South Africa Suffers Capitalist Crisis Déjà Vu. Above, Ramaphosa and Zuma
The old guard of South Africa’s ruling party put on new clothes last year, and a new party of the working class finally made its debut.
A year ago, the majority of South Africans stared into the abyss. They faced either a continuation of corrupt misrule by a stereotypical kleptocrat—Jacob Zuma—whose anti-imperialist rhetoric failed to disguise worsening austerity, or a potentially dramatic change of political direction toward liberal capitalism.1 Next door in Zimbabwe, Robert Mugabe had just been pushed out in a wildly popular palace coup that at least superficially shared South Africa’s ideological overtones, given that his successor, Emmerson Mnangagwa, also courts big business while maintaining a liberal veneer.2 The choice was obvious at least for South Africa’s urban citizenry, a large subset of which had campaigned against Zuma and his increasingly notorious cronies in the 2017 “Zuma Must Go!” movement. Finally, in late December 2017, 52 percent of the ruling African National Congress (ANC) delegates voted for the party’s next president, narrowly electing business tycoon Cyril Ramaphosa over former African Union chairperson Nkosazana Dlamini-Zuma, Zuma’s loyal ex-wife.
Ramaphosa, who, according to Forbes, was worth more than $450 million in 2015, grew rich through ownership of McDonald’s and Coke franchises, as well as banking and extensive coal and platinum mining interests. But as the major local investor in Lonmin—the British producer of platinum metals operating in South Africa’s Bushveld Complex—in August 2012, he e-mailed the police and mining ministers to describe a wildcat strike at the Marikana platinum mine as “dastardly criminal” and requiring “concomitant action.” The next day, police massacred thirty-four workers in what became known as the Marikana massacre. Ramaphosa only apologized for his e-mail in 2016, and in early 2018 admitted the need for “atonement” for Marikana. The $1,000/month minimum wage demanded by the Lonmin rock-drill operators in the mines was never won, in part because the platinum price soon plummeted. Lonmin lost 99.3 percent of its share value in 2015 as the commodity supercycle collapsed and, facing bankruptcy in 2017, agreed to a friendly takeover by a firm (Sibanye) prepared to fire 40 percent of its workforce as soon as the takeover is completed this year.3
“In early 2018 Ramaphosa admitted the need for “atonement” for Marikana.”
Prior to this incident, Ramaphosa had epitomized the ANC liberation movement’s venerated old guard, having led the mineworkers’ union in the 1980s, served as the ANC’s secretary general (chief operations officer), and chaired the drafting team for the country’s first democratic constitution in 1996. The focus on constitutionalism had prevented Ramaphosa from winning the power struggle within the ANC to become Nelson Mandela’s heir apparent. Nevertheless, during the fifteen years that Thabo Mbeki edged him out of politics, his business career boomed. There were, however, snags along the way, including two embarrassing bankruptcies in the late 1990s, at a time when all South Africa’s black business elites learned the limits of borrowing money at expensive rates in order to buy into white companies that were suffering share-price overvaluation.4
But soon enough, Ramaphosa evolved into the ideal Johannesburg branch-plant comprador partner to multinational corporations, aiding both Lonmin in brazen Illicit Financial Flow (IFF) profit transfers to Bermuda, and MTN—the largest African cellphone firm, which he chaired—in its prolific profit outflows to Mauritius. He also featured as a tax-haven abuser, via his main holding company, Shanduka coal, in the Paradise Papers leak in late 2017.5 Yet, as a nationalist politician, Ramaphosa retained sufficiently strong organizational skills to advance within the ANC. In the immediate wake of the Marikana massacre, incongruously, he was chosen as Zuma’s deputy party president. He became the state deputy president during Zuma’s second term in power, from 2014 to 2018.
“Ramaphosa must restore ANC unity and avoid the kinds of debilitating splits that lost it 9 percent of the vote to the right in 2009 and 6 percent to the left in 2014.”
Even though Ramaphosa and his allies pushed Zuma out of power last February, fourteen months ahead of schedule, the corruption-riddled era is not yet over. Bitterness prevails within the ANC’s patronage network, especially in Zuma’s heartland of KwaZulu-Natal province, home to an ongoing ethnicist Zulu backlash. Vast sums of tenderpreneurship winnings are at stake in state procurement contracts of more than $45 billion annually.6 For this reason, and because the Zulu people represent the country’s largest ethnic group and yet lack a single regional leader among the ruling party’s top six officials, a rump of Zuma’s supporters continue to slow Ramaphosa’s desired modernization, liberalization, and professionalization of the party, state, and economy.
In order to win more than 50 percent of the vote in the May 2019 national election, Ramaphosa must restore ANC unity and avoid the kinds of debilitating splits that lost it 9 percent of the vote to the right in 2009 and 6 percent to the left in 2014. From winning a high of 68 percent of national votes in 2004, the ruling party fell to 55 percent in the 2016 municipal elections. As a result of the far-left Economic Freedom Fighters (EFF) refusing to support the ANC at that point, the major cities of Johannesburg, Pretoria, and the Nelson Mandela Bay Municipality came under the control of the center-right Democratic Alliance, which had also run Cape Town for a decade. Among the half-dozen largest cities, the ANC only retained local power in Durban and the eastern Johannesburg metropolis. With ever-lower turnouts, the share of eligible voters who supported the ANC dropped from 53 percent in 1994 to 42 percent in 1999, 39 percent in 2004 and 2009, 36 percent in 2014, and 31 percent in 2016. Early polls suggest that in the largest province, Gauteng, voters in Johannesburg, Pretoria, and surrounding areas will give the ANC less than 50 percent of their support. Furthermore, there is the distinct possibility of a coalition government with the EFF, which could trade a provincial alliance for a few national EFF-led cabinet ministries.
