By Jeff Rudin | Daily Maverick | 27 Jun 2023
Understanding the background to the neoliberal political economy that underpins government policy choices is a starting point for addressing the changes needed to reduce the excesses of our country’s poverty, unemployment and inequality. This Part Two of a two-part series.
We have failed you, the people of Hammanskraal,” President Ramaphosa announced. Speaking at a community meeting on 8th June, his mea culpa included an apology for the number of needless deaths. The fact, he continued: “that you don’t have clean running water is enough for us to be extremely concerned about the exercise of your rights, as the people of our country.”
Apparently shocked by the deteriorating condition of the water-treatment plant he promised: “We are now going to put this right”.
Despite the “now” being pregnant with unspoken meaning, there is no reason to doubt the sincerity of his commitment. Having included R4-billion to fix the water treatment plant as part of his pledge to “now” doing the right things, he immediately acknowledged not knowing where this money was to come from. This wasn’t an issue during Covid-19, as we saw in Part One of this series. Then, it was a bold declaration that the country was at war.
“We are fighting a life-and-death war… Cost is not the issue here, saving lives is the main issue”.
What he didn’t say — couldn’t say — was how this war would exclude those reliant on public health or public transport, or those living in slums, known otherwise in polite circles as informal housing. The millions of unemployed and the further millions expected to live on an emergency grant of R350 were similarly amongst those excluded by the assurance that ‘cost is not the issue here’. Ramaphosa, evidently touched by his Hammanskraal experience, unguardedly gave voice to another contradictory ambition — the need for “transformation” that can unite all current political parties, from the DA on the right to the Communist Party on the left. Referring to an allegedly dodgy tender of R295-million that had been allocated for the water treatment plant, he noted:
“These tenders are the ones that get us into trouble because you find that those with the tender fight amongst themselves, fight for money. In the end, it is our people who then suffer”.
Addressing the people who most bear the suffering, 15 senior academics recently presented an action plan to prevent further cholera outbreaks. They said nothing new or particularly daring. Yet it is virtually guaranteed that nothing will come from their intervention: insufficient scientific and technical knowledge are not the problems. After all, it has been known since the mid-1800s that cholera is not caused by miasma or foul air, but by poor sewerage systems. Eliminating cholera is considerably more fundamental than eliminating rottenness in the ANC or blaming miasma. That said, the recurrence of cholera is the consequence of the choice of political economy willingly inherited and retained by the ANC in 1994, with the support of all Parliamentary parties, despite some differences over details.
Blaming the ANC in these circumstances — which is the current national consensus way beyond the Parliamentary opposition — is akin to blaming witches for the cholera. If only the solution was half as simple, as a recent Daily Maverick writer put it, “I would change the entire government, every single person”!
The ANC is guaranteed to ignore the latest of the academic action plans. Not because they disagree with them, but rather because the imperatives of the political economy make them unrealisable. Our failure to recognise how the constraints of the political economy affect decision-making gives rise to the growing cynicism and sense of hopelessness that now overwhelms ever-increasing numbers of us. Saying this is not to absolve the ANC of its well-known failures. But it does invite a much closer look at the political economy that largely goes unnoticed, even while imprisoning most of us.
The political economy that underpins much of our world
This huge issue can only be touched on in this article. For present purposes it includes the following:
- Taking back the concessions. Beginning with Franklin Roosevelt’s reforms following the global Great Depression of the early 1930s, and further extended by the promises made by the Allies as part of the World War 2 effort, and still further enhanced by the threat of what many saw as the attractive social features of the Soviet Union, Margaret Thatcher in Britain in 1979, followed shortly afterwards by Richard Nixon in the US, considered the time right to re-prioritise capital, to liberate it from what was presented as its State-induced sluggishness.
- Several capital-friendly measures were taken including the reduction of taxes on large corporations and the rich to stimulate investments.
- There was a move to reduce public expenditure to allow for the tax reductions, while reassuring investors that public debts would be paid.
