The death of Nelson Mandela, at age 95 on 5 December 2013, brings genuine sadness. As his health deteriorated over the past six months, many asked the more durable question: how did he change South Africa? Given how unsatisfactory life is for so many in society, the follow-up question is, how much room was there for Mandela to maneuver? South Africa now lurches from crisis to crisis, and so many of us are tempted to remember the Mandela years – especially the first democratic government – as fundamentally different from the crony-capitalist, corruption-riddled, brutally-securitised, eco-destructive and anti-egalitarian regime we suffer now. But were the seeds of our present political weeds sown earlier?
The critical decade was the 1990s, when Mandela was at the height of his power, having been released from jail in February 1990, taken the South African presidency in May 1994 and left office in June 1999. But it was in this period, alleges former Intelligence Minister Ronnie Kasrils, that “the battle for the soul of the African National Congress was lost to corporate power and influence… We readily accepted that devil’s pact and are damned in the process. It has bequeathed to our country an economy so tied in to the neoliberal global formula and market fundamentalism that there is very little room to alleviate the dire plight of the masses of our people.”
Given much more extreme inequality, much lower life expectancy, much higher unemployment, much worse vulnerability to world economic fluctuations, and much more rapid ecological decay during his presidency, how much can Mandela be blamed? Was he pushed, or did he jump?
South Africa won its democracy in 1994. But regardless of the elimination of formal racism and the constitutional rhetoric of human rights, it has been a “choiceless democracy” in socio-economic policy terms and more broadly a “low-intensity democracy”, to borrow terms coined respectively by Thandika Mkandawire for Africa, and by Barry Gills and Joel Rocamora for many ex-dictatorships. Nelson Mandela’s South Africa fit a pattern: a series of formerly anti-authoritarian critics of old dictatorships – whether from rightwing or left-wing backgrounds – who transformed into 1980s-90s neoliberal rulers: Alfonsin (Argentina), Aquino (Philippines), Arafat (Palestine), Aristide (Haiti), Bhutto (Pakistan), Chiluba (Zambia), Dae Jung (South Korea), Havel (Czech Republic), Mandela (South Africa), Manley (Jamaica), Megawati (Indonesia), Mugabe (Zimbabwe), Museveni (Uganda), Nujoma (Namibia), Obasanjo (Nigeria), Ortega (Nicaragua), Perez (Venezuela), Rawlings (Ghana), Walesa (Poland) and Yeltsin (Russia).The self-imposition of economic and development policies – typically at the behest of financial markets and the Washington/Geneva multilateral institutions – required an extraordinary insulation from genuine national determinations: in short, an “elite transition.”
This policy insulation from mass opinion could only be achieved through the leadership of Mandela. It was justified by invoking the mantra of “international competitiveness”, and it initially peaked with Mandela’s 1996 Growth, Employment and Redistribution policy. Obeisance to multinational corporations helped shape the terrain on the platinum belt that inexorably generated the Marikana Massacre in 2012, for example. In the South African case, it must be stressed, the decision to reduce the room for maneuver was made as much by the local principals as it was by the Bretton Woods Institutions, other financiers and investors.
South Africa’s democratization was profoundly compromised by an intra-elite economic deal that, for most people, worsened poverty, unemployment, inequality and ecological degradation, while also exacerbating many racial, gender and geographical differences. In the pages below we can review most of the critical choices and outcomes from 1994-1999. These confirmed the late-apartheid turn to neoliberal economic management, and amplified that turn in the context of world neoliberal hegemony until – and beyond – the 1998 East Asian crisis. To understand why requires combining analysis of the changing structure of capital – especially its worsening unevenness and financialisation – with study of divisions within the subordinate classes. This will in turn set the stage for considering a variety of public policies adopted immediately after formal apartheid ended, many of which reflected more continuity than change.
Ending the apartheid regime was one of the greatest human achievements of the past century. However, to promote a peaceful transition, the agreement negotiated between the racist regime and Mandela’s African National Congress (ANC) allowed whites to keep the best land, the mines, manufacturing plants, and financial institutions, and to export vast quantities of capital.
For there had been only two basic paths that the ANC could have followed. One was to mobilize the people and all their enthusiasm, energy, and hard work, use a larger share of the economic surplus (through state-directed investments and higher taxes), and stop the flow of capital abroad, including the repayment of illegitimate apartheid-era debt. The other, which was ultimately the one chosen, was to trudge down the neoliberal capitalist path, with merely a small reform here or there to permit superficial claims to the sustaining of a “National Democratic Revolution.” Because the latter path was chosen, we start by consider the economic barriers to deepened democracy, before proceeding to the economic outcomes, followed by a discussion of social policy patterns, the commercialized state, environmental concerns and the reactions of civil society.