Labor, Capital, and Corruption
This context of internecine party power battles, ethnicity, and a potentially decisive shift in voter loyalty against the ANC risks the overpersonalization of the South African struggle for social justice. As an antidote to the official leadership’s electoralism, it is tempting to prioritize the durable class and race struggles underway in the world’s most unequal country.7 After all, every year since 2012, South Africa has been rated as having the world’s most confrontational working class by the World Economic Forum.8 As a result, in 2018 the political elite finally acknowledged that the vast colonial and apartheid land dispossessions would become a powerful election issue, with the ANC now promising “expropriation without compensation.” However, Business Day comforted its readers that “the land debate is largely a political tactic to neutralise the EFF and radical elements in the ANC.”9
As the newspaper’s main political analyst, Carol Paton, put it last August: “For many years the governing party (and its trade union ally) could bluster left and then with a nod and wink to investors, walk right, with the explanation, ‘Don’t mind the noise; we are a robust democracy.’”10 In late 2013, in part due to the Marikana massacre, the largest union—the National Union of Metalworkers of South Africa (NUMSA), with 350 thousand members—broke from the ANC-aligned Congress of South African Trade Unions (COSATU). The South African Federation of Trade Unions (SAFTU) was then launched in 2017. COSATU still has the lion’s share of organized workers—around 1.7 million (more than double that of its left-wing rival)—with its center of gravity now no longer in mining or manufacturing, but in the civil service.
“South Africa has been rated as having the world’s most confrontational working class.”
As a result of these divisions, the class struggle in South Africa is mainly being waged from the top down. Johannesburg’s business district of Sandton has been dominated by rising financial, e-commerce, and merchant circuits of capital. The largest firm is owned by an Afrikaner, Koos Bekker, whose apartheid-supporting media house struck gold when he bought a third of the Chinese equivalent of Facebook, Tencent, in 2001. At the time, the Chinese company was worth $100 million and grew to a peak of $570 billion earlier this year. Bekker’s Naspers displaced former mining (Anglo American), alcohol (SABMiller), and tobacco (British American) firms in leading the Johannesburg Stock Exchange (JSE). Tencent then faced Beijing’s regulatory wrath and was told to stop importing popular Japanese video games, losing more than a fifth of its value. Similarly, the JSE peaked in early 2018 and dropped 20 percent by November, although South Africa still has the world’s highest “Buffett Indicator,” which measures the ratio of share value to GDP, and South African profit rates are among the half-dozen highest measured by the International Monetary Fund (IMF).11
Bekker’s pure luck aside, the South African ruling class includes exceptionally corrupt corporate leaders, who in 2018 once again bested Kenya and France for first place in PricewaterhouseCoopers’ biannual global economic crime rankings.12 Although politicians and civil servants have been rising in Transparency International’s Corruption Perceptions Index (since 1994, South Africa has gone from twenty-third to seventy-first least dishonest country out of 180 polled), South African state malfeasance still pales in comparison to that of the Sandton and Stellenbosch capitalists.13 But the two often come together, as in the case of the notorious Ajay and Atul Gupta—brothers who, fusing corporate and state graft with exceptional potency from 2009 to 2017, dealt a significant blow to the ANC while building a wide-scale patrimonial crime syndicate that numbered in the thousands.
During the mid–1990s, the Guptas began their South African careers selling street-side merchandise from their cars. By 2013, they were powerful enough to take over state military facilities for their personal parties and run massive parastatal corporations by remote control. However, such power was too vast to last and, in mid–2017, their state-capture empire imploded when tens of thousands of their private e-mails were hacked and leaked to investigative journalists. Within a year, watching from their flight haven of Dubai, the Guptas saw their toxic influence bring down Zuma, two finance ministers, a half-dozen other cabinet members, the two top men in the tax authority, and the leaders of the largest parastatal agencies providing electricity and rail transport.14
“The notorious Gupta brothers fused corporate and state graft with exceptional potency from 2009 to 2017.”
As a result, the relationship between the government in Pretoria and corporates in Sandton, just a half-hour drive south, became strained and confused. In 2017, the London Public Relations firm Bell Pottinger received a (literal) corporate death sentence due to its Gupta account, replete with its rhetoric of “White Monopoly Capital” (utterly different than the analysis Paul Sweezy offered in the pages of Monthly Review).15 In subsequent months, the same ignominy appeared likely for the venal local offices of consultants KPMG, McKinsey, Bain, and the German software firm SAP, which were all bound up in e-mail revelations from the “Zupta” (Zuma-Gupta) zone. To their credit, a wide variety of liberal and centrist elites, particularly the mining house AngloGold Ashanti’s chairperson Sipho Pityana and the reformist financier Magda Wierzycka, had spent the 2010s risking Zuma’s ire to campaign for a less corrupt capitalist state. Their desperation was so palpable and their victory over Zuma’s forces so sweet that talk of “Ramathusiasm” briefly uplifted business and consumer confidence in early 2018. However, the new dawn was a false dawn. The super-exploitative conditions of society, as experienced in the elemental process of labor reproduction, endured.
Social Services Suffer from Austerity
Today, 65 percent of South African society suffers poverty, measured using $3.33/day as the “upper bound poverty line” rate.16 After 1994, the dramatic rise of unemployment to 40 percent of workers (including those who have given up looking for work) and the introduction of a subminimum wage for youth apprentices since 2016 have, together, offset recent minor labor-policy gains. Last year, the introduction of a national $0.75–$1.33/hour minimum wage (with lower pay going to more than a million farmworkers and public-works construction staff) was applauded by COSATU, but protested by SAFTU as inadequate. The labor movement’s right to strike was also curtailed; a shopfloor ballot is now required instead of a decision by union leadership.
During the higher-growth period of the mid–2000s, when commodity prices and consumer-credit access both soared, the neoliberal Treasury achieved a primary budget surplus (that is, before debt payments). But after 2009, the world financial crisis and ongoing economic stagnation resulted in higher annual public deficits. The aggregate (historical) public debt as a share of GDP fell from 52 percent in 1996 to 27 percent in 2009, but then rose back up to 53 percent by 2018. Although overall state spending as a share of GDP rose steadily from 24 percent in 2003 to 33 percent by 2018, South Africa continued to spend a small fraction of GDP on social programs compared to the world’s top forty economies. On average, their governments spent 22 percent of GDP on social programs, while South Africa only spent 8 percent, with only India, Indonesia, Mexico, and China spending less.
South Africa’s oft-lauded social grants are minimal, providing less than thirty dollars a month to raise a child, down from the equivalent of thirty-seven dollars in 1996. For pensions and disability grants, just over one hundred dollars a month is provided. The number of South Africans receiving these monthly grants soared from fewer than three million in 1994 to eighteen million today (out of fifty-eight million residents). Consistent with neoliberal philosophy, these grants were means tested, although in their first decade of roll out, social-grant spending became increasingly regressive—that is, less directed to the poorest.17
“South Africa continued to spend a small fraction of GDP on social programs compared to the world’s top forty economies.”