- As part of these measures, retrenching the State to its smallest possible size was seen as virtuous. This minimising of the role of the State entailed the State’s withdrawal from directly providing as many public services as possible, other than for national defence.
- This shrinkage further meant maximising the privatisation of formerly publicly owned and publicly provided services. Private capital, hitherto cautious about investment, was thus provided with ample new and suitably profitable investment opportunities.
- Consistent with the removal of what was deemed a shackled market, people would no longer expect free or heavily subsidised services. Thus, not only the now-normal ‘user pays’ principle emerged, but also the related principle of ‘full cost recovery’ by the newly privatised services. People would be taught to live within their means. The free market was freely open to everyone. Everything was for sale provided only that it could be paid for. Sponging off the State via taxes on the rich had no place in this modern world.
The South African form of this new world economy
There is an almost total national consensus on at least seven of the foremost ailments that plague us: poverty, unemployment, inequality, dysfunctional municipalities, bankrupt state enterprises, incompetent managers throughout the public service and corruption. How, if at all, does the new world political economy shape these specifically South African disorders? Adding to the complexity of this question is determining the sequencing of the chicken and egg. The interplay between cause and consequence makes for less-than-straightforward analysis.
Being the world’s now officially most-unequal society suggests beginning with our inequality.
South Africa can be likened to a honey bees’ nest: one very large, totally privileged queen bee surrounded by a mass of bees all equally in service to the queen, despite the complexity of the division of labour amongst themselves. Our royals, small in number though not as small as a single queen, differ from the bees in one crucial respect: bees have no control over what they do, as their behaviours are instinctual; we, by contrast, know both what we’re doing and the consequences of our behaviour. We knowingly privilege our royals by significantly reducing the taxes they pay, especially corporate taxation. We know that municipal finances are crippled by the fact that more than 40% of our working-age population are unemployed, along with the large number of working poor and the even larger number of us living on inadequate welfare grants.
- Full cost recovery
This cardinal principle is why post-1994 South African municipalities are expected to self-finance 90% of their expenditure. But we also know that the extent of our inequality makes this a delusion.
- The guarantee of underfunded municipalities
The passage of time has served only to exacerbate this underfunding. This is well captured by the headline of a recent article, “Viability of councils in doubt as debt total soars to R300bn”. The blurb was, “Most municipalities are facing a liquidity crisis, hampering their ability to deliver services”. The situation is getting worse. According to the same article, the amount of debt owed to councils increased by R39-billion from the third quarter of the 2021/22 financial year to the R294.7-billion reported at the end of March this year. Of the R294.7-billion owed to municipalities, R139-billion is owed to SA’s eight metros, the centre of South Africa’s economy. Households account for R107.8-billion of this debt, while businesses owe R25.8-billion and government departments owe R4.7-billion.
To all this must be added austerity — the now almost given annual budget cuts to such cholera-sensitive services as water, sanitation, and health.
Highlighting the interconnectedness of the seven items now under discussion is that, besides not being able to finance the services for which municipalities have constitutional responsibility, they are also unable to pay Eskom for its supply of electricity. Municipalities owed the much-hated Eskom R58.5-billion at the end of March 2022
However, underfunding is not the sole reason for municipal dysfunction.
- Privatisation – with South African characteristics
Unlike in Britain, where Thatcher eagerly went to war against the trade unions as a first condition to restoring the primacy of capital, this option wasn’t available to the ANC. The very word ‘privatisation’ was anathema to both its key allies, Cosatu and the SACP. With their connivance, though, the government began playing with words. ‘Restructuring’ relaced privatisation, while legislation spoke of corporatisation instead of the forbidden ‘p’ word.