In one of the last public photos released of Nelson Mandela (29 April 2013), he sits with successors in the African National Congress leadership, each disgraced by scandals linking SA politics to crony mining capitalism: Jacob Zuma, Cyril Ramaphosa and Baleka Mbete.
Economic barriers
The neoliberal path was prefigured in the transitional years. The white ruling bloc’s political strategy included weakening the incoming ANC government through repression, internecine township violence, and divide-and-conquer blandishments offered to leaders by way of elite-pacting. The initial softening up process entailed Mandela’s controversial talks-about-talks with National Intelligence Agency director Neil Barnard in prison and the Afrikaner intellectuals’ and English-speaking business leaders’ approaches to exiled ANC leaders during the late 1980s. The unbanning of the ANC allowed many of the pacting processes to come above ground, through methodologies such as “scenario planning” promoted first by Shell Oil and then Anglo American, Nedbank and a variety of other corporates during the critical 1990-94 period.
Another crucial force in the battle for hearts and minds at that time was the World Bank. Along with International Monetary Fund (IMF) visits and a 1993 loan, the Bank’s Reconnaissance Missions fused with neoliberal agencies’ strategies during the early 1990s to shape policy framings for the post-apartheid market-friendly government. These were far more persuasive to the ANC leadership than the more populist ambitions of the 1994 Reconstruction and Development Programme (RDP). This was ironic, for the Bank and IMF had a regrettable history in South Africa:
• the Bank’s US$100 million in loans to Eskom from 1951-67 provided only white people with electric power, but all South Africans paid the bill;
• the Bank refused point-blank to heed a United Nations General Assembly instruction in 1966 not to lend to apartheid South Africa;
• the IMF provided apartheid-supporting loans of more than $2 billion between the Soweto uprising in 1976 and 1983, when the US Congress finally prohibited lending to Pretoria;
• the Bank lent tens of millions of dollars for Lesotho dams which were widely acknowledged to help apartheid South Africa “sanctions-bust” financial boycotts in 1986, via a London trust; and
• the IMF advised Pretoria in 1991 to impose the regressive Value Added Tax, in opposition to which 3,5 million people went on a two-day stayaway.
Subsequently, lending and policy advice by the Bretton Woods twins included:
• Bank promotion of “market-oriented” land reform in 1993-94, which established such onerous conditions (similar to the failed policy in neighbouring Zimbabwe) that instead of 30 percent land redistribution as mandated in the RDP, less than 1 percent of good land was redistributed;
• the Bank’s endorsement of bank-centred housing policy in August 1994, with recommendations for smaller housing subsidies;
• Bank design of South African infrastructure policy in November 1994, which provided the rural and urban poor with only pit latrines, no electricity connections, inadequate roads, and communal taps instead of house or yard taps;
• the Bank’s promotion of water cut-offs for those unable to afford payments, opposition to a free “lifeline” water supply, and recommendations against irrigation subsidies for black South Africans in October 1995, within a government water-pricing policy in which the Bank claimed (in its 1999 Country Assistance Review) it played an “instrumental” role;
• the Bank’s conservative role in the Lund Commission in 1996, which recommended a 44 percent cut in the monthly grant to impoverished, dependent children from R135 per month to R75;
• the Bank’s participation in the writing of the (ultimately doomed to fail) Growth, Employment and Redistribution policy in June 1996, both contributing two staff economists and providing its economic model to help frame GEAR;
• the Bank and IMF’s consistent message to South African workers that their wages are too high, and that unemployment can only be cured through “labour flexibility’;
• the Bank’s role in Egoli 2002, including research support and encouragement of municipal privatisation in Johannesburg (and many other cities and towns); and
• the Bank’s repeated commitments to invest, through its subsidiary the International Finance Corporation, in privatised infrastructure, housing securities for high-income families, for-profit “managed healthcare” schemes, and the now-bankrupt, US-owned Dominos Pizza franchise.