The bias in state services also exists in most municipalities. Trash collection occurs regularly in mainly white neighborhoods, but rarely, if at all, in the shack settlements that house a third of a typical city’s residents. The qualitative differentiation results not only from the legacy of racial apartheid, but also from the ongoing class-segregatory processes associated with the residential locations from which people send children to school. The result in most schools is an extremely low-quality education. The World Economic Forum’s Global Competitiveness Report 2015–16 rated South African schools the worst out of 140 countries in terms of science and mathematics training, and 138th in overall quality. Education spending is meant to be a proxy for human capital investment, but in many cases the result is better considered disinvestment. As researcher Nicholas Spaull remarked after studying 1994–2011 outcomes: “With the exception of a wealthy minority, most South African pupils cannot read, write and compute at grade-appropriate levels, with large proportions being functionally illiterate and innumerate.”18
In contrast, the wealthy minority’s public schools are sufficiently financed and produce extremely high-quality education, in part because of systems in which parents contribute additional funds. Extreme inequality in educational opportunities leads to about half of all students being pushed out of the system before reaching the twelfth grade. This, in turn, produces systemic illiteracy and skill shortages that reinforce unjustifiable pay gaps. It could, therefore, just as easily be argued that inequality is amplified, not mitigated, by the tokenistic manner in which public education is provided to the low-income majority.19
Large parts of the public health system are chaotic and labor’s hopes for a National Health Insurance appears dashed against the forces of fiscal constraint. Under massive pressure from Moody’s credit-ratings agency, the 2018–19 national budget cut funds for basic-needs infrastructure in a manner described as “savage” even by Business Day.20
In addition to fiscal austerity, all indicators point to rising interest rates in coming months due to adverse global conditions, exacerbating consumer bankruptcies. For the bottom decile of the population, such debt was a full third of asset value by 2015, while for the top decile it was only 9 percent. Widely differential costs of credit are another feature of inequality, with loan-shark mashonisas (higher-cost informal lenders) and high-priced micro-financiers dominating the lower end of the market. As the IMF remarks, “the bottom quintile’s access to loans and credit cards is only one tenth of the access of the top quintile. Hence, bottom quintile households account for 33 percent of loans from mashonisas compared to 8 percent for the top quintile.” At the high end, income-biased banking services typically include a discount on interest rates and service charges for the wealthiest consumers.
“The 2018–19 national budget cut funds for basic-needs infrastructure in a manner described as ‘savage’ even by Business Day.”
The year 2008 was the most painful. Once the United States ironically became the safe haven during the global financial meltdown emanating from its housing-market crash, interest rates climbed so the Reserve Bank could attract flight capital back. But this left half of the twenty million borrowers with what the National Credit Regulator (NCR) termed “impaired credit” profiles—meaning, having missed at least three payments. Although the default rate peaked and gradually diminished, in 2017 the NCR recorded nearly twenty-five million credit-active consumers, of whom fifteen million “were in good standing, while the balance of 9.69 million (39 percent) had impaired records.”21 Pre-2004 household debt/GDP levels of 55 percent rose to nearly 90 percent in 2008, declining only to 70 percent a decade later.
Another way in which poor people were adversely affected by financial and monetary policies was through inflation. According to IMF calculations, high interest rates exacerbated by the world financial meltdown from 2009 to 2017 reduced inflation to the low level of 5.1 percent for the wealthiest fifth of the population, thus preserving their financial asset base. But for the poorest 60 percent, average inflation was more than 7 percent.
Accumulation Crisis and Ecological Stresses
In short, the view of capitalism from above is all the more sobering. With South Africa formally in recession again in 2018, conditions remain dire for capital accumulation, and even more so for redistribution of wealth. The last GDP growth spurt dates to 2002–08, followed by a period of stagnation during which income per person has plateaued. Business sentiments fell quickly from “Ramaphoria” to “Ramageddon,” especially after land expropriation without compensation became official policy.22
More recently, a stimulus package was launched featuring (an unspecified) $3.3 billion in state-spending reorientation, but it was generally considered too little too late for an economy producing $300 billion in annual GDP. A proposed $27-billion infrastructure fund may begin to reverse the Treasury austerity budget. However, the state’s prolific outsourcing and procurement spending remain mired in corruption. According to leading Treasury oversight official Kenneth Brown, of $44.4 billion in 2016 state procurements, $17.3 billion was fraudulent expenditure: “It means without adding a cent, the government can increase its output by 30–40 percent.… That is where the real leakage in the system actually is.”23 (In early 2017, Brown resigned from the Treasury after receiving death threats.) Such explicit rent seeking represents a form of redistribution not covered in the mere income statements of managers and shareholders.
“The state’s prolific outsourcing and procurement spending remain mired in corruption.”
Petty corruption abounds within small-scale infrastructure. But the main National Development Plan megaprojects are vehicles for not only South Africa’s notorious corporate collusion and price fixing in construction, but also Gupta or ANC-related kickbacks. They are also characterized by excessive capital intensity, dependency on imported components and export commodity markets, and large-scale ecological damage. Until Ramaphosa came to power, Zuma’s 2014 deal with Vladimir Putin to build eight Rosatom nuclear reactors costing $100 billion was potentially the most damaging of the megaprojects, but social resistance and the Treasury’s fiscal restraints perpetually stalled it. This left three other obvious white elephants:
o The biggest is a $53-billion rail line designed mainly to export eighteen billion tons of coal on South China Rail locomotives, currently financed with a $5-billion loan from the China Development Bank, with more than $1 billion identified in back-handers to the Guptas.
o Second are the two massive coal-fired power stations costing $15 billion each. They are being constructed in part by Hitachi, in partnership with the ANC’s own investment wing, and financed by the World Bank’s largest-ever loan ($3.75 billion).24 Hitachi already paid a $20-million fine in 2015 for violating the U.S. Foreign Corrupt Practices Act through implicit bribery of Zuma’s party apparatus.
o Third is the $17-billion Durban port-petrochemical expansion, which aims to raise annual container traffic from the current 2.5 million to 20 million by 2040. It will also benefit from likely nearby offshore oil and gas drilling by ExxonMobil, Norway’s Statoil, Italy’s ENI, and South Africa’s Sasol.
