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“Today, all of us, by our presence here, confer glory and hope to newborn liberty. Out of the experience of an extraordinary human disaster that lasted too long, must be born a society of which will be proud. …
“We have, at last, achieved our political emancipation. We pledge ourselves to liberate all our people from the continuing bondage of poverty, deprivation, suffering, gender and other discrimination. …”
Thus spoke South Africa’s first democratically elected President, Nelson Mandela, on the event of his inauguration on May 10 1994. Indeed, to witness the installation of South Africa’s first black president was to “confer glory and hope to a newborn liberty”. The road to freedom had been a long and hard one, but it has certainly not ended. The President went on, “… I have discovered the secret that after climbing a great hill, one only finds that there are still many more hills to climb. I have taken a moment here to rest. …” The hills of “poverty, deprivation, suffering, gender and other discrimination…” still had to be climbed. Not surprisingly, therefore, immediately after the installation of Nelson Mandela as president, indeed long before that, the powerful media machine that is tied to South Africa’s most powerful conglomerates began raising the spectre of a “crisis of expectations”.
With every passing day the editorials wondered out loud: “There is a grave danger of the new government being seduced by economic populism”, said one; “It is necessary instil a new culture among the people, there is the grave danger of a culture of ‘entitlement’ taking root among the people”, said another. “The ANC must now become a proper political party, it must rid itself of populist wing” said yet another one.
South Africa’s rich and ruling classes had done all they could to protect their property. In the run-up to elections they had managed to secure a constitution that enshrined the to “right to property” as an inalienable right of every human being, which stood on the same plane as a right to a life free of discrimination. But the maze of constitutional “checks and balances” were clearly not enough to ensure a sound sleep for Johannesburg’s northern suburbs, where the rich and powerful still treated themselves to urban legends of how the maids will take over not only the property of the madams, but to crown it all also their husbands.
The forced coalition that was imposed on the ANC – the so-called government of National Unit (GNU) -was buttressed by a division of cabinet portfolios that saw the all-important post of Minister of Finance given to the former, and later, head of one of South Africa’s large all-powerful press, was necessary for “business confidence”. After all, in a thick tome rather deceptively name the “Normative Economic Model”, Keys had consecrated as government policy, in the dying days of the National Party government – in 1993, to be exact, the economic policies of the new right.
In that heavy tome Keys, with the able assistance of the country’s leading banker, Chris Stals, spelt out the new economic religion. Henceforth, they inveighed, there shall be “monetary and fiscal discipline and the curbing of inflation”, “the promotion of responsible wage and price determination”, “the establishment of international confidence”, “the redemption and servicing of foreign debt”, “growth in government expenditure [shall be curtailed]”, there shall be “commercialisation, corporatisation and privatisation”, “the promotion of the country’s ability to export…”. And so the commandments went. A process that South Africa’s National Party government had started in the 1980s now found its systematic expression in the Normative Economic Model.
The fact that Derek Keys was the first Finance Minister of the democratic South Africa, and Chris Stals its first Central Banker, was the first small but significant sign that the winds of economic change were blowing through the ANC.
The ANC, however, had not come into government with empty pockets. In the run-up to the 1994 elections the ANC, under the encouragement of the country’s largest trade union federation, COSATU, had adopted the Reconstruction and Development (RDP) Programme. The RDP declared its ancestors to be the Freedom Charter and the traditions of the democratic movement in general. In a popular pamphlet promoting the RDP, the ANC seized the bull by the horns: “Some people argue that we must first strengthen our economy and only then can we provide money to develop our poorer, disadvantaged communities. The RDP says NO to this. Of course, we need our economy to grow. We need to produce more. But also need to start now to wipe out poverty. Our people can wait no longer. Building the economy and developing the country must happen side by side…”
The RDP is organised into five key programmes. These are: Meeting basic needs such as jobs, land, water and electricity – among others; Developing Human resources, which meant focus on education and training; Building the economy, which meant the development of detailed industry and trade policy, upgrading infrastructure and improving labour rights; Democratising the State and Society, which included adopting a progressive constitution and reforming important arms of the state such as the armed forces; and an implementation strategy for the RDP, which largely covered how the RDP would be financed.