And, then, the Government discovered its own reasons to retain the SOEs. They could stack them with their ‘own’ people; they could pay them salaries not available in the private sector; and they could set their own qualifying conditions for being able to submit tenders. Eskom set a high bar for meeting these qualifying conditions. Finally, SOEs proved to be ideal ATMs for the looting of public money on a scale still hard to comprehend fully. This brings us to…
- Corruption: Affirmative Action, Employment Equity, BEE, Preferential Procurement Acts and Regulations.
It must be emphasised that corruption is not a necessary feature of any one of these measures. Corruption fortuitously benefited from the overlapping timing of the introduction of these measures. Selected Africans were the principal beneficiaries of South Africa’s miraculously peaceful transition to democracy in 1994. Entitlement filled the pockets of these now well-dressed victors. They wanted to be rich, and they were impatient for the expected gratification. But apartheid and the anti-apartheid struggle had left their pockets empty. Their dilemma was how to be capitalists without capital. I have retold this story on many occasions over the years, most recently here.
The first to face this problem, including Ramaphosa, had it easy. They became wealthy mining magnates courtesy of the mining companies with the foresight to know that the survival of capitalism needed a few respected African leaders to be transformed into capitalists. Ramaphosa’s brother-in-law, Patrice Motsepe, was among this fortunate few. For the rest, they have had to rely on affirmative action, Employment Equity, BEE, and preferential procurement. And corruption. For these late-comers, corrupt access to money is seen as taking back what rightfully ought to have been theirs in the first place, were it not for the vicious racism that set up their predicament.
But, thanks to the Government’s transformation programmes, their senior positions in the various departments of the civil service, SOEs, and sometimes the private sector as well, have proved to be commendably lucrative. Supposedly competitive tenders are at the heart of all these programmes. Hence the creation of tenderpreneurs. Hence, also, the whole cancer that begins with the ‘outsourcing’, via tenders, of functions that public services should be undertaking themselves.
- Incompetent management
In the early days, the widespread assumption was that competency depended on little more than a formal statement of having had some training. Schools and universities are complicit in passing unsuitable pupils and awarding unmerited degrees — right up to PhDs — for fear of being branded racist or anti-transformation. This, along with the power of frustrated entitlement, makes it easy to accuse invariably frightened employers of racism if they don’t appoint mainly Africans to whatever the position might be. The Employment Equity Forms required to be completed by designated employers, along with the enormous pressure to meet the requirement of the Preferential Procurement legislation inevitably turns the whole exercise into a tick-box necessity. Municipal legislation has been enacted making it mandatory to appoint only suitably qualified applicants. But, like so much of our legislation, this seems to be having limited success at best. Attributing the problem of managers without the expected capacity to ‘cadre deployment’ began as a way of addressing this much greater problem, without making oneself open to accusations of racism. However, Cyril Ramaphosa, with his talk about the need for a ‘capable state’ has now made it easier to speak more freely about the deeply-embedded problem of managers not able to perform the function for which they are employed — and lucratively paid.
- Capitalism, with the blessing of SA Communist Party
Accepting the continuation of capitalism made even stronger by the growing presence of black capitalists was easy for the SACP. Their short-term policies were predicated on precisely such policies. The removal of racial barriers to being a capitalist marked the first stage of their two-staged theory of the road to South African socialism. This theory was carried over in their later theory, the National Democratic Revolution (NDR). Led by the ANC, the NDR, having achieved its first objective of normalising capitalism (by deracialising the ownership of capital) would then move on to the transition to socialism, marked by such things as the dominant role of the working class. How the road to socialism would be led by a capitalist ANC is not explained. For present purposes, it doesn’t need to be. What matters is that the SACP and its close ally Cosatu have understandings that welcome the capitalist mould of our political economy. And this is a major problem.
Capping capitalism and not achieving socialism is the first requirement
This article seeks to show that there is a way out of what most South Africans see as an unbearable nightmare. To do this, we need to have a better understanding of our political economy in what has become known as its neoliberal form. The ills most of us readily acknowledge — dysfunctional municipalities, bankrupt state enterprises, incompetent managers and corruption — are the consequence of neoliberalism. They are also the easiest to change. Of course, ‘easiest’ doesn’t make them easy. But we have to start somewhere. We have to avoid allowing our despondency to become a state of permanent paralysis.