Notwithstanding a growing movement against climate change, with public interest lawyers achieving small but important court victories against fossil fuel projects, there is no indication that the ongoing National Development Plan rewrite will replace these commitments with infrastructure to meet basic needs. To take the megaprojects forward, several new multibillion-dollar loans were made to electricity parastatal Eskom by the China Development Bank in 2017–18, and hundreds of millions were committed to both Eskom and parastatal port and rail manager Transnet by the BRICS New Development Bank. Eskom’s 2030 plan for energy production that was announced in August is even more fossil-centric than ever.
Instead of considering solar and wind as attractive state-run alternatives, the government commissioned 10 percent of the country’s electricity supply from private companies. This is strongly opposed by left critics, including the metalworkers’ and mineworkers’ trade unions, which last May proved themselves capable of sabotaging the whole country’s energy supply. They did so when offered a 0 percent nominal wage increase, which they were able to raise to 8 percent in subsequent negotiations, and again in November 2018, when these two ideologically opposed unions marched together against the outsourcing of renewable energy to European companies. The NUMSA metalworkers’ historic role in fighting for a Just Transition was threatened by Eskom’s unilateral decision to close coal-fired power stations without replacement jobs for tens of thousands of affected workers.25
Moreover, any South African economic recovery must confront the extremely hostile global and regional context, including the strong likelihood that the next world recession will degenerate into another financial crash and full-fledged depression. With the advent of Donald Trump’s U.S. presidency and resurgent hostilities in the Middle East, worsening economic chaos comes amid tumultuous geopolitical realignments. Commodity prices are far below 2011 peaks for South Africa’s main exports (platinum, gold, coal, and iron ore) and the economy has suffered a rapidly declining trade to GDP ratio even before Trump imposed tariffs against steel and aluminum. So-called emerging markets crises are also unfolding in Argentina, Turkey, and India, and these regularly bleed into South Africa, what with the currency value crashing from 11.5 ZAR = 1 USD to 15.3 ZAR = 1 USD in just weeks in mid–2018, before recovering to a level of around 14 ZAR = 1 USD (far lower than the prior commodity supercycle peak level of 6.3 ZAR = 1 USD in 2011).
“South Africa’s Illicit Financial Flows have been measured at $21 billion.”
South Africa began receiving junk-quality credit ratings on international bonds in 2017 and therefore must continue offering among the world’s highest interest rates to foreign creditors: in 2017–18, the ten-year state bond rate was in the 8.5–10 percent range, with only Turkey’s rate being consistently higher. Tragically, the country’s foreign debt, both public and private, rose from $25 billion in 1994 to $183 billion today, with large periods of growth due both to the 2010 soccer World Cup and imports for stadium construction, and to major outflows of profits to companies that were once locally headquartered in Johannesburg but moved to London and New York twenty years ago. In addition, South Africa’s Illicit Financial Flows—often as simple as trade misinvoicing and other tax dodges—have been measured at $21 billion annually by Global Financial Integrity.26
Accumulation crises are also evident in the four Southern African economies that are South Africa’s main local trading partners—Angola, Mozambique, Zambia, and Zimbabwe—due to extreme levels of debt and foreign currency shortages, generating pressures that push the region’s economic refugees to South Africa. Zimbabwe is hit particularly hard, having lost its own currency in a 2008 inflationary catastrophe, one it repeated in 2018 when the state’s electronic salary payments began to rapidly devalue at a time of extreme shortages of its main currency, the U.S. dollar. Moreover, climate refugees come to South Africa because the region is already suffering prolonged droughts, drying soils, hotter temperatures, floods, and other extreme weather events. In one dramatic example, two years of far below-average rainfall left Cape Town’s dams at just 14 percent capacity before the mid–2018 rains, resulting in the forced rationing of thirteen daily gallons of water per person in 2017–18.27
As a result of all these processes, an economic upturn is unlikely to occur spontaneously. Due to the business capital strike, very low-gross fixed-capital investments occur, despite at least $100 billion in idle corporate cash holdings. Along with structural overaccumulation, there is excessive corporate concentration in most sectors.28 Few of the Black Economic Empowerment strategies of assimilation into big companies have led to broad-based wealth creation. The proposed Mining Charter satisfied none of the participants, with more battles anticipated from communities opposed to mining and greater labor demands for higher wages, occupational safety, and health improvements.
“Few of the Black Economic Empowerment strategies of assimilation into big companies have led to broad-based wealth creation.”
South Africa enjoys the world’s greatest mineral resource endowment, valued by Citi Group at $2.5 trillion at its peak.29 The mining houses receive generous subsidies, including electricity Special Pricing Agreements, which have especially assisted two giant mining houses, BHP Billiton and Anglo American. They pay $0.01/kWh, the world’s lowest rate (often consuming in excess of 5 percent of the grid).30 The state has also failed to comprehend and mitigate natural capital depletion by the extractive industries, which also exceeds $20 billion per annum.31Indeed, there are many other forms of corporate welfare that more than offset social spending. Reflecting weak regulation, the inability of the Treasury and Reserve Bank to monitor banks’ foreign currency transactions was exposed in 2016, when seventeen banks were alleged to have been manipulating the rand, according to the Competition Commission.32
This terrain of deregulation, corporate corruption, and excessive financial speculation has generally been more beneficial to those at the upper end of income distribution. The financial system has continued to operate in the interests of wealthier holders of financial assets, in part because of the extremely high rates of returns on interest-bearing assets. In addition, South African real estate was by far the world’s most price inflationary during the 1997–2008 global property bubble (twice as high as second-ranked Ireland in the Economist database). Moreover, in the same spirit of financialization, the JSE grew rapidly through October 2017, reaching a Buffet Indicator ratio unprecedented in world economic history and 3.2 times higher than the world average.
The uptick in commodity prices in 2016–17 helped restore South Africa’s trade surplus, even if outflows of profits, dividends, and interest (“balance on income”) to London and other overseas financial headquarters remain unsustainable. The current account deficit fell from its high of 7 percent of GDP in 2009, particularly after the commodity crash of 2015. The currency had dropped to as low as 17.9 ZAR = 1 USD in January 2016, which compelled cuts in imports and assisted export recovery. The current account deficit continues at 2–3 percent of GDP even in good years, such as 2016–17, in which $6.6 billion were earned in net-trading income. But in those two years, there were $23.5 billion in net profit and transfer outflow.