The RDP became the electoral platform of the ANC and among aspirations of the oppressed communities.
The RDP also set out specific targets and time-frames for the implementation of its social goals. For example, the RDP planned to supply 20 to 30 litres of water to every person within two years, this given the fact that in 1993, 12 million people, out a population of about 40 million, did not have access to clean water; one million houses would be built within 5 years; 2,5 million houses would be electrified within 5 years, and so on.
When the ANC entered government the RDP was reworked into a government white paper. The publication of the white paper signalled the first movement away from the RDP platform, and already in the white paper, the recently elected ANC government committed itself to the “gradual reduction of the fiscal deficit”, to ensuring that “government recurrent expenditure does not increase in real terms”, “to reducing government dissaving overtime” and so on.
After a mountain of “green papers”, “white papers” and discussion papers, and after two years of equivocation and confused signals, the ANC government finally ran the gauntlet and produced a macro-economic framework titled, “Growth Employment and Redistribution”. With a passion for acronyms for which South Africans are renowned for, the document came to be known as GEAR.
It was indeed a change of gear. The ANC in government had given birth to a macro-economic strategy that was an identical twin, not of the RDP, but of the Normative Economic Model. In the press conference that publicly launched the government plan Thabo Mbeki, one time ideologue of the South African Communist Party and member of its politburo, then Deputy President of South Africa, said, “call me a Thatcherite!”. The comment was of course intended as a tongue-in-cheek joke, but it was certainly not far off the mark.
Immediately after its publication, President Mandela made it clear that the “fundamentals” of the economic framework were not for negotiation with the governments “social partners”, i.e. labour and business. Just as well, for the “fundamentals” of the GEAR read like the commandments of the normative economic model, the very one the RDP was an alternative to. It was the turn of GEAR to inveigh: there: shall be “a tighter fiscal stance in the short-term to counter inflation”; “an appropriate medium-term deficit target to eliminate dissaving…”; “a further step in the relaxation of exchange controls”; “a social agreement to facilitate wage and price moderation”; “… transformation towards a competitive outward-orientated economy”; “… a roughly constant level of real recurrent government expenditure and a reduction of 3 percentage points in this aggregate… by the year 2000”; “an accelerated tariff reduction process”.
The GEAR document reads as if South Africa is trying to quickly meet the Maastricht criteria for a single European currency in 1998. A fiscal deficit target of 3% of GDP is to be achieved by 1999, just one year short of the deadline for convergence! Public sector “right-sizing” is to be effected and privatisation will “lead off with the sale of non-strategic assets and the creation of public-private partnerships in transport and telecommunications”. In the race to ‘join’ the European Union social services are to be cut, so that the “claims of the poor to a fair package of basic needs” should be met while “eliminating or scaling down activities which cannot be provided at all or which could be undertaken by the private sector”.
True to form, hospitals are being closed in major areas of need such as Johannesburg, the education budget is falling in real terms while the number of students from disadvantaged background is rising, leading to a major financial crunch in the education system. Ministers have been sent to Chile to “study” that country’s infamous privatised pension system. Under the guise of “redistributing resources to previously disadvantaged communities”, old-age homes are being closed; public transport is being run down and being prepared for privatisation. The list is endless.
Not for nothing did the first ANC Finance Minister, Trevor Manuel, receive a warm welcome at the joint Annual Meeting of the World Bank and IMF. The GEAR was a mirror image of the “eleven commandants” of the Bank. Indeed, in the team that drew up the document on behalf of the Minister, two World Bank economists occupy pride of place. The Bank and the IMF were not the only ones to fill the champagne glasses. South Africa’s business community was equally ecstatic. GEAR had turned out to be a rather pleasant surprise. Said one of the captains of industry, “There was a fear the new government would be more interventionist but the reverse has happened. We are better on two counts: the new government is more enlightened than predicted and is more market orientated”.