So even without going through the process of lending to transitional South Africa, until the IMF’s $850 million loan in 1993, the Bretton Woods Institutions had enormous influence. The Bank carefully recruited ANC officials to work with them in Washington during the early 1990s, and also gave substantial consultancies to local allies in South Africa. But notwithstanding all the political maneuvers associated with the rise and fall of personalities, blocs and ideas during the 1990-94 era, perhaps the most important fusion of the old and new occurred on the economic terrain five months prior to the April 27, 1994 democratic election, when the “Transitional Executive Committee” (TEC) took control of the South African government, combining a few leading ANC cadre with the ruling National Party, which was in its last year of 45 in power.
Thus, even as racist laws were tumbling in parliament and as the dignity of the majority black population was soaring, the TEC accepted, on December 1, 1993, an $850 million loan from the IMF, signed first by subsequent Finance Minister Pravin Gordhan. It was ostensibly for drought relief, although the searing drought had ended 18 months earlier. The loan’s secret conditions – leaked to Business Day in March 1994 – included the usual items from the classical structural adjustment menu: lower import tariffs, cuts in state spending, and large cuts in public sector wages. In addition, Michel Camdessus, then IMF managing director, put informal but intense pressure on incoming president Mandela to reappoint the two main stalwarts of apartheid-era neoliberalism, the finance minister and central bank governor, both from the National Party.
So it was in May 1994, just after the ANC won an overwhelming victory, Mandela announced a “Government of National Unity” (GNU) which included FW De Klerk’s National Party and the Zulu-nationalist Inkatha Freedom Party. This was justified to an adoring society desperate for reconciliation, because highly creative vote tallying gave the National Party just over 20 percent and Inkatha 10 percent of electoral support and denied the ANC the two-thirds which Mandela himself had stated would be an adverse outcome, insofar as it would dent investor confidence to know the Constitution might be alterable. The subsequent roles of DeKlerk (an honorary-type deputy president) and Inkatha’s Mangosuthu Buthelezi (home affairs minister) were relatively unsubstantial, and the NP dropped out of the government in 1996 without much notice, and within a decade had dissolved as a party, folded into the ANC by DeKlerk’s successor Marthinus van Schalkwyk.
By mid-1996, with neoliberal economic policy in place, the elite transition was cemented and only provincial power shifts – from Inkatha to ANC in 2004 in KwaZulu-Natal, and from ANC to the Democratic Alliance in 2009 in the Western Cape – disturbed the political power-balance arrangements established in 1994. The ANC continued to receive between 60 and 67 percent of the national votes, and Mandela continued to be venerated after he departed the presidency, for having guided the “miracle” of a political solution to the surface-level problems of apartheid.
However, seen from below, the replacement of racial for what we might term “class apartheid” was decisive under Mandela’s rule. The behind-the-scenes economic policy agreements forged during the early 1990s meant the Afrikaner regime’s own internal power-bloc transition from apartheid “securocrats” (e.g., defense minister Magnus Malan and police minister Adriaan Vlok) to post-apartheid “econocrats” (such as finance minister Barend du Plessis and Reserve Bank governor Chris Stals). This was matched by a similar process of deradicalisation in the ANC.
There, party managers led by Mbeki – soon to be Mandela’s first deputy president – renamed the ANC Department of Economic Planning to the Department of Economic Policy and Trevor Manuel was appointed to lead it in 1990, replacing a man (Max Sisulu) with more Keynesian leanings. Along with Tito Mboweni and Maria Ramos (his future wife), Manuel ensured that a small group of neoliberal managers were gradually brought into the Treasury and SA Reserve Bank. The Congress of SA Trade Unions (Cosatu) and SA Communist Party (SACP) offered similar pragmatists who – no matter their personal predilections and internecine conflicts – could be trusted to impose neoliberal policies, including future trade minister Alec Erwin, Reconstruction and Development Programme minister Jay Naidoo, housing minister Joe Slovo, transport minister Mac Maharaj, and minister-at-large Essop Pahad. This politically-fluid group of change managers within the ANC-Cosatu-SACP Alliance had become trustworthy to the Afrikaners and English-speaking businesses.
In addition to the 1990-94 dealmaking and ideological panel-beating, various other international economic constraints were placed on the New South Africa. A few weeks after liberation in May 1994, when Pretoria joined the General Agreement on Tariffs and Trade on disadvantageous terms as a “transitional” not “developing” country, as a result of pressure from Bill Clinton’s White House, the economy’s deindustrialization was guaranteed. In January 1995, privatization began in earnest, with Mbeki facilitating the sale of a few minor parastatals but with much bigger targets looming.