Given the volatility of the currency, caused in part by this income insecurity, activity of daily over-the-counter foreign exchange (OTC FX) markets is far greater in South Africa than anywhere else, rising to 17 percent of GDP by 2017. The central reason for South Africa’s vulnerability to high levels of net-income payment outflows and currency speculation against the rand is Pretoria’s regular loosening of exchange controls.
As one example, in 2018, the Treasury granted permission for an additional $38 billion of pension and insurance funds to be transferred abroad. As another example, whereas in 2015 the maximum annual externalization of funds by wealthy South Africans was $300,000, it went up to $750,000 that year. Such loosening weakens the Reserve Bank’s ability to defend against currency crashes and financial outflows, given that Pretoria’s $50 billion in currency reserves have not increased over the past decade. A major, consistent fear is South Africa’s potential inability to service foreign loans, especially those borrowed by the main parastatals. “If the World Bank issues a default letter,” Paton remarked in 2018 at a time of financial tension at Eskom, “it will trigger a 14-day recall on its $3.75-billion loan, which could trigger a recall on Eskom’s $26-billion debt mountain.”33
“Poor consumers’ electricity bills rose far faster than inflation from 2008–17.”
Eskom has by far the largest portion of state-backed loans, representing a dangerously high contingent liability whose costs are carried by the general citizenry. Eskom is also repaying the World Bank’s largest-ever loan, which was used for the Medupi power plant—the bank’s last such coal-related lending due to a belated climate-change policy. Medupi’s $5 billion worth of boilers were supplied by Hitachi. In addition to corruption, at $15 billion, Medupi cost triple its original estimates and was delayed nine years due to numerous design and implementation flaws (including 7,000 welding mistakes on the Hitachi boilers).34
The high costs—exacerbated by a crashing currency—were passed onto poor consumers, whose electricity bills rose far faster than inflation from 2008–17. In mid–2018, Eskom received another $3.5 billion in loans from the China Development Bank to finish the $15-billion Kusile power plant, also with Hitachi/ANC boilers. The bank’s prior major loan to South Africa was to Transnet ($5 billion) for China South Rail’s and Shanghai Zenhua Heavy Industries’ corruption-riddled locomotive and Durban-crane procurement via the Gupta family empire.35 As noted, such megaprojects mainly benefit well-connected elites at the expense of the poorest.
South Africa’s mid–2018 foreign debt reached $183 billion, or 52 percent of GDP, far higher than the 41 percent level that catalyzed a sovereign default in 1985. The IMF’s 2018 Article IV statement warned Pretoria: “External risks include large gross external financing needs, and a current account deficit financed by flows that are prone to sudden reversals in response to abrupt changes in global financial conditions and sovereign credit ratings. Disruption in trade flows and a fall in commodity prices would worsen the twin deficits and dampen growth.”36 In short, Mandela and his colleagues’ 1990s gamble—that rapid international economic integration would generate prosperity—has conclusively failed.
A year ago, a new ruling-party leadership came to power in Pretoria, claiming it would clean up the political and economic mess. But their attempts in late 2018 to kickstart the economy through a stimulus package, jobs summit, investment summit, and budget adjustment appear unable to please constituencies and reverse the structural crises. The residual old-guard politicians from the era of Zuma’s patrimonial, corrupt regime still retain enormous power, consisting of at least four of the six leading ANC officials. But instead of placing hopes on personalities, the 2018 decline in economic fortunes suggests that the structural and policy problems dominate.
Given the high degree of dissent, an alternative social policy strategy, ideally pursued by a principled—and, tragically, still to be formed—left-leaning political party in conjunction with radical forces in civil society, would be to develop ideological alternatives to tokenism (not simply doubling the existing grants, as both main opposition parties promise). Within parliamentary politics, the EFF were, without question, the main party of the left advocating improvements in social and economic policy. Their votes rose from 6 percent in the 2014 national election to 8 percent in the 2016 municipal elections, with most projections of double digits in 2019, perhaps even enough to join with the Democratic Alliance and other smaller parties to deny the ANC power over various provincial governments, although an EFF-ANC power-sharing deal is more likely. The leader of the EFF, Julius Malema, is as controversial as any left-populist charismatic personality.37 In addition, NUMSA and SAFTU held a mid–2018 workers’ summit to launch a Socialist Revolutionary Workers’ Party, but conditions are not ripe for this nascent effort in the 2019 election.38
“EFF votes rose from 6 percent in the 2014 national election to 8 percent in the 2016 municipal election.”
If not from parliament, an alternative politics should ideally emanate from the daily practices of oppressed citizens, in their commoning of social resources. Ideally, such decommodified goods and services would be funded by more progressively applied state tax and fee revenues, and won through bottom-up struggle that shapes policy. For example, AIDS-medicines struggles from 1994 to 2004 led to the commoning of knowledge production against the drug companies’ intellectual property rights. The initiative came from the Treatment Action Campaign, mainly made up of several thousand black HIV+ South Africans, most of whom were women. Because they won these medicines as a free component of the South African public health system, and five million people are currently being treated, average life expectancy rose from fifty-two in 2004 to sixty-four today, a truly miraculous accomplishment.39 Similar decommodification strategies were used by community groups in Soweto when they illegally reconnected water piping and electricity wiring after disconnections. According to Eskom, which lost $1 billion of supplies in the process, such illicit reconnections provided 86 percent of residents with free electricity in 2018.40
In order to establish a genuine socialist project on this basis, a united front of labor, communities, women, youth, the elderly, environmentalists, the gay rights movement, and other progressives is needed. However, in 2014, in an effort initiated by NUMSA to do just that, there were many early growing pains and major fissures continued between labor and other segments of civil society.41
In addition, state repression has often been debilitating for organizations that go against the state and big business, producing the world’s highest protest rates. Xenophobia continues to bedevil working-class community movements, a problem that reached critical mass in terrifying national waves of attacks in 2008, 2010, and 2015. Furthermore, homophobia has proved lethal for LGBTQ organizers. In hundreds of environmental battles, resources and supportive state policies remain scarce for those attempting to confront the most crucial ecosocial injustices that will destroy life for future generations.