If for South Africa’s rich and powerful the “mountain had brought forth a molehill”, for the activists in the democratic movement, in the ANC and the Unions “they had sown dragon’s teeth and harvested fleas”. Up to the publication of Gear, a sense of disquiet within sections of the democratic movement had been kept in check by a combination of vague statements, new right economic policies clothed in the colours of the RDP, and of course by a good dose of political footwork.
The publication of GEAR, however, has drawn criticism from within the democratic movement. GEAR was criticised for being a “neo-liberal” economic programme and there is a growing concern within the trade union and some churches about the direction of government policy. The National Institute of Economic Policy, a research institute that was policy for the organisation published a paper, “From RDP to GEAR: The Gradual embracing of neo-liberalism in economic policy”, in which the GEAR strategy is criticised for abandoning the goals of the RDP. More significantly, COSATU also produced its own assessment of GEAR in which it said that “we have concluded that the proposed framework and policy scenarios represent an adoption of the essential tenets and policy recommendations of the neo-liberal framework advocated by IMF in its structural adjustment programme”.
The as yet small but growing opposition to the government’s direction also gave rise to demonstration against the visit to South Africa, at the invitation of the government, by Michel Camdessus, the managing director of the IMF. There were placard demonstrations at Johannesburg airport when he arrived, and in Cape Town when he addressed the parliamentary committee on Finance. The demonstrations around the visit also gave rise to an ad committee that brings together NGOs working in different fields but who are concerned or opposed to the neo-liberal policies of the government. The committee, called the Campaign Against Neo-liberalism in South Africa, has issued media statements and is also trying to broaden its basis and to establish itself on a more ongoing basis.
Although the post-liberation consensus appears to be breaking, the mass of the people, though increasingly bitter and cynical at the lack of any delivery of the promises of freedom, are still watching and looking forward in anger. The ANC leaders are not unaware of this gathering storm. Here and there even they look back in shame. On World Poverty Day, the Deputy-President, Thabo Mbeki suggested that a section on “human development” could be added to the GEAR document. Although Trevor Manuel was quick to point out that “nothing could be further from the truth” than the suggestion that “government’s macro-economic strategy is in conflict with human development and redistribution goals of the RDP”, it is clear that the ghosts of the pasts are haunting the sleep of the new ruling classes.
In many parts of the world elites wanting to implement policies promoting “get rich capitalism” have usually dealt with opposition to their policies by saying that in the present context there is no alternative, on the one hand, and by saying that their critics are unable to offer any way out anyway. Unlike other elites, however, the ANC has other reasons to look “back in shame”, and although the standard arguments of elites are dished out, when they come from the mouth of the ANC they are less convincing. The reason is that side by side with the process that produced the RDP, the ANC commissioned a group of economist from South Africa and from abroad, to produce a detailed macro-economic strategy which would not only spell out the path of economic development that would realise the goals of the RDP, but one that would also provide an answer to Derek about the Macro-Economic Research Group or MERG, later to become the National Institute of Economic. The MERG produced an equally large tome on macro-economic strategy, published in 1994, titled Making Democracy Work. Most of the criticisms of GEAR have in one way or another drawn from the work that was done by the MERG project.
Some of the people who participated in the drawing up of the MERG report now occupy prominent positions in government, and some have participated in producing the exact opposite of policies suggested in the MERG report. Some of the people are: Trevor Manuel, Minister of Finance and Maria Ramos, then Director-General of the Department of Finance which commissioned the GEAR; Alec Erwin, former unionist, then Minister of Trade and Industry, who as cabinet minister had to defend GEAR and the invitation of the Managing Director of the IMF; Stephen Gelb, a researcher at the University of Durban-Westville, who now also wrote the GEAR document; Brian Khan (an academic), Servaas van der Berg (an academic), also have the “honour” of having participated in drawing up two diametrically opposed macro-economic documents within the space of 18 months. The team of 15 that wrote GEAR includes 6 economists who also participated in the writing of the MERG report.
