South African economic policies disappoint progressives


By Patrick Bond

The African National Congress has a long history of accommodating competing political interests within its tent. Unlike Brazil's Workers Party, the ANC does not countenance active internal "tendencies". However, its formal Alliance partners — the Communist Party (SACP) and the Congress of South African Trade Unions (COSATU) — as well as its informal social movement allies regularly make public their disappointment at particular government policies and actions.

The electoral campaign for the June 2 poll illustrates how the radical and conservative forces in the ANC have drawn closer since 1994 in response to the drum beat of opportunistic attacks on the ANC's record of delivery from the right-wing opposition.

None of the three potentially left-leaning parties running in the election — the Pan Africanist Congress, the Azanian People's Organisation (AZAPO) and the Socialist Party of Azania — have sunk deep roots into the mass organisations which have served as government's more durable popular critics. None can expect to poll as high as 2%.

There is space available to provide only a flavour of the grievances that ANC constituencies have against ANC ministers. Often the friction amounted to a deep rumble: mass protests, sometimes anarchic riots, regular accusations of selling out and very public condemnations.

Those most often in the firing line are the ANC cabinet's economic team. Finance minister Trevor Manuel and his bureaucrats have been condemned by left critics for sticking firmly to the neo-liberal Growth, Employment and Redistribution (GEAR) economic strategy despite all its targets (except inflation) failing to be met.

Manuel has adopted draconian fiscal conservatism, leaving many social program in tatters. He ignored calls to remove the value added tax [South Africa's GST] on basic goods, while amplifying his National Party predecessors' tax cuts which favoured big business and rich people. At the same time, Manuel and his top bureaucrats have displayed a fanatical willingness to repay apartheid-era debt.

In recent months, Manuel gave his blessing to the controversial "chicken run" [fleeing overseas] by three of the country's largest corporations: Anglo American, Old Mutual and South African Breweries, to be listed on the London stock exchange.

In the same spirit, Manuel liberalised foreign exchange and turned a blind eye to capital flight (allowing Standard Bank to transfer £50 million to its London subsidiary to cover bad Russian loans).

Last year, Manuel granted permission to the two big mutual insurance companies to demutualise, and failed to regulate local financial institutions — especially in terms of racial and gender bias, for which South African banks remain notorious. Nor did he put discernible pressure on the Reserve Bank to reduce soaring interest rates.

Manuel publicly endorsed controversial figures like the International Monetary Fund's Michel Camdessus — in spite of extremely active progressive opposition during a 1996 visit — and Harvard Business School's Michael Porter, whose deregulatory, export-oriented advice generated none of the promised benefits.

Minister for trade and industry Alec Erwin — a former trade union leader and intellectual — has been attacked for the deep cuts the ANC cabinet has made to protective tariffs, which led to massive job losses.

At the same time, Erwin authorised expenditure of billions of rands in "supply side" subsidies for "spatial development initiatives", a form of direct corporate welfare. Ordinary workers gained little. Erwin cut "decentralisation grants", which led to the devastation of production sites in the former bantustans and the loss of tens of thousands more jobs.

Erwin disappointed the left in terms of regulating big business. He inserted huge loopholes in what could have been a tough liquor policy, and performed poorly in small business promotion. He authorised the lifting of the Usury Act exemption — in the process, deregulating the existing 32% interest rate ceiling on loans — from R6000 to R50,000 (R6=US$1) at a time when even Manuel was decrying moneylenders' rip-off interest rates.

Erwin has failed to impose a meaningful anti-monopoly regime. His chairing of the 1998 "jobs summit" — which brought together representatives of business, government and unions to discuss initiatives to reduce South Africa's ballooning unemployment — was seen as a smoke-and-mirrors exercise. Yet Erwin still carries a membership card of the SACP.

There are three competing explanations on the left for the status quo character of ANC economic policy. First, and least charitably, it is argued that the three key decision-makers — Manuel, Erwin and incoming president Thabo Mbeki — became more conservative the more they were distanced from their roots in, respectively, the impoverished communities of the Western Cape, politically radical shop-floors and union halls, and the exile liberation movement.

Second, ANC leaders themselves argue (unconvincingly), that during the late 1990s there was a confluence of interests between progressives and neo-liberals in promoting export-led growth, deregulation of inefficient industries, more efficient ("post-Fordist") production systems and Australian-style labour-government-business corporatism.

The third explanation is that local and international power relations were not optimal for a serious challenge to corporate prerogatives. In the SACP journal, African Communist, Erwin explained the predicament: "In 1990, this was an economy heading for a major train crash. It was stagnant, shedding employment, insular and characterised by conflict. Debt was rapidly rising as was public sector employment. However, the economic reform process did not start in April 1994. It began inching forward from 1992, propelled by the civil society process [the tendency towards corporatism] outlined above, and when the ANC became virtual de facto government in the latter half of 1993 and the leader of the Government of National Unity in 1994, this reform intensified and gathered pace."

The results of post-1994 economic reform include half a million lost jobs in the formal sector (and nearly a million lost farm jobs), the highest real interest rates in South Africa's history (10-15%, after inflation), the highest level of consumer indebtedness ever, a dramatic post-1995 drop in fixed investment, dramatic capital flight during two 30% currency crashes (1996 and 1998), an inability to break out of the bottom 10% of the World Economic Forum competitiveness index, and a recession now six months old and very likely to worsen.

[Patrick Bond is associate professor at the University of the Witwatersrand's Graduate School of Public and Development Management in Johannesburg.]