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After the ascendancy of Cyril Ramaphosa to the leadership of the African National Congress (ANC) last month and his imminent replacement of Jacob Zuma as national president, it is vital to understand deep structural barriers that prevent South Africa’s achievement of desperately needed socio-economic justice.
The ideological shifts that took place in the ANC’s economic views from 1990 can only be described as breathtaking: from an explicitly redistributive approach, towards embracing the American ideologies of neoliberal globalism and market fundamentalism.
From 1990 Nelson Mandela and Harry Oppenheimer met regularly for lunch or dinner and the main corporations of the Minerals Energy Complex (MEC) met regularly with a leadership core of the ANC at Little Brenthurst, Oppenheimer’s estate. When other corporate leaders joined the secret negotiations on the future of the economic policy of South Africa, the meetings were shifted to the Development Bank of Southern Africa during the night.
Although I was involved in the ‘talks about talks’ from 1987 until 1989, I did not take part in the 1990-94 negotiation process. I have been told that at the time senior individuals attached to the Sanlam Group of corporations were very much against my involvement because of my preference for social-democratic capitalism.
During these meetings an elite compromise gradually emerged between white politicians and capitalists under the leadership of the MEC, a leadership core of the ANC, and American and British pressure groups.
From February 1990 until early 1992, all the ANC policy documents emphasised the need for ‘growth through redistribution’. But when a reworked economic document of the ANC entitled ‘Ready to Govern’ was published in May 1992, the phrase ‘growth through redistribution’ was conspicuously omitted. Since then the ANC has never again emphasised the need for a comprehensive redistribution policy.
The secret negotiations reached a climax in November 1993. At that stage South Africa was preparing for interim government by the Transitional Executive Council (TEC), which decided that South Africa needed a loan of $850 million from the International Monetary Fund (IMF). The ‘statement on economic policies’ in the IMF deal committed the TEC to neoliberalism and market fundamentalism.
There can be little doubt that the secret negotiations between the MEC and a leadership core of the ANC were mainly responsible for the party’s ideological somersault. It was, however, not the influence of the MEC alone. There was also pressure and persuasion from Western governments, and from the IMF and World Bank, and global corporations. A large group of leading ANC figures received ideological training at American universities and international banks.
In the years after the Soviet Union imploded in 1991, an atmosphere of triumphalism reigned supreme in American political and economic circles: the ‘American economic model’ triumphed and every country in the world could only survive and prosper if it adapted as quickly and completely as possible to anti-statism, deregulation, privatisation, fiscal austerity, market fundamentalism and free trade.
Promises were made to the ANC that as soon as the new government had implemented this model, conditions would be conducive to a large influx of foreign direct investment, higher growth rates, higher employment and a trickle-down effect to alleviate poverty. The role of the American pressure group was, however, not restricted to exaggerated promises, but also included subtle threats that the US had the ability (and the inclination) to disrupt the South African economy if the ANC should be recalcitrant and not prepared to cooperate.
With the adoption of the Growth, Employment and Redistribution programme (GEAR) in 1996, the ANC and the American pressure group succeeded in Americanising the South African economy. In biblical idiom, we have every reason to lament the fact that the ANC was deceived on such a massive scale by false prophets who led South Africa, not to the promised land, but into a desert in which the poorer part of the population was doomed to live permanently in a systemic condition of abject poverty.
Twenty years ago, in late November, I was the first person to give evidence before the Truth and Reconciliation Commission’s (TRC) institutional hearings on the role of Business and Labour under apartheid. I proposed that a wealth tax ought to be levied. The income could be used to set up a restitution fund to help alleviate the worst poverty in South Africa.
The proposal elicited robust disapproval. One newspaper caricatured me as an alien apparition from outer space.
The most strident critiques came from representatives of Sanlam, Rembrandt, De Beers and Anglo-American. For instance, Ann Bernstein from the Anglo stable argued: “Corporations are not institutions for moral purposes…They are not institutions designed to promote some or other form of morality in the world. Other institutions exist to fulfil these purposes.”
But to her credit, Bernstein admitted corporate financial support for what was considered a crime against humanity: “Life is not a morality play. There are very few people who give up everything for their beliefs and ideas. Business in South Africa accommodated itself to the apartheid system.”
My 1997 proposal for a wealth tax was based on the deplorable and pervasive poverty, inequality and unemployment in which at least half of South Africa’s population was and is systemically trapped. The testimony motivated me to write the book A History of Inequality in South Africa, in which these structural poverty dynamics were canvassed in full historical perspective. Since then, a further deterioration of the socio-economic problems in especially the black community has been a core feature of the economy.
About twenty percent of the population is being advantaged in undeserved ways. We could subdivide this twenty percent into two groups of ten percent each: ten percent white and ten percent black.
And forty percent of the population could be described as undeservedly impoverished. This leaves us with three well-defined groups: a white elite, a black elite and a very poor, mostly black, mass. Keep in mind that the remaining forty percent of the population is largely dependent on very low wages.
+ In one corner of the dangerous triangle, the white elite lives it up with undeserved wealth and extravagance.
+ In the second corner the black elite also covets luxury and overindulgence.
+ In the third corner, the black majority barely survives in undeserved inhumane poverty and deprivation.
If these three dangerous corners of the triangle reflect a true version of the South African reality, what should we do about it? It would be a colossal mistake to ignore or underestimate the dangers locked into this unequal division of income and wealth.
The white elite has benefited from money hoarded since the years of Jan van Riebeeck. Their wealth is mainly “old money” passed down through estates. Most of this “old money” is concentrated in the pockets of the Ruperts, Oppenheimers and Bekkers, dating to apartheid but growing disproportionately as a result of post-apartheid policies. The white elite manifests wealth in ostentatious mansions, expensive cars, luxury apparel and extravagant holidays.