More rapid financial liberalization in the form of the abolition of the Financial Rand exchange controls occurred in March 1995, in the immediate wake of Mexican capital flight that destroyed the peso’s value. Without capital controls, the Reserve Bank lost its main protection against a run on the currency. So when one began 11 months later, the only strategy left was to raise interest rates to a record high, resulting in a long period of double-digit prime interest rates.
The most important post-apartheid economic decision was taken in June 1996, when the top echelon of ANC policymakers imposed what Finance Minister Manuel termed a “non-negotiable” macroeconomic strategy without bothering to properly consult its Alliance partners in the union movement and SACP, much less its own constituents. The World Bank contributed two economists and its econometric model of South Africa for the exercise, known as “Growth, Employment and Redistribution” (GEAR).
With Mandela’s approval and Mbeki’s formal ideological U-turn – “just call me a Thatcherite,” he pronounced to journalists – GEAR was introduced in the wake of the long 1996 currency crash to promote investor confidence. The document, authored by 17 white men using the World Bank’s economic model, allowed the government to psychologically distance itself from the somewhat more Keynesian RDP, a 150-page document which in 1994 had served as the ANC’s campaign platform, and which the ANC’s civil society allies had insisted be implemented. An audit of the RDP, however, showed that only the RDP’s more neoliberal features were supported by the dominant bloc in government during the late 1990s.
The constraints would tighten in the years after GEAR codified liberalization as the official ideology. Successive Reserve Bank governors loosened exchange controls even further, and finance minister Manuel let the capital flood out when in 1999 he gave permission for the relisting of financial headquarters for most of the largest companies on the London Stock Exchange. The firms that took the gap and permanently moved their historic apartheid loot offshore include Anglo American, DeBeers diamonds, Investec bank, Old Mutual insurance, Didata ICT, SAB Miller breweries (all to London), and Mondi paper (to New York).
It is here that the core concession made by the ANC during the transition deal was apparent: acquiescing to the desire by white businesses to escape the economic stagnation and declining profits born of a classical “overaccumulation crisis”, in which too much capital piles up in a given territory without sustainable ways to increase consumer purchases of goods, employment of idle labour, new investment of fixed capital, or value production to undergird financial speculation. Put simply, big business wanted out of South Africa and as part of the deal for the transfer of power, Mandela gave the nod to the extreme capital flight which today, leaves South Africa as amongst the countries most adversely affected by a current account deficit.
A symptom of that crisis, through the mid-1990s, was declining corporate profits. The profit rate had followed the downward slide from 1960s levels which were amongst the world’s highest, to extremely low rates by the 1980s, as University of Cape Town economist Nicoli Nattrass has documented. (The falling profits trajectory closely followed those of the world’s largest firms, in the United States.) But by the late 1990s, mainly through disinvesting from South Africa, the major Johannesburg and Cape Town conglomerates found overseas avenues and reversed the downward profits slide. By 2001 they were achieving profits that were the ninth highest in the industrialised world, according to a British government study.
Perhaps the three most critical processes in shifting resources to capital after apartheid ended were 1) the demise of the sanctions-induced laager – and its associated inward-oriented economic policies – so that business elites could escape the saturated South African market, 2) the deregulation of a variety of SA industries, and 3) the waning of the 1970s-80s rise of black militancy in workplaces and communities. There was a steady shift of the national surplus from labour to capital after 1994 (amounting to an eight percent redistribution from workers to big business in the post-apartheid era), with the major decline in labour’s share – a full five percent fall – occurring from 1998-2001. These processes confirmed the larger problem of choiceless democracy, in which the deal to end apartheid on neoliberal terms prevailed: black nationalists won state power, while white people and corporations would remove their capital from the country, but also remain welcome for domicile, and enjoy yet more privileges through economic liberalization.