The MERG report was not oblivious of the domestic and global problem that faced any attempt to reform the South African economy. In its opening lines it states that “despite difficult conditions globally and domestically, this new economy can be achieved. Other countries have made transitions which are similar in scale, although their specific problems have differed from those of South Africa. What is required is effective state intervention, a vigorous private sector, …”
Besides providing a critique of the National Party’s Normative Economic Model, the MERG reports spell out an economic strategy for the transition. The economic strategy is divided into two periods: the public investment phase, and the “sustained growth phase”. Whereas GEAR starts with a private sector led growth and stays like that, the MERG argued that during the public sector led growth phase the “rate of growth of corporate sector capital stock relative to GDP is low, but it picks up in the [second] phase”.
MERG also argues that this choice of phases would avoid balance of payments problems, since the first phase of the strategy, and its focus on building houses, infrastructure and human resource development has a low import content, and is less likely to lead to BOP crises. Interestingly, the MERG has a very cautious fiscal policy, and suggests that the “starting point for the design of fiscal policy is the principle that the relative size of the public sector investment has to be increased. If the targeted rate of growth in non-interest government expenditure is to be sustained, the proposed increases in public expenditure for human resources development, not into low productivity employment in the public sector, nor into consumption-orientated social welfare”. The report also commits itself not to raise personal income tax as a % of GDP. As a result of the public sector led growth strategy in the first phase, public debt will rise initially, but as the second phase of sustained growth begins the expenditure on physical and social infrastructure fall and with it the debt.
A major difference between GEAR and MERG is the way they treat provision of social services. For GEAR social services will be cut in the short-term and will be provided for when the economy grows. For MERG the provision of social infrastructure is integral to the growth process, with services such as housing provision, health provision, education provision and general poverty alleviation will boost economic growth via their multiplier effect and their contribution to increasing productivity in the economy as a whole.
The more than 300 pages of the MERG report have provided the basis for many of the COSATU documents criticising GEAR, and many people critical of GEAR look to the MERG report as an alternative that manages to take account of present global realities and at the same time provide a strategy to achieve the social goals of the liberation movement. For many who are critical of GEAR, it is clear that the adoption of GEAR by the ANC is not for want of serious alternative, but rather to a change in the overall orientation of the ANC leadership.
But if it is now becoming more and more obvious that the ANC government is adopting the economic policies of the new right, the questions still remains, and is increasingly asked: how did it come to pass that the ANC would so quickly from being a party committed to the interests of the poor to one now speaking the language of the rich?
It takes six to tango: the elites find each other
The theme of deliverance from oppression and darkness in South Africa was not invented in May 1994. Forty-six years earlier, one DF Malan and the volk he led also had their own experience of a “miracle of a freed nation”. “The outcome of the election”, he solemnly declared, “has been a miracle…… Afrikanerdom has lived under a dark cloud and the future has been black for many years. We feared for the future of our children. But the cloud has disappeared and the sun is shining once more. … In the past we felt like strangers in our own country, but today South Africa belongs to us once more… May God grant that it always remains our own”.
The National Party, a party of militant Afrikaner nationalism, had won the general election by a slim margin, its power within the state by means both fair and foul. Although the wish that South Africa “always remain our own” has been denied by history, the white future that the National Party unleashed on the majority of the South African population lasted long enough for the White ruling classes to accumulate riches easily without parallel in the world. So huge was the largesse from black skins that even the “claims of the poor to a fair package of basic needs” was assured. That the poor happen to be white was of course ordained by God, “from whom all blessings flow”.
An already highly concentrated ownership of wealth was concentrated further in the 46 years of National Party rule. Via a series of state measures, corporate marriages and a legislated swindle of the country’s majority, by 1994 South Africa was confronted with a white corporate elite that dominated both the state and society. From the mid-1980s this white corporate elite, made up of South Africa’s five largest conglomerates – Anglo American, Sanlam, Old Mutual, Liberty Life and Rembrandt – ensured a succession of Ministers and Central Bankers that were committed to implementing a neo-liberal economic programme. They were the power that stood behind the Normative Economic Model, and they ensured the first critical months of rule would be presided over by their handmaidens.
