By Jeff Rudin
Most South Africans agree that the country is in a mess and that the ANC must go if there is to be any chance of a second building of a new South Africa. Re-birthing the South Africa so many of us hoped for in 1994 will not be easy but the consensus is that it will be impossible until the ANC accepts it has turned out to be a bad architect and builder.
The Mail & Guardian editor-in-chief, Ron Derby, recently added his voice to this consensus. He tells us about one of his senior editors asking incredulously why South Africa is “perennially in a state of crisis?” This question arose out of the editorial team having earlier spent time trying to make sense of the previous “25 years of bad decisions made by good, bad and, even more dangerously, ignorant people”. The national catastrophe symbolised by Eskom and its load-shedding are the products of these bad decisions.
There’s a different and easy answer to the Eskom question. Most people forget the answer because it disrupts their understanding of South Africa.
Now cause for surprise, in 2001 Eskom was named the global power company of the year. It received the international award at the Financial Times Global Energy Awards ceremony in New York, as reported by Engineering News, “for exhibiting technical excellence in plant production, maintenance and operation while at the same time demonstrating an ability to provide the world’s lowest-cost electricity to its customers”.
Power companies worldwide were judged on their development and implementation of a strategic plan that optimises performance, growth and a robust proactive approach to a radically altered business environment.
The importance to this then-new business environment in shaping our economy right up to today is too challenging to be remembered. In 1996, the ANC formally swopped the Reconstruction and Development Programme (RDP) for the radically different Growth, Employment and Redistribution (Gear) policy; a policy written with the assistance of the World Bank, the International Monetary Fund and likeminded economists.
Then, as now, growth — the G in Gear — was seen as the essential marker of economic health, as measured by GDP. According to the still accepted economic orthodoxy in South Africa, there could be no growth without large injections of private capital, mainly of foreign origin. (This, despite the between R200 billion and R300 billion that returns to the foreign investors each year in interest and dividends payments or the R100 billion Edward Kieswetter says leaves the country in illicit financial flows each year.)
Rather than ignoring Eskom’s warning in 1998 that new electricity generation capacity was urgently needed, the ANC’s response was consistent with why Eskom won its 2001 award. As detailed in section 7.1.6 of the government’s White Paper on the Energy Policy of the Republic of South Africa 1998, it invited the private sector to provide this needed new capacity, through independent power producers (IPPs). The unexpected problem was private capital’s disinterest.
Corruption and cadre deployment were still cancers of the future. Capital’s primary — if not sole — interest is in maximising profit. Capital’s problem with South African electricity was that it was too cheap. Producing the cheapest coal in the world might attract awards but its very cheapness meant it had no attraction for investors. The ANC can be faulted for ignoring the evidence of no capital buy-in. It was too late by the time it was forced to accept the unacceptable. We’ve been living with the consequences of this forlorn waiting for IPPs since the mid-2000s.
What is perhaps amazing is that the ANC is still committed to what economists deceptively call growth, and that the ruling party — like almost everyone else — still sees itself beholden to mainly foreign investment speculators. Even more amazing is the endurance of the idea that the ANC remains ideologically unsympathetic to capital, a supposed consequence of it being in an alliance with the South African Communist Party and labour federation Cosatu. Just listen to Anthea Jeffery if you need any reminding.
But for some, market realities are at last forcing the ANC to free itself from its ideological imprisonment — its hostility to the private sector.
Stuart Theobald, a weekly columnist for Business Day, says that the ANC’s “largely unmanaged and chaotic” ideological shift has come at a huge cost to the economy. He is among the many unable to allow that the ANC’s attempts to semi-privatise Eskom began in 1998, rather than the current ones designed to save us from Eskom. Being unable to acknowledge capital’s disinterest in the role allotted to it by the 1998 White Paper, he writes: “Electricity, for example, was meant to have been restructured two decades ago, in a way that would have optimised transition to a mixed and competitive industry.”
Theobald also edits Business Day’s Investors Monthly and is head of research boutique Intellidex. He speaks to and for an important segment of the business community.
The M&G’s Derby tells us that the more he thinks about what lies behind the corruption and the state capture narrative, the more he understands “just how badly conceived, planned this entire economy has been from its very beginning”.
With the health of the JSE being his thermometer for the state of the economy, he is unlikely to disagree with Theobald’s diagnosis: “The government’s exit from important economic sectors is a runaway train crashing through taboos at an accelerating rate. The “developmental state” model … which envisages the government directly driving the economy, is collapsing around us … By default, we are turning into an economy driven far more by the private sector than before.”
Consistent with the theme of blaming the ANC, Theobald concludes: “What we really need is a government that has not ended up in this position by default and against its ideology.”
All this blaming the ANC makes it extraordinary that he seems unable to acknowledge the government’s renewable energy independent power producer procurement programme. This programme, introduced in 2011, is entirely dependent on private capital. It is certainly not the action of an ANC that, “by default and against its ideology”, has suddenly discovered the private sector.
Theobald identifies some aspects of the economy that need changing. But what he omits saying is no less important than what he does say. The constraints of this article, however, mean I can offer a rejoinder of no more than the briefest of outlines.
The private sector means competition
The burb to Theobald’s article states: “The developmental state model is collapsing around us — and that is good news for competitiveness”.
The cure of competition is indeed among the shibboleths of how to heal our economy made sick by state monopolies such as Eskom. But how real is this competition allegedly so foundational? Global competition is found only among the few giants of transnational corporations. There is little to no domestic competition to these giants. In the same way that there is no competition to the giants of some domestic sectors, like the big five banks in South Africa, which control about 90.3% of the sector’s R5.4-trillion in assets. All this is far from what is usually understood by free-market capitalism.