The black elite also accumulated much money, mostly in the more recent past. This elite group is a nouveau riche that also behaves like one. Much like the white elite, the black elite likes to publicly flaunt its wealth.
Our third dangerous corner in the South African economy is the undeserved poverty and deprivation allocated in overwhelming measure to the black majority. The deficit of the masses manifests itself in lack of means and basic needs such as food, clothes, shelter, medicine and access to all levels of education.
It is the eyes of the youth that should touch the hearts of the elites. The eyes of the mass of children are sunk deep into their sockets, with 20% of our children now stunted by malnourishment. These are eyes of poor children that cannot “close” but must remain “open” in order to relay a clear message to the wealthy: their numbers have risen to more than 70% of all our children. Indeed, below the StatsSA “upper-bound poverty line” of R992/month (a conservative measure), we find at least 53% of South Africans.
It is true that many adults and children in this third corner receive state subsidies. However, the subsidy system is weakened by numerous deficiencies. The subsidies are not sufficient (just R380/month to raise a child) and many subsidies fall by the wayside in the delivery process.
Black children are the main source of concern. Their living conditions are so contemptible that it should ignite the conscience of both elite groups. What exactly are the two elite groups doing to alleviate the circumstances of the masses?
Twenty years after the Truth Commission, the wealth tax proposal has yet to get sufficient attention. The TRC mooted a wealth tax as one of a set of recommendations in its final report. The ANC government rejected the proposal. Last year, the Davis Tax Commission officially invited proposals for a wealth tax.
The TRC and government’s failure to make a systemic intervention into the structural inequalities of post-colonial and post-apartheid South Africa has resulted in a deepening of poverty and inequity. The rot among the business elites has burst into the open to show the contagious extent of underserved wealth of both the white and black elite.
The November 2017 Credit Suisse Global Wealth Database shows that amongst the 40 largest developed and emerging economies, the top two scores for the Gini Coefficient which measures inequality – where a perfect 1 means 1 person has everything and 99 have nothing – were 0.87 for South Africa followed by 0.86 for the United States (the bottom were Hungary, Japan and Belgium, all below 0.63).
The false distinction being made by some between a corrupt ‘Zupta’ black elite (combining Zuma and the Gupta brothers) and the wicked ‘White Monopoly Capital’ bloc should cease, and a more explicit commitment made by the entire society to end the rot that pervades big business.
On 11 February 1990, the day of Nelson Mandela’s release from prison, he made the following statement: “The white monopoly of political power must be ended, and we need a fundamental restructuring of our political and economic systems to address the inequalities of apartheid and create a genuine democratic South Africa.”
But the new politico-economic system turned out to be highly dysfunctional. a neoliberal politico-economic system was institutionalised to serve the narrow interests of the old white elite and the emerging black elite. The enabling conditions of the new system were moulded in such a way that the imperial aspirations of the American-led neoliberal empire would be satisfied.
The quid pro quo between the corporate sectors and the ANC leadership core was that lucrative opportunities would be created for the emerging ANC elite to join the white capitalist elite to become rich enough to maintain the same consumerist lifestyle as the white elite.
The elite compromise emphatically excluded the possibility of a comprehensive redistribution policy, which was regarded as unaffordable after preference was given to addressing the interests of the old white corporate elite and the emerging black elite, and after the conditionalities prescribed by the American-led neoliberal empire were accepted. The fact that taxation and expenditure were fixed by the elite compromise deprived the ANC government of the ability to implement a comprehensive redistributive policy.
The most harmful consequence has been the de-industrialisation through South Africa’s obligation to implement a free-trade policy. This has had a devastating effect on many industries that operated for decades behind tariff walls. Clothing, textile and footwear were almost destroyed by the import of cheap products. But while the free-trade policy was harmful for manufacturing, it was to the advantage of the MEC. These corporations were later given the additional privilege of shifting their main listings to London and New York, and to become independent transnational corporations.
While the ANC operated on the moral high ground during the anti-apartheid struggle, since 1994 they have slipped into a sleazy underworld where corruption, nepotism and money squandering are the order of the day, so that South Africa could become a neocolonial satellite of the American-led neoliberal empire. Although the ANC has been the government of South Africa since 1994, we could allege that it is still not ‘ready to govern’.
It is very much in doubt whether the South African project is still viable, given this context. Dangerous levels of corruption, state capture, inequality, poverty and inefficiency under Zuma’s presidency may perhaps be turned around under strong leadership. But structurally, a dangerous triangle has emerged between three groups in South Africa: the old white elite, the new black elite, and the impoverished bottom forty percent. This conflict may yet lead to an implosion of the country. It is therefore vital to revisit the decision made twenty years ago by the neoliberal elites within the ANC government to reject the proposal of a wealth tax for redistributive purposes.
Sampie Terreblanche, 84, is professor emeritus at Stellenbosch University, and also spent time at Harvard and the University of the Free State. His work as political economist and public commentator over sixty years was marked by sharp and controversial shifts to the left of his Afrikaner nationalist roots. Terreblanche served on several public commissions and as deputy chairman of the SABC. He has authored 13 books and hundreds of papers and public lectures, with a focus since the 1990s on inequality and its underlying wealth problem. Among many awards, he received three honorary doctorates. A celebration of his work will be held at the University of Johannesburg on Monday, January 29. Lost in Transformation, his 2012 book about South Africa’s transition to neoliberalism – from KMM Review Publishing – is available online for $12 and will be on sale at the event.