But the Brenthurst Group – as these captains of industry have come to be known after the name of the residence of the Oppenheimer family, South Africa’s richest family -had a more powerful weapon at their disposal: the state bureaucracy. With the able assistance of the erudite general secretary, Joe Slovo, South Africa’s white monopoly interests were able to guarantee that the bureaucracy would grace the new order with its presence for a few decades to come. In the armed forces, the outcome of the ingenuity was to ensure that the old Defence Force – notorious throughout the Southern African region – would preside over the newborn democracy. The symbolism of the continuity of the old order was expressed most graphically at President Mandela’s inauguration. Without a touch of irony, the president was to later write in his autobiography: “…. A few moments later we all lifted our eyes in awe as a spectacular array of South African jets, helicopters and troop carriers roared in perfect formation over the Union Buildings. It was not only a display of pinpoint precision and military force, but a demonstration of the military’s loyalty to democracy…”.
It is impossible to understand the ANC’s embracing of the political-economy of the new right without appreciating the stranglehold that the old order, its powerful monopoly interests and its bureaucracy continue to exercise on the new order. The GEAR document represents the last laugh of the old order as it “rides blissfully into the sunset”. The GEAR is the political testament of the white monopoly capital in South Africa.
White monopoly capital has invested a lot of money and energy to seduce the ANC into lying down with it. The methods were both brutal and prosaic. The large-scale violence unleashed on the black townships of South Africa’s industrial heartland, Gauteng, had the express purpose of weakening the traditional base of the ANC. Large contributions to the ANC election coffers and the personal relations that were built in the process softened up the ANC. Increasingly, the leadership of the ANC is dined and feted in the mansions of South Africa’s rich and the high salaries of the parliamentarians and the new black bureaucratic elites – the now infamous “gravy train” – also ensure a social distance between the and its mass constituency.
But white monopoly capital could not tango alone in this seduction of the ANC. The increasing internationalisation of capital that now dominates the political and economic headlines has increased the power of the Transnational corporations and their bailiffs, the World Bank and the IMF. The neo-liberal economic gospel of these forces and institutions is well known, and their interests coincided with those of South Africa’s white monopoly capital. Together, however, they had to find some forces within the historically oppressed classes which could share their interest in moving towards the get-rich-quick capitalism that they represented. Enter the new black corporate elite.
The storm and stress period of the mid-1980s had convinced some of the farsighted sections of the ruling class that a “strong middle-class” among the black population was needed to defend and promote the way of “free enterprise” way of life. The liberation forces at the time had responded to the concentration of wealth in South Africa by embracing the ideals of socialism. The concentration of economic power in South Africa, however, precluded any spontaneous emergence of a strong black middle class. Such a class could only come about as a result of a conscious political strategy. Apartheid, however, stood in the way of such a strategy.
The end of legal apartheid, signalled by the unbanning of the ANC and other organisations, and completed by the elections of April 1994, now made possible a vigorous pursuit of the strategy of building a black elite. Under the new conditions it is of course no longer to just build a “middle-class”,
blacks had in some way to be brought into the very corridors of corporate power. Thus was born the “black economic empowerment” movement, which some more honestly refer to as the “black enrichment movement”. The black enrichment movement, however, did not just reflect a political plot by white corporate interests, it also reflected strong desires for enrichment by an up to then small black elite, whose numbers were now swelled by the new layer of parliamentarians and black top bureaucrats.
But the aspiring elite had two problems. The one problem was that the deal struck in the constitutional negotiations with the representatives of the old order had blacked any use of the state as an instrument of accumulation. The apparatchiks of the old order, the National Party, knew all about how to use the state as an instrument of dispossession and self-enrichment. They were not going to stand by and watch the new apparatchiks do unto them as they had done unto them. So it came to pass that a path that had proven lucrative to all aspiring elites has come to be blocked for new black elites in South Africa. It must of course be said that what was blocked was not the self-enrichment of individuals – after all they could vote themselves as high a salary as they wished – but rather the use of the state for land and company grabbing that the National Party its predecessors had perfected in their centuries of rule.
If the political road to richness was blocked, the economic barriers to entry in the most profitable industries were formidable. South Africa’s industrial structure is highly capital intensive and ownership is equally concentrated. Not a cent to its name the black elite turned to white monopoly capital and to transnational capital to ask for the capital that would give it a place in the sun. From its birth, therefore, the nascent black capitalist class is stamped with the mark of dependency. It is compradorist to the core.
