The momentum of the post-Zuma renewal and the alacrity with which South African institutions have fought back against their tormentors has been heartening and unexpected. All South Africans are entitled to a great deal of relief at the developments of the last few weeks, and more than a measure of satisfaction at the dramatic defenestration of Zuma and the Guptas.
But there are dangers in getting too swept up in the current mood and its attendant faith in the promise of a competent state and a buoyant investor class.
The optimism has been carried most forcefully by those who tend to blame every unfulfilled promise of the liberalized economy on the failure of previous governments to truly win the approval of business. Purveyors of this theory are agog because if there is any politician that can break the trend and ignite the animal spirits of investors in droves, it’s South Africa’s new President, Cyril Ramaphosa. Accordingly, provided that his clean-up operation is allowed to proceed unhindered, we need only sit back and let the free market whirl us out of the economic malaise of the last two decades.
Unfortunately, there is very to recommend this theory, as either diagnosis or prescription.
The Mbeki administration bent over backwards to assuage the concerns of a skittish business class. In the National Treasury and a few other agencies it built pockets of efficient bureaucracy which ensured that the government’s overall mandate stayed within the bounds set by financial markets and overseas investors. Extensive liberalization allowed South African corporates to remodel themselves, pursuing narrow specialization on “core competencies” through global alliances and acquisitions. This enabled many companies like Sasol, Naspers and Standard Bank, to develop into highly successful, internationally competitive firms that have returned enormous value to their shareholders.
Unfortunately, Mbeki’s liberalizing reforms did not help the country in any way towards the kind of industrial restructuring needed to find jobs for the 36% of the workforce who have been searching in vain, or giving up entirely. Only for a very brief period prior to the 2008 crash, lifted by swells of local and global assets, did private investment creep above 15% of GDP. In the early years of the Zuma administration it ticked back down to Mbeki-era levels of around 12,5%, and has since sunk below that. For workers, the economic outlook over the last decade has been exceedingly dire, but corporates have found a way to remain highly profitable— largely by migrating their operations overseas.
Corporate fortunes have become significantly detached from domestic economic conditions. Ensuring the short-term confidence of the business community in this environment turns entirely on demonstrating that the state will not interfere with globalizing dynamics, and that its spending plans wont create macroeconomic imbalances. Winning favor in this way may lead to one or two new investment projects at the margin, but it has proved utterly hopeless as a strategy for generating the deep changes in industrial structure that are required.
Anyone who has looked at the issue without ideological blinkers understands that South Africa’s economic crisis is structural, not conjunctural, and its untangling requires radical economic transformation of some kind or other. Unfortunately, the variant offered up by Zuma in his autumn years offers little to inspire. Its main thrust is diverting state procurement budgets more overtly towards the nurturing of black capitalists. The underlying assumption is presumably the same that crops up repeatedly in ANC strategic documents, namely that black capitalists can be expected to behave differently, and more patriotically, than their white counterparts.
I can think of no better refutation of that theory than Ramaphosa’s own recent biography. Shanduka, the company through which he built his fortune, was recently named in the Paradise Papers for its offshore tax havens, which are likely to represent only a fraction of the profit shifting in which he is implicated through various subsidiary holdings like MTN and Lonmin. As a major shareholder and director of the latter, Ramaphosa displayed precious little patriotic sentiment in 2012, when he leaned on a provincial police chief to break up striking workers who he labelled as ‘criminals’. His complicity, direct or indirect, in the ensuing massacre of 34 mineworkers by police — generally known as the Marikana Massacre — has haunted him since. (Last week in Parliament Ramaphosa offered up “healing and atonement” for what he reduced to a “tragedy.” The widows of the murdered miners said they’ve heard his empty promises before.)
Ultimately, if South Africa is to shift out of the minerals- and energy-dependent industrial formation that carries such a sordid history, it will have to rely on the only proven means of late industrialization: a strong, mission-oriented state capable of guiding and allocating capital independently of clientelistic interests. Radical economic transformation of the Zuma variety should be resisted if only because it forecloses on this path to development by once again diluting the boundaries of the state, allowing patronage to supplant planning.
To deliver on the enormous hope South Africans have invested in him, and to construct the instruments necessary for development, Ramaphosa can’t rest at renewing the state that Mbeki built – he has to radically restructure it. Critical to this will be displacing the National Treasury from the apex of inter-governmental power. It’s enormous authority and corporate efficiency have been a crucial check on corruption, but have also been deployed at holding back every modest challenge to economic orthodoxy that has issued to date. The trick for reformers will be in retaining its internal policing functions while repealing Treasury’s ability to dictate strategic policy. Broader changes must also target the social networks in which the economic cluster of the state operates. High-level Treasury functionaries have tended to go on to executive jobs in finance following their service. This brings to mind Japan’s famous “descent from heaven,” in which bureaucrats from elite pilot agencies took up post-retirement positions in the industrial sector, strengthening collaborative relationships between the state and business—except that in South Africa’s case the result has not been to build coherence around productive upgrading, but to make policy more sensitive to rentier interests.
In a developmental state, history teaches, macroeconomic ‘prudence’ can no longer reign supreme, it must be subjected to the demands of industrial policy. Power and capacity will therefore have to be redirected toward industrial planning boards – away from economists and in favor of engineers.