Economic outcomes
In the controversial words of one observer, “I am sure that Cecil John Rhodes would have given his approval to this effort to make the South African economy of the early 21st century appropriate and fit for its time.” That was Nelson Mandela in mid-2003, when launching the Mandela-Rhodes Foundation in Cape Town. “Fit for its time” meant the Minerals-Energy Complex and financial institutions at the South African economy’s commanding heights were given priority in all policy decisions, as had been the case over the prior century and a third, along the lines Rhodes had established. The results, explored in coming pages, include:
• the most profitable, fast-growing sectors of the SA economy, as everywhere in the world during the roaring 1990s, were finance, insurance and real estate, as well as communications and commerce, due to speculative and trade-related activity associated with neoliberalism;
• but the context was stagnation, for overall GDP/capita declined in the late 1990s, and even in 2000 – a growth year after a mini-recession in the wake of the Asian crisis – there was a negative per person rate of national wealth accumulation recorded by the World Bank (in its book Where is the Wealth of Nations?) if we subtract non-renewable resource extraction from GDP so as to more accurately reflect economic activity and net changes in wealth;
• labour-intensive sectors such as textiles, footwear and gold mining shrunk by 1-5 percent per year (gold hit its low point of $250/ounce in 1998 after peaking in 1981 at $850/ounce), and overall, manufacturing as a percentage of GDP also declined;
• private gross fixed capital formation was a meager 15-17 percent during the late 1990s, only picking up to higher levels after 2004;
• the sustained overaccumulation problem in highly-monopolised sectors continued, as manufacturing capacity utilization continued to fall from levels around 85 percent in the early 1970s to 82 percent in 1994 to below 80 percent by the early 2000s; and
• instead of funding new plant and equipment in this stagnant environment, corporate profits were redirected into speculative real estate and the Johannesburg Stock Exchange which by the late 1990s had created the conditions that generated a 50 percent increase in share prices during the first half of the 2000s, while the property boom which began in 1999 had by 2008 sent house prices up by a world record 389 percent (in comparison to just 100 percent in the US market prior to the burst bubble and 200 percent in second-place Ireland over the 1997-2008 period).
The transition is often said to be characterized by “macroeconomic stability,” but this ignores the easiest measure of such stability: exchange rate fluctuations. The currency crashes witnessed over a period of a few weeks in February-March 1996 and again in June-July 1998 exceeded 30 percent, and both led to massive interest rate increases which sapped growth and rewarded the speculators. Another four such crashes of more than 15 percent within a few weeks occurred in the dozen years after 2000.
These moments of macroeconomic instability were as dramatic as any other incidents during the previous two centuries, including the September 1985 financial panic that split big business from the apartheid regime and paved the way for ANC rule. Domestic investment was sickly (with less than 2 percent increase a year during the late 1990s GEAR era when it was meant to increase by 7 percent), and were it not for the partial privatization of the telephone company (disastrous by all accounts), foreign investment would not have even registered during Mandela’s presidency. Domestic private sector investment was net negative (below replacement costs of wear and tear) for several years, as capital effectively went on strike, moving mobile resources offshore as rapidly as possible.
Recall the mandate for “Growth, Employment and Redistribution”. Yet of all GEAR’s targets over the period 1996-2000, the only ones successfully reached were those most crucial to big business: reduced inflation (down from 9 percent to 5.5 percent instead of GEAR’s projected 7-8 percent), the current account (temporarily in surplus prior to the 2000s capital outflow, not in deficit as projected), and the fiscal deficit (below 2 percent of GDP, instead of the projected 3 percent). What about the main targets?
The “G” for growth was actually negative in per capita terms using GDP as a measure (no matter how biased that statistic is in a Resource Cursed society like South Africa). The driving forces behind South African GDP were decreasingly based in real “productive” activity, and increasingly in financial/speculative functions that are potentially unsustainable and even parasitical. The contribution of manufacturing to GDP fell from 21.2 percent in 1994 to 18.8 percent in 2002, although the crashing rand helped push the mining sector up from 7.0 percent to 8.1 percent over the same period, while the agriculture, forestry and fishing sectors ranged between 3.2 percent (2000) and 4.0 percent (1997). Most tellingly, the category of “financial intermediation” (including insurance and real estate) rose from 16 percent of GDP in 1994 to 20 percent eight years later.
The “E” for employment was the most damaging initial result of South Africa’s embrace of the neoliberal economic approach, for instead of employment growth of 3–4 percent per year promised by GEAR proponents, annual job losses of 1–4 percent characterized the late 1990s. South Africa’s official measure of unemployment rose from 16 percent in 1995 to 30 percent in 2002. Adding frustrated job-seekers to that figure brought the percentage of unemployed people to 43 percent. Meanwhile, labour productivity increased steadily and the number of days lost to strike action fell, the latter in part because of ANC demobilization of unions and hostility to national strikes undertaken for political purposes. These happened regularly, e.g. repeated national actions against privatization, but were “set-piece” in character, entailing no fundamental disruption of power relations.