The imperative of profit maximisation has resulted in the once real competition between small to medium enterprises now ending in takeovers and bankruptcies. Over time, competition leads to concentration of ownership. This has produced the few mainly foreign giants — the “oligopolies” rather than the “monopolies” of popular usage — that now straddle each of the major sectors of most of the world’s economies.
These oligopolies control their specific markets, while competing among themselves for increased market share nationally and globally.
All this is considered to be the cut-throat nature of business. Anti-competitive laws exist in many countries, including South Africa. But these are mainly, and increasingly, for public purposes only. The long-running bread price-fixing scandal that became public in South Africa in 2007 provides egregiously abundant details of the (mostly) fictional influence of the Competition Commission.
Monopolies are the natural state of today’s mature economies. This is why others — but not Theobald — often acknowledge the need to regulate the private sector. But even when this regulation is enforced, it ends up in a practice so common that mainstream economists have given it a name — regulation capture.
State bailouts of state-owned entities
The ANC’s alleged ideology is often blamed for the billions of rands made available to the dysfunctional state-owned entities (SOEs). Describing the shift now taking place as a “calamitous exit” of the state from the ANC’s former position, Theobald ruefully notes that: “Privatisation would, in retrospect, have generated far more value for the state while the assets it operated were still worth something. This exit might have happened much sooner, but the government has been content to continue pumping funding into the unprofitable businesses, despite the damage done to the national balance sheet in the process.”
Members of the “blame it on the ANC”, as we have seen, hold the now tottering ANC’s alleged anti-privatisation ideology accountable. The ANC’s bailout for SOEs, however, had little to do with its supposed erstwhile ideology. These bailouts made possible the appointment of Africans to leading positions, which wasn’t happening in the private sector.
SOEs additionally made possible the unusually high salaries paid to these senior managers, along with similarly lucrative packages given to cadre-appointed board members. It is telling that the government’s Remuneration Guidelines for Chairpersons and Non-Executive Directors of State-owned Entities dates back to 2007 — before state capture.
Finally, SOEs proved to be the best ATMS available for the looting by those members of what Thabo Mbeki called the black bourgeoisie, who were not among the lucky elite made overnight billionaires by Big Capital, as Pieter du Toit details in his 2022 best seller, The ANC Billionaires: Big Capital’s Gambit and the Rise of the Few.
Black economic empowerment
For present purposes only two things about black economic empowerment (BEE) must suffice. First, Big Capital chose to make the ANC billionaires to ensure that the political-economy of the new, post-1994 South Africa remained predicated on Big Capital. Second, with the national focus firmly on BEE — seen universally as an ethical obligation — capitalism escapes attention.
The broadly agreed national challenge remains how to diversify South Africa’s riches by opening them to the previously disadvantaged. But only a few of the previous disadvantaged can ever enter this opening.
Neither Derby nor Theobald mention inequality, which is a defining feature of all capitalist societies. Moreover, although all parliamentary parties list inequality as one of the major three ills besetting South Africa, most never acknowledge that capitalism automatically creates poverty alongside the wealth it produces for the few.
Somewhat lost in the notoriety of South Africa being the world’s most unequal society is that inequality characterises all capitalist economies. French economist Thomas Piketty’s magisterial Capital in the Twenty-first century provides the inconvenient details to those who see inequality as a problem.
The one major issue for which the ANC is not blamed is one for which it does bear responsibility — climate change. The fantasy of the carbon tax the ANC government has taken years pretending to impose on a few of South Africa’s big greenhouse gas polluters is no more than stark confirmation of the government’s prevailing priority of saving the economy rather than help saving the planet as a home for humankind.
Climate change is also not mentioned by either Derby or Theobald. Could this be because of the unpalatability of the link between capitalism and climate change? Seeing the link between the fossil fuel industry and climate change — which many people now do (in Britain they are the direct action campaigners behind “Just Stop Oil”) — is akin to treating a single pimple on someone dying from smallpox.
Identifying the economy Bill Clinton wouldn’t name
According to the latest information from the Electoral Commission of South Africa, there are 1 558 registered parties in South Africa, 14 of which were elected to parliament in 2019. With the exception of the ANC, all the other parties represented at national, provincial or local levels of the state agree on one point — that the ANC must go to be replaced by honest, incorruptible people committed to providing the long-promised “better life for all”.
Unchallenged in achieving this better life — other than occasional rhetorical flourishes — is the same profit-maximising economy that leaves us “perennially in a state of crisis”, that, as we saw at the beginning of this article, so perplexed one of Derby’s senior editors.
Recognising that capitalism has few winners, as even its richest beneficiaries are invariably emotionally and morally afflicted, is the essential starting point. But this does not necessarily mean instant socialism.
Piketty is but one of several notable economists who are critical of both neoliberal capitalism and Marxian socialism. A united front committed not to overthrowing capitalism but at least to addressing some of the injustices and inequalities of capitalism ought thus to be a starting point. Recognition of the ANC being the problem is simplistic unless the problem is seen as the symptom, rather than the cause, of our predicament.
This starting point is the essential re-kindling of our dreams of a new South Africa. It draws heavily on the losses, pains and costs of our first abortive attempt.
Jeff Rudin is with the Alternative Information Development Centre in Cape Town. He writes in his personal capacity.
*This Opinion Piece was first published by the Mail & Guardian