The two most important initiatives in the formation of a black class of corporate chieftains both come from the country’s largest conglomerate, the Anglo-American corporation. In dramatic developments Anglo-American sold two large companies to consortia of black businesses. The one company is Johnnic, a large holding company with interests that include the ownership of the countrys large newspapers, the world’s third largest brewery – ‘South African Breweries, as well as Toyota South Africa and other industrial and commercial interests. Johnnic was sold to a consortium which included the most powerful black corporation, the New Africa Investment now led by Cyril Ramaphosa, the Secretary General of the ANC. The other company, Johannesburg Consolidated Investment, or JCI, was sold to another black consortium, Capital Alliance. JCI has interests mainly in mining, including mining portfolios in a number of African countries.
The large place in the sun conferred by the acquisition of Johnnic and JCI by the black groups does not shake off the mark of dependency. The finance for paying for this acquisition was supplied by South Africa’s large financial institutions and some overseas money. Through a number of cross-holdings and interlocking directorships the seller, Anglo-American Corporation, has significant and sometimes quite decisive interests in these financial institutions. Anglo-American, however, is a farseeing corporation, and so understands the price that has to be paid to secure the future of capitalism in South Africa. Anglo-American is an old hand at giving with one hand and taking back with the other. In the 1960s, in circumstances not too dissimilar, interests in gold mining, with the political intention of muting criticisms that mining was blocked to Afrikaner capital.
Together with local white monopoly capital and transnational capital, the black elite now joined the tango that was producing and celebrating the victory of the political economy of the new right in South Africa. “With freedom comes responsibility”, and for the nascent black capitalist class its most important responsibility is to legitimate the new neo-liberal order. But the cast was not complete.
The marriage of naked money interests was too prosaic for a nation steeped in the mythology of its own uniqueness. The liberation movement’s priests of theory had to be summoned to bless the marriage as an event worthy of the democratic and socialist traditions of the mass movement in South Africa. Two of our prestigious priests of radical political economy solemnly pontificated:
“global competition in trade and finance, as well as narrow fiscal constraints makes…a wage-led strategy more difficult to defend and sustain, given the link between unit labour costs and international competitiveness… the more pressing problem [is] on the supply-side of the economy, requiring ‘profit-led’ growth. Wage restraint should be treated as one element of a compromise between labour and capital”.
Thus wrote Eddie Webster and Stephen Gelb, one time doyens of radical and political economy in South Africa. Gelb graduated and went on to be co-author of the Gear document.
On the sidelines stood the Communist Party, in its own words “still spinning” from the rude cutting of the umbilical chord that tied it to Moscow. From counselling its members to tread softly softly when discussing GEAR, the party went on to admit that in “any way we don’t have the capacity” “to come up with an economic strategy”. Only one party now awaited to be admitted to the inner circle: the trade unions.
The trade union leaderships are trying to be men for all occasions. One day they are issuing a position paper castigating Gear as a neo-liberal document, and threatening to mobilise their members for the defence of the ideals of the RDP. In the same breath they would be pleading with the ANC not to abandon its constituency, and simultaneously assuring capital that their interest will not be prejudiced. The next day the union leaderships would be buying heavily into the black enrichment deals and other stocks on the financial markets. In the Johnnic deal a number of COSATU unions and those belonging to the second biggest federation, the National Council of Trade Unions, NACTU, participated in the consortium that bought the company. Union investment companies have seen the ushering in of an era of business unionism in South Africa. Many of these investment companies are now lining up to buy the companies that are being privatised as part of the ANC. The effect of this footwork has been that notwithstanding their theoretical opposition to GEAR, the unions do not seem prepared to mobilise their members against this home-grown structural adjustment programme.
And so it came to pass that a movement steeped in democratic and socialist traditions should become a champion of the political economy of the new right. It took a complex and macabre dance by six partners to realise this transition. For the time being, the masses are looking forward in anger. It would seem that they are still numbed by this betrayal of hope. Deputy-President Mbeki is aware of the impending storm. As he had occasion to remark, “When the poor rise, they will rise against all of us!”
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