The Missing Piece by Kevin Lings

[Philip Copeman]

Arguably this is the best book this year on the South African Economy and is a must read for any Azanian student of the dark art of economics. The Missing Piece is worth the read simply for the revisionist summary of the last 20 years. Anyone that has tried it, knows how difficult it is to collect comprehensive data from multiple sources on the SA economy. Lings integrates the data from a number of public sources and gives us a very clear statistical picture of the changes that have happened 1994 to 2014. He does this is an easy format with no tables, no formula and no economic jargon. This book is easy going for even the most basic reader and whatever your view on the PPE (philosophy, politics, economics) of South Africa this is a useful source for argument. However it falls short of being a great book...

Lings divides macroeconomic goals into four divisions: Global integration; Macroeconomic policy; Social programs; Infrastructural development. He rates South Africa as successful in the first three and woeful in the forth, Infrastructure. The first 80 percent of the book gives us a fair description of the last two decades. In particular The Missing Piece reminds us of the success of Trevor Manuel and Tito Mboweni, an inconvenient truth lost on both the modern political opposition and the current ANC regime that have promoted a Stalinistic purge of the first 10 years of the economic history of the South African Independence.

After fully describing the last 20 years of economic progress and our current shortcommings, we are treated to a solution. For Lings, the “Missing Piece”, the solution to our problems, is expanding internet access, the development of infrastructure, delivery of a stable electricy supply and the promotion of a culture of education. He then thanks his wife, Stanlib for giving him the resources to collate the data.

…. Bertrant Russel said, “There would be more atheists if men did not protect their wages”.

Lings is a believer with a blind faith in the system that is reserved for the opulently employed. It is a sad corollary that any book on economics written by a University Professor or Corporate executive is first going to protect his employers and then as a secondary goal, give a fair assessment of reality. So whereas Lings is quick to point out the success of the financial service industry in South Africa, he fails to mark the link that this success has had to the narrowing of wealth in South Africa.

The Missing Piece describes the Gini Coefficient, but fails to see how the expansion of the financial sector has encroached on the SME sector and driven many of the very players he wishes to support out of the market. Since 2008 active VAT payers have dropped by 100 000. Behind each of those drops is a heartbreaking story of a failed SME. In pre 1994 is was relatively simple for a small entrepreneur to gains access to unsecured finance at reasonable rates (I know I did it). It is impossible in 2014. It is easier to borrow at usurious rates against a Governement salarly than it is to buy stock for an SME business. Business finance in 2014 is available only to those that already have capital (I know I do it). Such is the extent of the carry trade that there are few industries left in South Africa, where an SME can compete without soon coming up against a bank or pension fund.

Lings correctly sees the horrific turn around in the fiscal deficit, but fails to shame the financial sector as the willing accomplice. (Someone has to buy those bonds). He fails to point out how we have hocked our future to the financial institutions, who in turn have sold their equity to foreigners and how his salary and profit bonus is going to be paid by generations of South Africans to come.

However it is in the denouement of The Missing Piece that Lings really falls short. It is not genius to build infrastructure. It is surely obvious to all observers, from Jacob Zuma in his blue light cavalcade to the humblest of office clerks stuck on the side of the road that South Africa falls short in the development of infrastructure. Lings presents us solutions, but they are untenable solutions and serves rather as a hollow list of dreams of little more value than a Julius Malema rant. Worse, from his gilded cage Lings is unable to mouth the words “There is something rotten in the state of Denmark”.

Why have we not followed the obvious – to expand infrastructure? Surely it is a simple transfer of resources into developing infrastructure from where we currently spend them. Aye and there is the rub.

In an unholy alliance, driven primarily by the financial sector, a small group of tax payers supports a corrupt regime that does little more that collect taxes and pay themselves. (while tossing a R 100 Bn bone to 15 Million SASSA voting dependents). Ling fails to point out that 60% of tax collections go straight out of the fiscus into Government wages and the following day into the tills of retailers, in shopping centres paying turnover linked rent 15 days later to the financial sector.

The “Missing Pieces” are going to stay missing unless we are able to move resources away from the incumbents and onto the productive. You can't employ better maths teachers if you don't fire the bad ones that you already have. You can't build roads if you don't move funds away from paying municipal counsellors and into buying building material. You can't develop the SME sector unless you are prepared to drive back the boundaries of the cosy relationship between the tax paying 1% and the top feeders, whose uncontrollable greed is diverting funds away from development to satisfy their consumption needs. In summary – big business out - party faithful out – infrastructure solutions in.

Yes we need to build infrastructure, but that solution may require radical action like driving the “newly created middle class” from their highly paid tax collecting desks and into the SASSA queues to collect their far less share of the bones. Other than the fact that a hamstrung Lings doesn't actually have the agility to honestly tell us the real solution, The Missing Piece is a good read.