Just consider our dysfunctional municipalities. Even though properly servicing only white communities during apartheid, they functioned well. And they did so with constrained levels of corruption. There were no tenderpreneurs because very little was outsourced, as municipalities provided a whole range of their own public services. This, indeed, was the standard practice in much of the so-called first world. The most probable cause of the Hammanskraal cholera, according to Anthony Turton, is contaminated water delivered in outsourced tankers but sourced from polluted rivers because it is considerably cheaper than using municipal water.
Even with the political will to end outsourcing, it can’t happen without the prior appointment of optimal numbers of new, properly capacitated, or retrained staff. Staff able to do what they’re paid to do would have two immediately beneficial outcomes: They would stop the absurdity of cash-strapped municipalities having to return large amounts of unspent State and provincial-provided cash. Moreover, the serious curtailment, if not abandonment, of corruption, would facilitate Parliament’s making available some of the billions of rands needed not only for infrastructure recovery but for actual development. Substantial job creation would be integral to these various developments. This, in turn, would reduce the need for some social welfare expenditure. It would, furthermore, increase the size of the municipal tax base; the hitherto small size of which has condemned most municipalities to permanent underfunding. All this would turn transform a vicious cycle into a virtuous one.
With the return of a public service ethos, competent managers and committed (not demoralised) workers, good quality and affordable services could again be available and this time available to everyone.
But this still leaves unaddressed the triple ills of poverty, unemployment and inequality. Although these are universal features of capitalism, there are South African-specific reasons making them so particularly bad here. This suggests they could be less bad, even if our political economy remains a capitalist one.
Central to achieving this is the harsh reality that even the most noble policies, with inclusivity as a main aim, have winners and losers. The winners in South Africa’s political economy are supposed to be the privileged. But, except for a diminishing minority, this is no longer the case. Dysfunction now touches all services, public and private alike. Private health is not good; it’s only less bad than the public alternative. Only Cabinet Ministers and the other very wealthy can now avoid almost-daily blackouts. We all pay for corruption, even though we tend to think only of Eskom. We all fear crime. Although still privileged, we feel overwhelmed by our helplessness, by being in a country where everything appears to get only worse. Even young black and capable professionals are fleeing the SA that once was the beacon of hope.
Some of us, me included, see socialism as the only alternative to growing barbarism around the world. Yet, there are many influential economists who offer critiques of both capitalism and critiques of Marxian understandings of capitalism. Beginning with John Maynard Keynes (1883-1946), they include such contemporary economists as Ha-Joon Chang of Cambridge University, the French economist Thomas Piketty, best known for his magisterial Capital in the twenty-first century and the American economist Joseph Stiglitz, a former senior vice president and chief economist of the World Bank.
Whether there is a third way between capitalism and Marxian socialism remains to be tested in practice. What is however assured is that putting it to the test will again make South Africa a place people would choose to live.
There is currently no political party committed to either reversing neoliberalism or implementing policies designed to reduce the excesses of our poverty, unemployment and inequality. We can turn this absence to our advantage by giving us more time to prepare for the needed changes by, for instance, being better informed as to their necessity and then sharing this knowledge, and/or to advancing the formation of the required political formations with which to achieve the changes.
With the hopes of the first ‘new’ South Africa having soon turned dystopian, these preparatory measures can additionally promote a new sense of hope. There is every reason why we should try again. This time with the benefit of hard learnt lessons from the failures of our first attempt. There is little left for us to endanger by trying again.
Let’s prove celebrated economist John Kenneth Galbraith wrong for thinking, “Faced with the choice between changing one’s mind and proving that there is no need to do so, almost everyone gets busy on the proof”. DM
*This Opinion Piece was first published by the Daily Maverick.