In the context of State capture and corruption, former Deputy Finance Minister Mcebisi Jonas believes South Africa’s “developmental-State project is almost dead”, with resources being diverted away from dealing with the country’s serious unemployment crisis towards poorly governed State-owned companies (SOCs).

Speaking at the release this week of a new Centre for Development and Enterprise (CDE) research document dealing with youth unemployment, Jonas argued that the country’s SOCs were increasingly competing with the private sector, rather than “working in a symbiotic way in the interests of the economy”.

He blamed this partly on an “over fascination with State capitalism”, which was still viewed, ideologically, as the best way to overcome the country’s social and economic challenges. “I want to state categorically that there is nothing bad in itself with State capitalism as a model. We have cases where it works.”

However, for State capitalism to work, good governance at SOCs and a corruption-free State were preconditions for success, which was “not the case in South Africa today.” As a result, resources were being misdirected from what should be the country’s overriding priority of employment-rich growth.

“The so-called developmental-State project is almost dead if corruption and State capture is high,” Jonas averred.

In addition, ongoing antagonism towards the private sector was not conducive to domestic firms investing in capital expansion rather than in offshore opportunities; a problem exacerbated by increasing levels of policy uncertainty.

“At a policy level, I don’t think we have placed enough emphasis on the importance of diversification and economic growth,” Jonas said, noting that even communist countries such as China and Vietnam placed growth at the very centre of their economic priorities.

Reigniting economic growth and the growth of firms, he added, were key to the reduction of youth unemployment in South Africa, which was at “crisis” levels.

“The idea of firms as the most important employment generating projects is correct.”

CDE executive director Ann Bernstein, who edited the ‘No Country for Young People’ report, reinforced the importance of private companies overcoming the high level of youth unemployment in South Africa.

She argued that “enterprise-led growth” offered the best prospect for success in a context where 7.5-million of South Africa’s 20-million young people, aged between 15 and 34, were “not in employment, education or training”.

A return to far higher levels of growth was a prerequisite for faster employment growth and the viability of new companies, Bernstein asserted, while adding that firms were also the “most sustainable, expandable job-generating projects”.

“Therefore, South Africa cannot be pro-growth and anti-business.”