Finally, the “R” – redistribution – benefited corporations most because a succession of finance ministers lowered primary company taxes dramatically, from 48 percent in 1994 to 30 percent in 1999, and maintained the deficit below 3 percent of GDP by restricting social spending, notwithstanding the avalanche of unemployment. As a result, according to even the government’s own statistics, average black African household income fell 19 percent from 1995–2000 (to $3,714 per year), while white household income rose 15 percent (to $22,600 per year). Not just relative but absolute poverty intensified, as the portion of households earning less than $90 of real income increased from 20 percent of the population in 1995 to 28 percent in 2000. Across the racial divide, the poorest half of all South Africans earned just 9.7 percent of national income in 2000, down from 11.4 percent in 1995. The richest 20 percent earned 65 percent of all income. The income of the top 1 percent went from under 10 percent of the total in 1990 to 15 percent in 2002, (That figure peaked at 18 percent in 2007, the same level as in 1949.) The most common measure, the Gini coefficient, soared from below 0.6 in 1994 to 0.72 by 2006 (0.8 if welfare income is excluded).
In sum, the acronym GEAR might have more accurately been revised to Decline, Unemployment and Polarization Economics. A great many South Africans were duped by Mandela’s persuasiveness into thinking that the economy Cecil Rhodes would have found “fit for its time” would somehow also fit the aspirations of the majority. The big question was whether a variety of social protests witnessed after apartheid by civil society – many groups associated with what was formerly known as the Mass Democratic Movement – would shift social policy away from its moorings in apartheid white privilege and instead towards a transformative approach empowering of poor people, women, youth, the elderly, the disabled and the ill.
Social policy in philosophy and practice
The biggest social policy challenge was the use of state patronage to demobilise South Africa’s once-formidable mass movements. Mandela had already, in 1992 after the Bisho massacre and in 1993 after the Hani assassination, taken upon himself to cork the anger building below. At the opening of parliament in 1995, Mandela inveighed, “The government literally does not have the money to meet the demands that are being advanced.” As for social policy, “We must rid ourselves of the culture of entitlement which leads to the expectation that the government must promptly deliver whatever it is that we demand.”
The first programme along these lines was Operation Masakhane, “Let’s Build Together,” a campaign that Pretoria used to link improved state services – although the initial allocation was just R700 million – to resident payment of rent/service bills. Notwithstanding advertisements by Archbishop Desmond Tutu, its failure coincided with rapid increases in water and electricity prices that were required by the 85 percent cut in central-to-local state operating subsidy funding transfers, leaving municipalities bankrupt just at the stage they were taking on vast numbers of new residents.
Previously, the apartheid-era “Black Local Authorities” had mainly been funded by Regional Services Councils, and the 1995-96 municipal elections were meant to legitimize the increasingly decentralized municipalities that combined white and black residential areas for the first time. But even that combination was suspect, because white, Indian and “coloured” councillors were overrepresented due to ward-based voting. Thanks to the compromised Interim Constitution of November 1993, 50 percent of the municipal council seats were allocated to that odd combination, while 50 percent went to African townships, serving to break the unity of combined “black” politics. Moreover, the Interim Constitution permitted veto power over planning and budgeting with just a third of a council’s seats, again reinforcing residual white power and making rapid change impossible.
These compromises of the Interim Constitution, approved by Mandela, meant that prospects for a genuinely democratic local government were reduced to an even lower-intensity level than earlier. In 2000, just after Mandela left office, the municipal demarcation exercise reduced the numbers of local authorities from 843 to 284, which had the effect of increasing the geographical requirements for service delivery in Bantustans and other poor areas to untenable distances, thus reducing the possibilities for meaningful local democracy.
By 2002, the result of these shifts of responsibility – “unfunded mandates” – was that service charges on water and electricity consumed 30 percent of the income of those households earning less than $70 per month. An upsurge of disconnections resulted, with an estimated 10 million people losing service; 60 percent of these were not reconnected within six weeks, indicating that poverty was to blame, not the so-called “culture of nonpayment” that had allegedly resulted from effective anti-apartheid activism. The worst disconnection rate was for fixed telephone lines, where of 13 million people connected for the first time, 10 million were cut, as prices per call soared since the partial privatization of Telkom resulted in the demise of internal cross-subsidies as the new Texan and Malaysian investors attempted to maximize profits during the late 1990s. Reflecting the cost-recovery approach to service delivery and hence the inability of the state to properly roll out and maintain these functions, the category of GDP components known as “electricity, gas and water” fell steadily during the Mandela years, from 3.5 percent of the total in 1994 to 2.4 percent in 2002.
