ANC Parliamentary Caucus
ANC Debate
Hon N Gcaleka- Mazibuko
06 September 2024
Introduction
Let us begin with what we all know. South Africa holds some painful world records. According to the World Bank, South Africa is the most unequal society on earth. We have the highest levels of income inequality (as measured by the GINI coefficient). Our wealth inequality is even greater. We have what must rank as the world’s worst, crisis-levels of unemployment at an unsustainable level now at 42.6 per cent in the broader and more accurate definition. Youth unemployment at around an incredible 60.8 per cent regardless of gender is even more catastrophic. Unemployment of women of all working ages, with black women the most affected, is 2.4 per cent higher than that of men. Given that the racial and gender dimensions of unemployment continue to be rooted in the stubborn legacy of colonialism of a special type, it is pretty obvious that young black women are the majority of youth unemployment.
These are facts. But they are not just statistics. They testify to the daily reality of working-class households and communities to children going to bed hungry and losing their childhood, to unemployed youth with their dreams shattered, to women suffering the most awful gender- based violence, to LGBTQI+ people being abused, to retrenched workers on street corners
These are daily South African realities. In differing degrees, you will find them throughout the Global South. But what makes South Africa a global outlier, is the degree to which poverty and unemployment occur amid extreme inequality and significant wealth.
Because South Africa is a global outlier in other respects as well. The value of speculative
capital on the Johannesburg Securities Exchange (the JSE) is around three times more than our GDP. The Rand is amongst the most traded emerging market currencies. We are said to have amongst the most sophisticated financial sectors.
Are these different sets of realities unconnected, social calamity on the one hand, and hyper- financialisation on the other?
Are inequality, poverty, unemployment, and endemic social violence as we are told, merely a legacy hang-over from decades of apartheid, worsened by state capture corruption.
The terrible legacy of a colonial and apartheid past and endemic corruption are major factors. But it is the hegemony of the financial oligarchy and its related neoliberal policies, and its deep influence upon government and wider society that have become the major drivers of the deepening socio-economic crisis confronting the majority of South Africans.
It is perhaps imperative to recognise the historical evolution of the high levels of concentration of the South African economy and the financial sector and it begins with the fact that Apartheid had left the country with an economy characterised by excessive levels of concentration of ownership and control, as well as a lack of participation by all South Africans.
The Apartheid regime actively promoted national champions in different sectors, developed industrial state- owned enterprise (SOE) monopolies and agricultural cooperatives that were later privatised and condoned industry cartels in its efforts to promote self-sufficiency and the economic interests of a minority. This era also saw the emergence of a few conglomerate holding companies that held investments in businesses across much of the economy, resulting in an excessive concentration of wealth on the Johannesburg Stock Exchange (JSE).
Whilst high or growing concentration does not always equate to a lack or deterioration in competition, we must differentiate between efficient and inefficient periods of growing concentration. Efficient periods are generally associated with tougher price competition, intangible investment and increasing productivity of leaders which results in growing shares for efficient leading firms but which occur off low levels of concentration. Inefficient concentration growth occurs where entrenched leaders are resulting in lower levels of competition and higher entry barriers, and where concentration is associated with lower investment, higher prices and lower productivity growth.
In the South African context, concentration is of particular concern because it is generally not associated with efficient forms of growing concentration, but rather inefficient forms. This is because the economy inherited a concentrated market structure from the Apartheid era, with entrenched leaders that remain dominant today. Inefficient concentration is associated with higher margins and is seen to impose a structural constraint on growth. Persistent concentration by historically dominant firms is also associated with a lack of transformation of the economy, denying opportunities to those who were historically excluded to participate and grow their share of economic value.
The high levels of concentration in the financial sector are evidently shown by the competition commission in its concnetratio report in that the bottom 50 percent firms which are all SMEs in the sector receive are total share turnover of only 4.4. percent as opposed to the top 10 per cent of firms receiving a total share turnover of 77.2 percent.
The Gini coefficient of firm inequality for the entire economy is 0.8 which is far higher than the coefficient measuring the inequality in household expenditure which sits at 0.6.
The high levels of firm income inequality is consistent with a weaker SME sector in South Africa relative to comparator countries such as the OECD set of countries. It also highlights the lack of meaningful participation and spread of ownership in the economy for the vast majority of South Africans, and the need to make this a focus of both competition law enforcement but also general economic policy. The lack of participation and transformation of the economy also directly impacts on employment and household inequality as SMEs do contribute disproportionately to employment which is, one of the major factors driving household inequality.
At the core of our mission lies the urgent pursuit of transformation within the financial sector, an imperative rooted in redressing historical imbalances and promoting inclusivity for all South Africans. Throughout the post-apartheid era, our democracy has made significant strides, but the pressing need for economic inclusion continues to demand attention. The financial services sector, in particular, continues to be heavily dominated by a minority, while the majority faces significant barriers to essential services and opportunities. This disparity perpetuates social and economic inequality, impeding our nation’s overall economic growth and potential.
It is almost instructive that the financial sector should be at the center of providing enterprise development of SMEs to invest in science, innovation, and technology and support the productive capabiliites of the state to enhance structural transformation.
To this end, an effective instrument is required for socio-economic transformation to be able to fully respond to the realities of society on our on-going journey of realising transformation in the sector, to change the general economic conditions.
It is evident that the financial sector will not transform itself without an effective compelling instrument, Government needs to aggressively show appetite for change. It cannot be business as usual.
The financial sector has an important role to play in driving sustainable economic development, empowering historically disadvantaged individuals and communities, and fostering an inclusive and thriving economy. The assets held by the sector can effectively be used to promote and support the financing of transformational infrastructure projects, setting affordable housing standards, and providing adequate funding for black-owned businesses. This element, together with the Access to Financial Services element is vital for unlocking the potential of South Africa’s economic environment towards advancing the transformation agenda.
As the ANC we call upon all stakeholders, who are at the core of redressing the social imperatives, to embrace the collaborative commitment required to redress historical imbalances that continue to hinder our progress of achieving meaningful and impactful transformation in the sector. By fostering a more inclusive financial sector, we can cultivate an environment where the aspirations and talents of all South Africans can flourish, irrespective of their background.
I thank you