As long as the decision over when and how much to invest remains in private hands, ‘business confidence’ of some kind will be a necessary element of any successful economy. But if structural change is the goal, it will have to be a confidence of a different kind, achieved on radically different terms, underpinned by a different calculus of power. The promise of profits and cheap capital from participation in state-orchestrated industrial programs should be undergirded by punitive measures against firms which don’t comply or which abuse subsidies. Downsizing and financialized business strategies should be deterred with strict controls and regulations. Transformation and racial diversification in the corporate sector should be pursued, not simply as an end in itself, but as a concomitant of this strategy of reconfiguring the terms of state-capital relations.
In Korea’s famous industrialization drive, those found guilty of capital flight received extremely harsh jail sentences. Ramaphosa’s South Africa would do well to adopt the same (although the president may have to issue himself a pardon before signing this into effect).
Unfortunately, pursuing the development of a strong disciplinary apparatus will always be a path of high resistance. South African capitalists see even the most innocuous impulse of state planning as a stalking horse for expropriation and socialism. The country’s deep entanglement in global financial markets and the advanced internationalization of the domestic corporate sector have provided powerful tools and incentives for conservative interests to resist economic change.
Even in the absence of these challenges, nothing whatsoever in Ramaphosa’s personal history or political orbit suggests that he would voluntarily opt for the difficult path of reorganizing the state. If his rise to power was not dependent on the largesse of the corporate class, he certainly counts on their backing as a vital element of his coalition. His own political instincts have no doubt been realigned through his two-decade stint as one of South Africa’s richest black businessmen (he started his political life as a founder of the National Unions of Mineworkers). Within the party, his most high-profile allies are avowed centrists, and those who may differ with him on economic policy, like the SACP, have shown little capacity for getting their way.
If nothing in his background portends an ambitious agenda, little in the immediate conjuncture looks set to push him there either. The sheer despondency of the Zuma years has granted Ramaphosa unprecedented leeway. Even if he makes no move on underlying structural issues, he stands to yield enormous goodwill from the relatively easier and more immediate task of cleansing and normalizing state bodies. The disaster of the Zuma years, in other words, has adjusted the expectations of the South African electorate so far downwards that Ramaphosa could successfully claim a mantle of renewal by expunging the worst excesses of his predecessor, but doing little else. There can be little doubt Ramaphosa will try to ride out this grace period as far as possible, feeding off the atmosphere of hope to delay deeper challenges.
If there was ever an indication that some glimmer of the former unionist survives, and that Ramaphosa may depart slightly from a strictly market-sanctioned program, it was his sponsorship of a national minimum wage during his Deputy Presidency. Unfortunately, the subsequent history of that legislation augurs badly for any such hopes. Conceived initially by COSATU policy thinkers as a ‘springboard’ for lifting wages across the economy (and not simply as a bulwark against destitution), it has since been transformed beyond recognition. Its latest instantiation comes with exclusions for the most vulnerable workers and looks set to pare existing sectoral determinations downwards rather securing a basis for higher demands. It’s also packaged with a raft of anti-union laws that will drastically contain the disruptive power of workers.
The afterlife of a brief spell of radicalism which Zuma opportunistically allowed into the party may force Ramaphosa into a few progressive platforms. The prospects of more assertive land redistribution, free tertiary education, and national health insurance are significant and highly welcome. But every other indication suggests that aside from these, Ramaphosa will revert to an old method of dressing neoliberal fundamentals in tokenistic social policy. The signs point to the same kind of stabilized dysfunction that existed under Mbeki, in which a more competent state keeps the economy on life support but defers any hope of recovery.
Historically, strong developmental institutions in catch-up countries, like those that lifted the Asian Tigers into high-income status, have only emerged in highly particular conditions where external circumstances aligned the interests of state and capital, and forced elites on a path of economic upgrading. We cannot will these conditions into existence in contemporary South Africa, and Ramaphosa certainly won’t bring them about for us. Any pressure that forces his administration up from a low road of state renewal onto the higher path of state reconstruction will have to arise from below. The most effective means of generating that pressure is by leveling wage and income claims that can’t be met within the existing productive structure, with business’ existing expectations of profit. Only at the prospect of serious social unrest and the loss of electoral support will the government take strong measures to make capital’s profitability contingent on delivering jobs and high investment. Forging developmentalism through worker’s power is also the only means of avoiding the usual zero-sum trade offs between growth and ecological and social concerns.
It’s for this reason that the left can’t afford to heed the injunction, heard regularly these days, to ‘grant Ramaphosa the space to govern’. Any space he is given now will be used to further legitimize a program limited to restoring the status quo ante, in which the relief and hopefulness of the moment will be used to inure the public against demands for radical redress. Difficult as it may be to agitate in such conditions, the urgent task of Ramaphosa’s critics on the left will be to remind us that purging the Gupta shadow state, welcome as it is, is not enough.
Resisting the backsliding on the national minimum wage, and turning it once again into a vehicle for deep redistribution, presents a promising site on which to revive a struggle for more meaningful change. A joint campaign for a minimum wage built on principles of justice rather than economic expediency could provide a platform for uniting trade union federations and radical parties – ensuring the left finds its feet and isn’t left spellbound by the “Cyril effect”.