South Africa is facing a defining moment after five years of weak growth with stagnant and currently declining GDP growth and limited investment growth.
Downgrades and a recession compound the downward spiral. Our political leadership is increasingly found wanting and current political formations appear unable to arrest the decline.
Increasingly, the difference in how one relates to the transition and the institutions that came out of 1994 can now be associated with two different ways of doing politics.
The first operates within the constitution and builds institutions to achieve progressive policies.
A second way is mistrust of the formal "rules of the game", whether of the constitution or of government.
In the institutional instability that this politics has created, corruption and criminality thrive. It has three defining characteristics:
• It comes at the expense of the constitution and South Africa's democratic order;
• It weakens and even collapses key state institutions; and
• It results in highly racialised politics, undermining nonracialism.
I believe the 1994 national consensus has become unviable and will unravel if not combined with a new economic consensus.
The 1994 consensus reduced extreme poverty and vulnerability and extended access to basic services.
Yet, South Africa remains locked in a capital-intensive, energy-intensive and financialised growth path that reproduces rent-seeking by the old white, foreign-owned and new black rentier classes.
It is too dependent on financial inflows and commodity booms, making the economy extremely vulnerable to global shocks. It creates little productive new wealth and excludes many South Africans.
The economy is overdue for transformation and reform. But what should change, and how?High inequality and low growth are mutually reinforcing. High inequality leads to low growth and stagnation because it reduces demand, and low growth reduces fiscal resources available for redistribution, employment and wealth creation.
Historically, white monopoly capital played a core role in reproducing South Africa's unequal economy. In the mid-1980s, some 83% of JSE shares were owned by four giant companies, all owned by white South Africans.
Since then, the structure of capital has changed significantly with investment diverted from fixed capital into high-return (often speculative) financial investment.
Today, much of white monopoly capital has globalised, with foreign primary share listings and foreign interests and investments far surpassing their local interests.
Indeed, private capital in our economy is now significantly foreign-owned — just under 40% of JSE capitalisation and 50% of the JSE top 40. About 40% of our government debt is financed through foreign savings, which is why investment status and related costs of borrowing is important.
This has enormous implications for economic restructuring. Globally, this foreign-based big capital is driven by short-term shareholder maximisation, and ownership traded in highly liquid markets.
This seriously limits our ability to draw such capital into a national development project. And given low domestic savings and current levels of government indebtedness, disinvestment at scale threatens national sovereignty.
Current political and policy instability also drive investment away.
We must not reduce transformation to black rent-seeking replacing white rent-seeking. Economic transformation is not simply about increasing black ownership of the large JSE-listed corporations to the corresponding reduction of South African white and foreign ownership.
Even if this could be accomplished without capital flight, it will not reduce overall inequality — in fact, inequality could increase
A fundamental economic restructuring is required, where rent-seeking is replaced by development of productive capabilities in which the previously dispossessed have a high share on a mass scale.
Government policy must shift from redistributing existing assets to linking redistribution to productive outcomes.
We also need to understand how state-owned companies can be managed for developmental reasons, rather than for personal ends.
So what is to be done?We must construct a new national economic consensus upon three national obsessions:
• Inclusive growth, based on fostering new logistics and technological capabilities;
• Constructing a state that is stronger, more capable, less corrupt and more developmental; and
• Improving the quality of public education and training.
The current conjuncture is not a choice between either transformation or growth.
Growth without transformation will exacerbate inequality, leading to increasing social tensions, and the rise of populism.
Transformation without growth will be accompanied by disinvestment, rising unemployment and less wealth to redistribute. Decreased state revenue will lead to a reduction in fiscal redistribution (for example on social welfare).
Without growth, transformation will make us poorer; without transformation, growth will exacerbate inequality, which will make growth unsustainable.
Working against the consensus are the vested interest in the status quo and the leadership crisis where leaders are focused on fighting for their survival rather than national interests. Visionary leadership capable of mobilising support across interests and sectors and managing spoilers is required. We have no choice.
• Jonas is a former deputy minister of finance. This is an edited version of a speech he gave at the University of Johannesburg. The full text can be found online at timeslive.co.za..