none of this is possible without leadership committed to development and more stability. These changes of moving from autocratic to more democratic regimes take time and their impact takes a lot of time and effort before they really start having an impact on economic growth rates.

Hanns Bühler:

You are talking about the importance of leadership and you provide in your studies and in the research the ISS is doing concrete recommendations for policy making in the areas of agriculture and trade, as you just said. At the same time, we see that in many countries, development is hampered through internal power struggles on the basis of ideological differences. In some regions of Africa, there is the never-ending debate between socialist and capitalist ideas and ideology – for us it seems that, in times of crisis, these ideological battles are increasing. Do you think that certain principles and elements of a model of the social market economy could be implemented to overcome these ideological barriers?

Jakkie Cilliers:

Politics is politics and African politicians are no different to politicians in Germany, in Europe and elsewhere. So, sometimes you get good ones and sometimes you don’t get such good ones. The ideological hang-ups that we have are very typical of southern Africa. We are the most recently liberated region, we therefore have a bigger chip on our shoulder about our history and former liberation parties still dominate - the African National Congress in South Africa, Frelimo in Mozambique, Swapo in Namibia, MPLA in Angola and so on. The debate in southern Africa is therefore quite different from the debate in central, western, east Africa. And is very different from north Africa. North Africa has a very different economic framework, heavily influenced by subsidies from oil and gas, which is not possible in the rest of Africa. The vast majority of African states believe in democracy and opportunity, what Germany knows as the social market economy. Now, there is a global consensus, even communism with Chinese characteristics has many of the free market ideas that the original Mao Tse-tung and others twenty or fifty years ago would not have accepted. The Nordics have the social democratic system and the Americans have what they refer to as the mixed or free economy. I think that we must not get distracted by these ideological debates. In my view, the challenge is often to bring evidence-based policies and practices to the table and try to avoid – particularly in southern Africa – the ideological debates. They take us nowhere and they hark back to the 1950s and the 1960s, particularly to the ideological framework of the Soviet Union where many of the former liberation parties find their ideological root.

Hanns Bühler:

Fascinating, thanks, Jakkie. You are talking about evidence-based policies as a baseline at the end for overcoming those ideological discussions happening especially in southern Africa. Now let us turn to South Arica and to Marius Oosthuizen to establish to what extent these models and recommendations which were formulated, for example by Jakkie in the field of agriculture or the Free Trade Area, could become a reality. South Africa is a country with huge potential and importance, but also a country where you will find most of the challenges facing the African continent.

Foto:Marius Oosthuizen, GIBS

Marius Oosthuizen, GIBS

GIBS

Marius, I think when you refer to a more pragmatic and productive discussion which is needed in South Africa to support economic reforms, that would also be in line with the Development Agenda of President Ramaphosa, the Thuma Mina project. But at the same time, still nowadays in South Africa, actually really today and yesterday and the weeks before it is often argued that the state, which is also the biggest employer, is to have a huge influence on the economy.

In a social market economy, the question about the influence of the state is discussed somewhat differently: it is not only about redistribution, but also about addressing market failures in order to make the market more productive. So how do you see the options for these discussions on different models and could they really overcome the challenges facing South Africa?

Marius Oosthuizen:

Well, I think when the president refers to Thuma Mina he is of course quoting a very famous song, the theme of which is “send me”. It is the spirit of active citizenship that the president is trying to provoke in South Africa. And I think there is something in there about how we as South Africans would need to change the character of how we work together with one another. If you have a private sector that is self-interested or quite short-termist or if you have a public sector that is primarily focused on elites using the public sector as an extractive mechanism to further their own names, then you have a breakdown in the social contract. And I think the lesson from Germany, particularly with reunification, is we need to find a new frame of reference within which to look at one another, whether it is the private sector or the public sector, as well as across the various strata of society, the upper income South Africans versus lower income South Africans. And then say to ourselves, what is the model around which we can all convene and agree and then bring to the society whether it is capital, whether it is labour, our skills and our contributions to creating the society that we want. I do think that as we’ve moved from the so-called President Zuma Era where really the state was distracted into extractive ends, we’re now in an opportunity for a period of time where South Africans can open a new chapter, start with a clean page and reconstitute ourselves as a society to begin to work towards a future that we prefer.

Hanns Bühler:

Thank you, Marius. I think the whole discussion around active citizenship aligns very much with the social market economy in Germany where we had to find after World War II a common social compact and that was also the social market economy. And as I was following your and Jakkie’s input, that could also contribute to softening the debate about the welfare state, the land issue or the reform of the state-owned enterprises.

In conclusion, I would like to ask you for a brief statement on the following question, both of you, Jakkie and Marius. What is your perception in Africa with regard to the discussion of international or maybe even European economic models? Do you not run, as a European organisation like the Hanns Seidel Foundation, but also as a South African organisation, as the ISS or GIBS, do you not run the risk of this being considered an interference in internal affairs, and how could this be prevented? Maybe, Jakkie, if possible you go first.

Jakkie Cilliers:

Thanks, Hanns, I think that the framework of the social market economy or the social democratic system has a lot to offer. But as we indicated earlier in this podcast, southern Africa is still often trapped in ideological framings that are quite polarising and that can be quite distracting. That is why, in my view, I think, I always like to take the debate down to the practical; let’s bring everyone to the table. There is a lot that South Africa and Africa can learn, including from China. For example, how China managed to alleviate poverty through a very focused effort, how it managed to engage in knowledge transfer from Europe and elsewhere, from the Asian Tigers and so on. Africans generally believe in democracy and they believe in the free market. And there is concern elsewhere that Africa, somehow, is going to turn away from democracy and the free market. I don’t believe that that is possible. I think that that requires a strong state and that does not exist in much of Africa. So, we need to learn, we need to avoid being caught in a great new Cold War struggle between the US and China. We need the partnership of everybody and Europe sort of lies a little bit in the middle. And Europe, for Africa, is particularly important for historical, geographical and language reasons, but also because it’s the only region where our exports have a higher value than the commodities that we export elsewhere. So I think these debates are important, but they should not obscure us.

Hanns Bühler:

Marius, what are your insights when it comes to South Africa on this?

Marius Oosthuizen:

I think that we have to appreciate that South Africa has only been free from apartheid for twenty-five years and the longer history of colonialism is for many South Africans still part of living memory. And so when we think about partnership and collaboration with states outside of Africa, we have to appreciate that a shadow of the history that we’ve been through in our history still hangs over the society. And so in that regard I think Africans want to work with partners from around the world, but they are looking to do so in a way that allows them to being an equal partner. And allows them to sit at the table with the same dignity and respect that other international partners would give each other. So it is about the tone of that partnership and the tone of that engagement. And for institutions or even countries wanting to work with Africa and South Africa, if they approach them as partners and as equal partners and they look for mutual interests, I think they would find that Africans are quite willing to learn and quite willing to work together.

Hanns Bühler:

Dr Jakkie Cilliers, Mr Marius Oosthuizen, thank you very much for your time and our trusting cooperation and partnership which I think is really at eye level. It’s an absolute pleasure working with both of you. And thank you very much for being available for this podcast!

As a German political foundation, we can promote research and support dialogue between representatives of different sectors with regard to economic models so that decision makers and key institutions can draw on well-founded insights formulated and expressed by African experts, as Dr Cilliers and Mr Oosthuizen.

As both of our speakers have underlined: Copying the model of social market economy will not work in the African context. Africa must formulate its own sustainable economic policies and they must be owned by Africans. However, an open and focussed debate on fundamental pillars of a social market economy and practical policy options emerging from such a debate could provide an important contribution to a more productive discussion on economic policies.