“State repression has often been debilitating for organizations that go against the state and big business.”
Still, there is enormous potential. Console Tleane’s recent review of the frustrated black petite bourgeoisie in Monthly Review and my own Monthly Review surveys of South-African leftward momentum in recent years—from township protests to social-movement mobilizations to NUMSA and independent, left union organizing, to the EFF as a jejune political party—should be updated with analyses of the impressive generational and gender-justice campaigns.42
The student movement’s #FeesMustFall campaign was mostly victorious in 2015–17 by maintaining a protest culture bordering on urban guerrilla warfare. It was sufficiently strong that, in 2015, the vitally symbolic Cecil Rhodes statue towering over the entrance of the elite University of Cape Town was forcibly removed following a high-profile shower of excrement. In 2015–16, the status of the lowest-paid university workers was changed from “insourced” to “outsourced,” with a doubling of their salaries plus benefits, thanks to the alliances between students and workers. And in 2015–17, a rise in fees of 0 percent, which in inflation-adjusted terms is −6 percent, was won despite the university’s requests for increases of more than 4 percent in real terms. The most extraordinary victory was achieved in late 2017, when Zuma, who was struggling to garner more ANC-delegate votes to swing the odds in favor of his ex-wife, took a strategic left-populist turn and announced that, from 2018, entrants whose annual income was below $26,000 would have free tertiary education.43
South Africa’s recent #MeToo struggles and the August 2018 #TotalShutDown march against gender violence, led by enraged, courageous women, have had a major impact. The #TotalShutDown march targeted Ramaphosa specifically, which he temporarily diffused by assenting and offering a Gender Summit.44 These struggles were preceded by the #TaxiRape and #MenAreTrash campaigns, and especially by attempts in 2006–15 to remind Zuma about his alleged rape of Fezekile Ntsukela Kuzwayo (known as Khwezi), a family friend half his age who passed away in 2016.45 But in 2017 and 2018, #MeToo forced several powerful men in the state, private sector, academia, and NGOs to resign in disgrace.
“In 2018 scores of commuter-train carriages were burned in Cape Town.”
Nevertheless, these men are only the tip of the iceberg. According to the main statistical agency, “21 percent of women over the age of 18 reported that they’d experienced violence at the hands of a partner.”46 At the deepest level, capitalism’s abuse of women is an economic feature of the “articulation of modes of production”—they are unpaid for childrearing, looking after sick family members, their family’s retirement support, and domestic work in general.47
Following from all these contradictions, the resulting social protests are very intense, such as in 2018, when scores of commuter-train carriages were burned in Cape Town. As the Sunday Times newspaper lamented in mid–2018,
the police appear helpless. They have no intelligence-gathering capacity to enable analysis and prevention of the train arson. It is the same with the frequent ‘service delivery’ protests all over South Africa, part genuine frustration and part opportunistic criminality. Public-order policing is either primitive or nonexistent. When violent strikers intimidate workers, or roads are blocked with burning tires, or taxi operators shoot one another, the police stand by and watch.48
The main research site into community protests is the University of Johannesburg’s Center for Social Change. Its director, Kate Alexander, rebuts:
Schools are very rarely burnt, as they are often protected by community pressure. In protests, people are wounded by rubber bullets and live ammunition and sometimes killed, others are arrested. Mandela and other freedom fighters went to prison for decades. Strikers lose pay and sometimes lose their jobs. It’s true that cops don’t stop all protests. We shouldn’t forget that people have a right to peaceful protest, even if they block a road, which can be annoying, but not necessarily illegal. Public Order Police are expected to clear blocked highways, but not minor roads. However, in my view, there are now so many protests that the cops do experience resource problems sometimes; plus some cops are sympathetic to poorer communities where they often have friends or relatives.49
To be sure, the bottom-up experimentation with revolutionary potential has recently produced somewhat less hopeful rebellions by victims of capital and the rancid state. Social movements are weak after years of division along lines of ideology and party (or factional) loyalties, geographical segregation and atomization, silo-mentality specializations, personality conflicts, persistent racial and ethnic divisions, and competition over constituencies and funding. But even if it is not yet organized coherently, Alexander agrees that social protest is escalating, with the annual numbers of major conflicts between communities and the state soaring from just over one hundred in 2005 to a peak of 480 by 2012, and sustained levels of more than 350 since then.50
“Social movements are weak after years of division.”
Thinking more about long-term social change, activists can proudly recall at least five major ruptures that followed earlier episodes of grassroots mobilizing:
o The 1970s–’90s, which led to the overthrow of apartheid.
o The late 1990s, when post-apartheid protests emerged over water and electricity, compelling the state to provide Free Basic Services by most municipalities for low-income residents since 2001 (at the initiative of then-Water Minister Ronnie Kasrils).
o The early 2000s, when AIDS medicines—then supplied as branded multinational corporate products—were prohibitively expensive and Mbeki was an AIDS-denier, requiring enormous efforts by the Treatment Action Campaign to win the locally made generic drugs that raised life expectancy so dramatically.
o The 2013–18 period, as various citizens’ movements fought the Gupta faction of the state, demanding accountability from government, parastatal, and even multinational corporations, reversing the Johannesburg highway tolling system and successfully protesting about $100 billion in Zuma’s proposed nuclear reactor acquisitions.
o 2015–17, when #FeesMustFall struggled for free tertiary education and the insourcing of low-paid workers, followed by the unprecedented promise of 50 percent state budgetary increases (from 0.68 to 1.0 percent of GDP).
These bursts of confidence by poor and working-class people, often in alliance with a small middle-class progressive bloc, have sustained the radical imagination for a future socialist movement. Class-disintegrating processes periodically emerge from new twists in capital accumulation: the 1990s’ liberalization, deindustrialization, and outsourcing wave; the 2000s’ financialization boom and mounting worker indebtedness; the 2010s’ winding down of the commodity supercycle; and the current era of creeping austerity prior to a more decisive crash similar to those of 1998 and 2008. The slow, painful process of rising worker and social consciousness emerging from these dislocations—such as the evolution from COSATU to SAFTU, and from the ANC Youth League to the EFF—seems to be genuinely progressive, albeit with stop-start features like xenophobia, outbursts of gendered violence, and questions about the EFF’s integrity. The risk of a fascistic turn—which is attracting so many grieving lower-middle class individuals and workers in the United States, Europe, Brazil, and the Philippines—appears minimal here. The difficulty, as ever, is tying together threads of potential leftist organizing into a political movement that can capture majority support.