One reason for lack of capital investment was lack of return on investment, as the state became increasingly commercialized, thus slowing the rate of electrification in rural areas and even to outlying schools, for example. The 1998 national electricity policy called for Eskom to apply cost-reflective pricing policies, which meant much higher charges to poor people, especially those who during the 1980s and early 1990s had fought successfully for a nominal township service charge (often as little as $3 per month).
Recognising how vital it was to provide cheap electricity and water, the RDP had, in sharp contrast, endorsed the progressive principle of cross-subsidisation, which imposed a block tariff that was to rise for larger consumers. This would have consciously distorted the relationship of cost to price and hence sent economically “inefficient” pricing signals to consumers. In short, the RDP insisted, poor people should use more essential services (for the sake of gender equity, health and economic side benefits), while rich people should save the environment by cutting back on their hedonistic consumption.
The neoliberal critics of progressive block tariffs correctly insisted that such distortions of the market logic introduced a disincentive to supply low-volume users. For them, the point of supplying any good or service was to make profits or at minimum to break even in narrow cost-recovery terms. In advocating against the proposal for a free lifeline and rising block tariff, a leading World Bank expert advised the first democratic water minister, Kader Asmal, that privatisation contracts “would be much harder to establish” if poor consumers had the expectation of getting something for nothing. If consumers weren’t paying, the Bank suggested, South African authorities required a “credible threat of cutting service”. This was the logic that began to prevail during Mandela’s years in power.
In 2000, the next water minister, Ronnie Kasrils, promised to finally implement a free basic water policy. This led the authors of the Bank’s Sourcebook on Community Driven Development in the Africa Region to lay out a typical neoliberal policy for pricing water: “Work is still needed with political leaders in some national governments to move away from the concept of free water for all.” Later the Bank claimed that the 1995 advice it gave Asmal was “instrumental in facilitating a radical revision in South Africa’s approach to bulk water management” – and the revision away from the microeconomic mandate for Free Basic Water (FBW) was just as critical.
When the FBW step was finally taken by Kasrils, the commercialization instinct was already thoroughly accepted by municipal government suppliers. As a result, FBW ended up being delivered in a tokenistic way and, in Durban – the main site of FBW pilot-exploration starting in 1997 – the overall real cost of water ended up doubling for poor households in the subsequent six years because the FBW was so small, and because the second bloc of water was priced so high. This price hike had the direct impact of causing a decline in consumption by poor people, by one third, during that period’s pandemics of cholera, diarhhoea and AIDS when more water was needed the most, especially in the city with the world’s highest number of HIV+ residents.
Matters were even worse in rural South Africa. After a 1994 White Paper was adopted by Asmal which prohibited subsidies on operating and maintenance costs, his officials began a major capital investment roll-out of community water supply projects featuring communal standpipes at an average distance of 200 metres from residences. Despite the array of problems associated with collecting payment for water from communal standpipes, the principle of full payment for the operating, maintenance and replacement costs was insisted upon. Once projects were built, especially by Mvula Trust and other non-governmental suppliers, communities were meant to receive no further support. Inexorably, extremely serious problems arose in the community water supply projects.
Where monitoring and evaluation did take place, there were varying estimates about project sustainability, but most were desultory. Even the pro-government Mvula Trust acknowledged that roughly half of the projects it established failed because of inability to maintain the system. The main reasons for unsustainability of a water system invariably included genuine affordability constraints. There was also an unwillingness to pay for communal standpipes, as they were often not viewed as a significant improvement on existing sources of water. Other important reasons for failure include poor quality of construction, areas within communities without service and intermittent supply.
Reflecting the rise in capital expenditures and subsequent decline in maintenance across the terrain of social policy, government’s “general services” role in GDP rose from 16.2 percent in 1994 to 17.3 percent in 1998, but fell back to 15.8 percent by 2002. On the one hand, state fiscal support for the social wage increased a bit, and recipients of existing apartheid programmes were broadened to include all South Africans. But this expansion wasn’t necessarily a commitment to either social democracy or the “developmental state” that was talked of through the 2000s, given how little the fiscal commitment represented in absolute and relative terms.
There were some who argued that these shifts were profound, including Stellenbosch University professor Servaas van der Berg. He insisted that between 1993 and 1997, social spending increased for the poorest 60 percent of households, especially the poorest 20 percent and especially the rural poor, and state subsidies decreased for the 40 percent who were better off; together by counting in non-pecuniary support from the state, Pretoria could claim a one-third improvement in the Gini coefficient. Hence the overall impact of state spending, he posited, would lead to a dramatic decline in actual inequality.
