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South Africa: Talk Left, Walk Right

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An impression is forming that the South African government is hostile to global business thanks to its recent cancellation of a few bilateral investment treaties (BITs). With the World Trade Organisation (WTO) stagnating, BITs have protected foreign firms from expropriation or other politically related financial harm.

Boston University political economist Kevin Gallagher, for example, argued last week that along with Ecuador, South Africa “leads by example” when it comes to fighting transnational corporate (TNC) domination of the BITs’ arbitration panels, where weak states’ sovereignty is usually lost.

But look a bit more closely at how demands for protection of TNC profits are made and won in South Africa, using class analysis. At stake is whether state sovereignty can be maintained against an international arbitration regime that typically favours the TNCs.

Sadly, last week, we witnessed the destruction of the main anti-neoliberal provisions of the Promotion and Protection of Investment Bill, which will soon become law and replace the BITs. Neoliberals wanted the bill to change its stated mandate from maximizing the “public interest” with the words “national security” (as a delimiting semantic), and they may still win.

In contrast, progressives had hoped such a law would retain this clause: “The following acts do not amount to acts of expropriation: protecting or enhancing legitimate public welfare objectives, such as public health or safety, environmental protection or state security [and] the issuance of compulsory licences granted in relation to intellectual property rights.”

That was indeed genuinely progressive wording—but negotiations in the country’s main stakeholder bargaining forum wiped it out of the bill, in spite of the labour movement’s verbal support.

Could more have been done by critics of corporate power to retain the tough language? The Congress of South Africa Trade Unions (COSATU) is not well positioned to resist these days, having split roughly in half on November 8. The flank favouring class struggle, led by the National Union of Metalworkers of SA and including general secretary Zwelinzima Vavi, seems to have been defeated by the flank favouring “class snuggle.”

COSATU’s ability to lobby its Tripartite Alliance partners—the ruling African National Congress (ANC) and South African Communist Party (SACP)—on behalf of anti-corporate policies has waned dramatically. Yet with workers ever more desperate, class struggle is delivering the goods via massive strikes waged since 2012: wage hikes this year for platinum miners were 14 percentage points above inflation (around 6 percent) and metalworkers won a 4 percent real increase. Farmworkers won a 53 percent real raise last year.

Meanwhile, the crony-capitalist fraction of the bourgeoisie, nicknamed “tenderpreneurs” because they get rich by winning access to state tenders, grows ever stronger. The main point of so-called “Black Economic Empowerment” (BEE) policy is to generate an elite whose primary claim to adding value to (mainly white) corporate shareholders is their connectivity to the democratic state.

To illustrate, influence-peddling in the lucrative conversion of analogue to digital technology caused a recent shake-up in the leading private sector TV network. The popular news programme eNews was unveiled as trading off more favourable positioning when it comes to technology regulation for extremely favourable news coverage of the state’s pro-business infrastructure investments. In reality, these investments have bred a herd of white elephants, which eNews was once quite aggressive in criticising. But not at a time—just before the May 2014 national elections—when it was lobbying for narrow self-interest that would have raised profits at the expense of the consumer.

Government’s cancellation of many BITs followed litigation against the BEE legislation which compels each major sector to increase ownership by “historically disadvantaged persons.” At stake here is the state’s shifting-deckchairs-on-the-Titanic BEE strategy: i.e., ignoring the “disadvantage” suffered by tens of millions of people, by allowing obscene accumulation for a mere handful of very dubious characters.

One is the billionaire Cyril Ramaphosa, who is currently deputy president of both the ruling party (since December 2012) and country (since June 2014), and who is anticipated to take over the presidency in 2019. Ramaphosa was given a cheap 9 percent shareholding in Lonmin, a London mining firm once termed by British Tory Prime Minister Edward Heath “the unacceptable face of capitalism.”

In exchange, Ramaphosa was expected to run the company board’s Transformation Committee, with responsibilities for worker welfare, including building 5500 houses—with a World Bank loan of $100 million on the table—to replace apartheid-era hostels. But he only built 3 houses because, he claimed to a state commission of enquiry in August, the firm had insufficient funding. (The loan went untouched.)

His real role in Lonmin was rather more sinister. On 15 August 2012, emails he sent to top South African government officials claimed that a wildcat strike then underway at a Lonmin mine was “dastardly criminal,” and required a “pointed” police intervention. A day later, the police carried out the Marikana Massacre to put down the strike.

Is it progress to drop BITs so as to defend men like Ramaphosa, who provide political cover by taking ownership stakes in the operations of some of the world’s most exploitative firms, especially those like Lonmin guilty of prolific, illicit financial outflows? The latest International Monetary Fund review of South Africa determined that the profit rate of corporations here is third highest among major countries.

What’s not at stake, according to South Africa’s Minister of Trade and Investment Rob Davies—who is also, ironically, an SACP leader—is any real threat to profits through changes in property relations. The ANC’s 1955 Freedom Charter included this promise: “The mineral wealth beneath the soil, the Banks and monopoly industry shall be transferred to the ownership of the people as a whole.”

But as Davies explains prominently on his website, “We have gone through the debate of nationalisation in this country, and it has been made clear that we do not have such a policy in South Africa. Even if someone wanted to nationalise, there is something called the property clause in our constitution, according to which investments are protected.”

Davies’ main assistant, Mustaqeem de Gama, wrote in the business press seven months ago: “All foreign investors are protected irrespective of whether a BIT exists between their home country and South Africa. The draft bill also embeds non-discrimination by providing national treatment for all foreign investors.”

Protection of TNC property rights, including the objectionable constitutional treatment of corporations as “juristic persons” with the same rights as us humans, is one reason our corporations have become the “world’s fraud champs,” according to a 2014 PricewaterhouseCoopers study.

As a result, inequality has worsened since the end of apartheid in 1994, and thousands of community protests per year have increased in pace since 2005. And according to the World Economic Forum’s Global Competitiveness Report, South African workers—already the seventh most militant on earth in 2011—rose to become the world’s least “cooperative” from 2012-14.

So from South Africa, there are indeed grounds for hope in opposing TNCs: in a new left party committed to the Freedom Charter (the Economic Freedom Fighters), in a fighting miners’ union gaining ascendance, and in the prospect for a “United Front” of civil and uncivil society catalysed by the metalworkers.

Class analysis can reveal how corrupt big corporations, captive regulators and weak COSATU advocacy together left the South African state capable of “talk left walk right”  like the downgrading of BITs and upgrading of other investor protections.

When it comes to curbing TNC power, such analysis can also inform us of the only durable solution (short of socialism): “let goods be homespun whenever it is reasonably and conveniently possible, and, above all, let finance be primarily national” (as John Maynard Keynes once put it). Tragically, the Pretoria regime is doing the opposite: letting TNCs rubbish national sovereignty, socio-political values, the environment and the economy too—but their days are numbered.

Patrick Bond teaches at the University of KwaZulu-Natal and in November published the third edition of his book, ‘Elite Transition: From apartheid to neoliberalism in South Africa’ (Pluto Press). This article was originally published at TripleCrisis blog).

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Patrick Bond (pbond@mail.ngo.za) is professor of political economy at the University of the Witwatersrand School of Governance in Johannesburg. He is co-editor (with Ana Garcia) of BRICS: An Anti-Capitalist Critique, published by Pluto (London), Haymarket (Chicago), Jacana (Joburg) and Aakar (Delhi).

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