Of course, it took a United Democratic Front more than two decades to restore South Africa’s anti-apartheid forces into a national force, following the banning of the ANC and other movements in 1960. Then, after seven years of hard fighting, Mandela was freed, the ANC and South African Communist Party were unbanned, and, four years later, apartheid was formally defeated in 1994. The current ANC leadership is not only bloated with corruption, but is full-on neoliberal capitalist, with a mildly confusing capability to revert to radical nationalist discourse. Furthermore, there is no real continuity between one liberation (racial) to the next (class, social, environmental): the Third International tradition’s fabled “two-stage revolution.” But given how South Africa’s pot keeps boiling, whatever left-black-youth-feminist-ecologist regroupment emerges from the political and economic turmoil that is inevitable in 2019, it cannot come quickly enough.
- ↩ For background, see Patrick Bond, Elite Transition (London: Pluto Press, 2014) and Patrick Bond, “For South Africa’s New President, ‘Black Economic Empowerment’ Is All About Personal Enrichment,” Nation, February 27, 2018.
- ↩ Shortly after the coup, he announced, “[P]rimarily, it is economics, economics, economics and trade for Zimbabwe.” South African Broadcasting Corporation, “Zimbabwe is Open for Business: Mnangagwa,” SABC News, December 21, 2017.
- ↩ Discussion of the incident is in Patrick Bond, “Marikana’s Meaning for Crisis Management,” in ed. Ulrike Schuerkens, Global Management, Local Resistances: Theoretical Discussion and Empirical Case Studies (London: Routledge Press, 2014).
- ↩ A brief biography of Ramaphosa can be found in Patrick Bond, “South Africa’s Resource Curses and Growing Social Resistance,” Monthly Review 65, no. 11 (April 2014): 1–21.
- ↩ Details can be found in Patrick Bond, “In South Africa, Ramaphosa Rises as Lonmin Expires,” CounterPunch, December 20, 2017.
- ↩ Tenderpreneurship is a South African colloquialism for businesspeople using political contacts to secure government procurement contracts (called tenders), often as part of reciprocal exchanges of favors or benefits.
- ↩ World Bank, Overcoming Poverty and Inequality in South Africa: An Assessment of Drivers, Constraints and Opportunities (Washington, DC: World Bank Group, 2018).
- ↩ In 2018, South Africa fell to the fifth most militant, in part because, until a November 2018 unity march to Ramaphosa’s Pretoria office against electricity privatization and coal-related retrenchments, the two main labor federations refused to engage in joint action. Klaus Schwab, ed., Global Competitiveness Report 2018 (Geneva: World Economic Forum, 2018).
- ↩ Genevieve Quintal, “Land Debate a Tactic to Offset EFF and ANC Radicals, Says BMI Research,” Business Day, July 11, 2018.
10. ↩ Carol Paton, “The Inexorable Pull of Populism Takes SA Down a Cul-de-sac,” Business Day, August 2018.
11. ↩ The Buffett Indicator is provided by the World Bank, http://data.worldbank.org; and profit rates can be found in International Monetary Fund, South Africa: 2016 Article IV Consultation—IMF Country Report no. 16/217 (Washington, DC: International Monetary Fund, 2016), http://imf.org.
12. ↩ PricewaterhouseCoopers, Global Economic Crime and Fraud Survey 2018—6th South African Edition(Johannesburg: PricewaterhouseCoopers, 2018), http://pwc.co.za.
13. ↩ Transparency International, Corruption Perceptions Index (Berlin: Transparency International, 2018), http://transparency.org.
14. ↩ Details can be found at the Judicial Commission into Allegations of State Capture, http://sastatecapture.org.za.
15. ↩ In September 2017, the resulting loss of major clients forced Bell Pottinger’s bankruptcy. One Marxist analyst with an inside perspective explains the differences in phraseology: Christopher Malikane, “Some Notes on White Monopoly Capital,” Pambazuka, June 29, 2017.
16. ↩ Josh Budlender, Ingrid Woolard, and Murray Leibbrandt. “How Current Measures Underestimate the Level of Poverty in South Africa,” Conversation, September 3, 2015.
17. ↩ Patrick Bond, “South African Social Policy Tokenism as Austerity Grips,” Africanus 46, no. 1 (2016): 32–51.
18. ↩ Nicolaus Spaull, South Africa’s Education Crisis: The Quality of Education in South Africa 1994–2011(Johannesburg: Centre for Development and Enterprise Working Paper, 2013).
19. ↩ International Monetary Fund, South Africa: Selected Issues—IMF Country Report no. 18/247(Washington, DC: International Monetary Fund, 2018), 18–76.
20. ↩ Hilary Joffe, “Savage Fiscal Consolidation Comes as a Legacy of Zuma’s Poison Pills,” Business Day, February 22, 2018.
21. ↩ National Credit Regulator, Annual Report 2016–17 (Johannesburg: National Credit Regulator, 2017), http://ncr.org.za.
22. ↩ Jason Burke, “How South Africa’s ‘Ramaphoria’ turned into ‘Ramageddon’,” Observer, September 9, 2018.
23. ↩ Sam Mkokeli, “Fraud: SA’s Treasury on the Prowl,” Business Report, October 6, 2016.
24. ↩ Patrick Bond, “The Bank Loan that Could Break South Africa’s Back,” CounterPunch, April 4, 2010.
25. ↩ The metalworkers’ role in Trade Unions for Energy Democracy—the global red-green labor network based at the City University of New York—was once formidable, but the main champions for a Just Transition left NUMSA in 2016 and 2017. SAFTU’s November 16, 2018 press statement addressed the apparent contradiction: “Workers and poor communities are being asked to pay the price for an environmental crisis for which they bear no responsibility. It is not the workers but the capitalist system which has caused global warming, climate change and the destruction of our ecosystem. Privatisation will not only not resolve this crisis but make it even worse. Private companies which are only interested in making profits, will do nothing to help the workers whose jobs disappear.” SAFTU, “SAFTU Calls on Workers Join March for Eskom Jobs and Against Privatisation,” http://saftu.org.za. SAFTU endorsed a 2012 NUMSA statement: “To avoid a ‘just transition’ being another capitalist concept, the path to a low carbon economy must be based in worker-controlled, democratic social ownership of key means of production and means of subsistence, including the energy. There is a need for long term collective planning of wealth and production and how needs are met.” Cedric Gina, NUMSA President Speech in New York, http://numsa.org.za.
