I’ve been pondering the process of change quite a bit lately, especially with regard to structural reforms in South Africa, parastatal reform being quite a hot topic at present.
I know that many people in South Africa currently hope for good news regarding structural economic reforms, notably with regard to improving the performance of many areas of broader government. Widespread mismanagement and corruption is widely reported, and this large part of the economy has become the key “drag” on growth performance.
But recent revelations at emerging from South Africa’s power utility Eskom (and certain other key parastatals) around investigations and progress relating to widespread corruption and mismanagement can be both encouraging and demoralising at the same time.
That the investigating authorities are on a “drive”, and appear to be making progress in uncovering malpractices, with action already being taken, is encouraging. But as the scale of the decades of mismanagement becomes evident, one can be forgiven for wondering if it is at all fixable, and this can be rather demoralising.
Often, as better information around the extent of a crisis emerges, and big battles between the proponents of change vs those who are anti-change heat up, progress towards a sustainably better situation can often feel more like we are going backwards. This is perhaps due to a lack of understanding of the realities of the process of change.
One thing that we must understand is that the time frames for fixing this crisis are likely long ones at best, no matter how good the new Eskom board and management may be. Not only is this due to the sheer magnitude of the malpractices, which have built up over decades, but also due to the likelihood that people who benefit from these practices won’t go without a fight.
There is an apparent attempt by Government at a massive change in how Eskom (and other key parastatals it seems) operates, and any change will see some groups sidelined from the “benefits” in the process. Worse, some may end up being convicted for their crimes and face jail time, while many ordinary workers may lose their jobs. This almost inevitably brings about strong resistance to change.
In the early-1980s, Margaret Thatcher’s reforms in the UK brought about huge and almost inevitable battles….trade unions being one of her big adversaries. When she moved to privatize mines, a national mining strike of more than a year followed. She dared not blink first. Winning these battles despite significant disruption to the economy was crucial to making progress in the longer run.
As it was in Mrs Thatcher’s case, it is important in the Eskom case that the authorities moving for positive change win these reform battles in order to ultimately take the economy forward on a more sustainable basis.
Economics 101 text books teach us how a policy change instantly shifts the supply and demand curves to a new equilibrium and life goes smoothly on. But in the real world of human nature and vested interests, the change adjustment process is a far slower and rockier path.
Mrs Thatcher’s 1980s battles give us some insights into the rough process of structural reform that may await us…..where positive change can first require a very rough, uncertain and turbulent period as big battles play out. It is this sometimes very rough path to positive change that, I believe, many members of the public and commercial sector are not prepared for and are often surprised and horrified by….and may incorrectly interpret it as a sign of going backwards instead of forwards.
But Thatcher’s era in the UK also showed that if it is the “right” structural reform, that rocky period can be followed by a future period of improved and more sustainable economic performance….if the often tough reform battles can be won.
Domestically, it was a similar story in the dying days of Apartheid rule. The end of minority rule was effectively announced on the 2 February 1990. This was likely the most positive policy reform that could have been made at that time. But 4 extremely volatile and uncertain years followed in the run up to the 1994 democratic elections. For those 4 years of recession, violence and unrest, it often felt more like we were going backwards rather than forwards at times. Only thereafter to economic performance meaningfully improve, and a relative economic boom period ultimately arrived…a period that is unlikely to have happened without those early-1990s reforms.
It is a case of short term pain in the hope of long term gain, and historic examples of major structural reform suggest that it would be unrealistic to expect quick and smooth results. It is important to understand what the process of change can imply.
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