Economists weigh in on nationalisation

THE ANC has opened the door to a debate on greater state intervention in – and possibly nationalisation of – elements of the economy, but economists warn that state involvement is normally successful only in a mono-economy dominated by one resource, if it is backed by a wise and benevolent state.

Standard Bank chief economist Goolam Ballim said there was a measure of credence in the arguments that the wealth generated by an economy was increasingly characterised by greater flows to the rich while labour’s claims to wealth were declining.ANC secretary-general Gwede Mantashe has indicated his party’s openness to suggestions that the debate on nationalisation should include not only the mining sector.ANC national spokesman Brian Sokutu said yesterday that the debate should specifically be conducted around ‘the transformation’ of economic sectors, including banking, where he argued that ownership and staffing should represent the nation’s demographics.Ballim said China was one obvious instance indicating a measure of success of the model of ‘state-led growth’ and the public sector’s dominance of the economy.’You have an economy that has lifted millions of people out of poverty in a space of two decades. That is unprecedented. It signals the capacity of leadership of the public sector to make a profound difference and to be able to overcome the challenges that many say are only solvable by the private sector.’However, Pan-African Advisory Services chief executive Iraj Abedian, said that the successful Chinese model actually allowed for ‘state capitalism’ and capitalism through the back door. This model, in fact, allowed for enormous amounts of private investment in the economy and attracted foreign direct investment.Ballim argued that China was an example not of public sector success, ‘but deeply considered and smart leadership at the early stages of (economic) development’. In the past few years there had been ‘marketisation’ of the economy, with the price of money ‘more risk based’. This ensured that unviable projects did not take root. The nationalisation experiments of Venezuela’s President Hugo Chavez had ‘crippled the factors of production’, Ballim said.Abedian agreed that the Chavez experiment was more successful when the oil price was high; Venezuela’s economy was now reaping the consequences of low oil prices.Abedian argued that there was no real example of a state enterprise that had been hugely successful. There were arguments, he noted, that Sasol and Iscor had been successful in the apartheid era as state oil and steel companies, respectively. But he said this took place within a siege economy before the era of globalisation.Such companies could be successful in periods of duress, but this often ceased in a more competitive environment.Abedian said Opec economies, which were dominated by the oil industry, could be presented as successful models of state control.But the operation and exploration work was carried out by private firms.Mantashe has cited the example of state ownership of the diamond industry in Namibia and Botswana in partnership with De Beers. But Abedian argued that state involvement really was like a toy phone – the state gained dividends while De Beers ran the operations. De Beers was also in the unique position of being the monopoly player in the global diamond business.Abedian said there was an argument that transformation in banking was required and he awaited the report carried out by the competition commission on collusion in the sector.Meanwhile, Bloomberg reported that Finance Minister Pravin Gordhan said this week that the nationalisation of mines and other industries was not the policy of the ANC.’The ANC is the ruling party in the government and its Polokwane resolutions’ adopted at the December 2007 national conference ‘don’t talk about nationalisation’, Gordhan said in an interview with 702 Talk Radio. -Business Report