26. ↩ Dev Kar and Joseph Spanjers, Illicit Financial Flows from Developing Countries: 2004–2013 (Washington, DC: Global Financial Integrity, 2015).
27. ↩ Amy Maxmen, “As Cape Town Water Crisis Deepens, Scientists Prepare for ‘Day Zero’,” Nature 554 (2018): 13–14.
28. ↩ Pamela Mondliwa and Simon Roberts, “Structural Transformation, Competition and Economic Power,” Econ3x3, March 13, 2018. For background about recent corporate overaccumulation and falling profitability, see Christopher Malikane, “Profitability and Crisis in the South African Economy,” Munich Personal RePEc Archive, January 2017.
29. ↩ John Mala, “Economic Overview,” Access Newsletter, Industrial Development Corporation, April 2012, http://idc.co.za.
30. ↩ Patrick Bond, “In South Africa, the Poor Pay the Electricity Bill of Mining Giants,“ Ejolt blog, October 31, 2012.
31. ↩ Patrick Bond, “Ecological-Economic Narratives for Resisting Extractive Industries in Africa,” Research in Political Economy 33 (2018): 73–110.
32. ↩ “More Banks Probed for Rand Manipulation,” ENCA News, January 12, 2018.
33. ↩ Carol Paton, “Treasury to Approach Banks in Bid to Avert Eskom Default,” Business Day, January 22, 2018.
34. ↩ Patrick Bond, “Theory and Practice in Challenging Extractive-Oriented Infrastructure in South Africa,” Research in Political Economy 29 (2014): 97–132.
35. ↩ Desmond D’Sa and Patrick Bond, “BRICS Bank Should Have Consulted Before Lending to Corrupt Transnet,” Pambazuka, June 22, 2018.
36. ↩ International Monetary Fund, South Africa: 2018 Article IV Consultation—IMF Country Report no. 18/246 (Washington, DC: International Monetary Fund, 2018).
37. ↩ Malema was accused of fixing state procurement contracts when he was an ANC Youth Leader, prior to 2012, and paid large tax penalties for undeclared income. In November 2018, he and his deputy Floyd Shivambu were accused of benefiting from the 2017–18 looting of a provincial bank via family members, although they deny the charges. Perceptions of graft aside, the main ideological controversy that persists is the EFF’s tendency toward racial essentialism. This was vividly on display in 2018 when anti-Indian sentiments were directed toward former Finance Minister Pravin Gordhan and Treasury colleagues, who were attacked by the EFF not for their neoliberal policies, but for their ethnicity. Moreover, the strong possibility that Malema will return, in mid–2019, to his former party in a post-election ANC-EFF alliance in order to seek increasing state managerial power, will confirm critics’ fears of his opportunism. However, notwithstanding many such shortcomings, regular claims by prominent center-leftists (and also a few leftists) that the EFF is a protofascist organization suggest a level of hysteria.
38. ↩ Ahmed Kajee, “Socialist Revolutionary Workers’ Party Outlines Plan of Action,” Eyewitness News, November 3, 2018.
39. ↩ Mandisa Mbali, South African AIDS Activism and Global Health Politics (London: Palgrave Macmillan, 2013).
40. ↩ Isaac Mahlangu, “Soweto Residents Owe Eskom R15bn in Unpaid Bills,” Sowetan, September 18, 2018.
41. ↩ Lekgantshi Console Tleane, “South Africa’s ‘Radical Economic Transformation’,” Monthly Review 70, no. 4 (September 2018): 11–23. My writings here include “South Africa: Exploding with Rage, Imploding with Self-Doubt—but Exuding Socialist Potential,” Monthly Review 67, no. 2 (June 2015): 21–39; “South Africa’s Resource Curses and Growing Social Resistance”; “South Africa’s Bubble Meets Boiling Urban Social Protest,’ Monthly Review 62, no. 2 (June 2010): 17–28; and “From Racial to Class Apartheid: South Africa’s Frustrating Decade of Freedom,” Monthly Review 55, no. 10 (March 2004): 45–59.
42. ↩ For more on these developments, Amandla! magazine is invaluable. Contradictions associated with the metalworkers’ efforts are discussed in Patrick Bond, “African Labour and Social Militancy, Marxist Framing and Revolutionary Movement-Building,” Pambazuka, January 27, 2017.
43. ↩ For background, see Rekgotsofetse Chikane, Breaking a Rainbow, Building a Nation: The Politics Behind #MustFall Movements (New York: Pan Macmillan, 2018); Musawenkosi Ndlovu, #FeesMustFall and Youth Mobilisation in South Africa: Reform Or Revolution? (London: Routledge, 2017); and Susan Booysen, ed., Fees Must Fall (Johannesburg: Wits University Press, 2016).
44. ↩ “Total Shut Down Activists Send Warning to Government,” Eyewitness News, November 3, 2018.
45. ↩ Redi Tlabi, Khwezi (Cape Town: Jonathan Ball, 2017).
46. ↩ Shaazia Ebrahim, “South Africa’s #MeToo Gap,” Mail&Guardian, December 5, 2017.
47. ↩ Annette Kuhn and Ann Marie Wolpe, Feminism and Materialism: Women and Modes of Production (London: Routledge & Kegan Paul, 1978).
48. ↩ “Who Is Behind These Sustained, Flagrant and Widespread Attacks?” Financial Mail, October 4, 2018.
49. ↩ Kate Alexander, e-mail message to author, September 15, 2018. See also Jane Duncan, Protest Nation (Pietermaritzburg: University of KwaZulu-Natal Press, 2016).
50. ↩ P. Alexander, C. Runciman, T. Ngwane, B. Moloto, K. Mokgele, and N. van Staden, “Frequency and Turmoil: South Africa’s Community Protests 2005–2017,” South African Crime Quarterly 63 (2018): 27–42.
This article previously appeared in Monthly Review.
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