Unfortunately, van der Berg (a regular consultant to the neoliberal Treasury Department) made no effort to calculate or even estimate state subsidies to capital, i.e. corporate welfare. Such subsidies remained enormous because most of the economic infrastructure created through taxation – roads and other transport, industrial districts, the world’s cheapest electricity, R&D subsidies – overwhelmingly benefits capital and its shareholders, as do many tax loopholes.
Moreover, at the same time, the size and orientation of social grants were not particularly satisfactory, for according to University of KwaZulu-Natal researchers Nina Hunter, Julian May and Vishnu Padayachee, “The grants do not provide comprehensive coverage for those in need. Unless they are able to access the disability grant, adults are largely excluded from this framework of assistance. It is only possible for the Unemployment Insurance Fund to be received by the unemployed for a maximum of six months and then only by those who were registered with the Fund, for the most part the formally employed.”
There were other problems: means-testing was utilized with the inevitable stigmatization that comes with a state demanding proof of poor people’s income; cost-recovery strategies were still being imposed, by stealth, on recipients of state services; the state’s potentially vast job-creating capacity was never utilized aside from a few short-term public works activities; and land and housing were not delivered at appropriate rates.
Moreover, according to Hunter, May and Padayachee, Pretoria’s spending on public education was definitely not “pro-poor, since the share going to the poor and the ultra-poor was substantially smaller than their share of the population. In South Africa, education should be free, but in practice schools require school fees and other costs (such as uniforms, school books and stationery, transport to school) are making it increasingly more difficult for the poorest to access basic education.” Indeed, in a 2001 state survey, it was revealed that 35 percent of learners dropped out by Grade 5 (worse than neighboring Namibia, Lesotho and Swaziland) and 48 percent left by Grade 12. The state schools were in terrible shape, with 27 percent lacking running water, 43 percent without electricity, and 80 percent without libraries and computers.
On the brighter side, gender relations recorded some improvements in those early years, especially with the inclusion of reproductive rights in health policy, albeit with extremely uneven access. But one measure of women’s poverty in the 1994-2002 period – a $1/day income or below – showed a rise from 10.1 percent to 11.1 percent. Women were also victims of other forms of post-apartheid economic restructuring, with unemployment broadly defined at 46 percent (compared to 35 percent for men), and a massive late 1990s decline in relative pay, from 78 percent of male wages in 1995 to just 66 percent in 1999.
One reason was that contemporary South Africa retained apartheid’s patriarchal modes of surplus extraction, thanks to both residual sex discrimination and the migrant (rural-urban) labour system, which is subsidized by women stuck in the former bantustan homelands. These women were not paid for their role in social reproduction, which in a normal labour market would be handled by state schooling, health insurance, and pensions. This structured superexploitation was exacerbated by an apparent increase in domestic sexual violence associated with rising male unemployment and the feminization of poverty. Women also remained the main caregivers in the home, there again bearing the highest burden associated with degraded health.
With the public healthcare services in decline due to underfunding and the increasing penetration of private providers, infectious diseases such as tuberculosis, cholera, malaria, and AIDS became rife, all far more prevalent than during apartheid. Life expectancy fell from 65 at the time of liberation to 52 a decade later. Diarrhea killed 43,000 children a year, as a result mainly of inadequate potable water provision. Most South Africans with HIV had, until the mid-2000s, little prospect of receiving antiretroviral medicines to extend their lives.
The 1997 White Paper for the Transformation of the Health System did at least set out the following national objectives: “(a) unify the fragmented health services at all levels into a comprehensive and integrated National Health System (NHS); (b) reduce disparities and inequities in health service delivery and increase access to improved and integrated services, based on primary health care principles; (c) give priority to maternal, child and women’s health; and (d) mobilise all partners, including the private sector, NGOs and communities in support of an integrated NHS.” Four programmes received strategic focus: free health care, the clinic building and upgrading program, HIV/AIDS, and the Primary School Nutrition Programme.
And there was indeed some progress to report because most importantly, perhaps, the national Department of Health committed in 1994 that Primary Health Care (PHC) would be free for pregnant women and children under age six, and in 1996 expanded the commitment to assure all South Africans would not pay for “all personal consultation services, and all non-personal services provided by the publicly funded PHC system”, according to government’s Towards a National Health System statement. Indeed there was a major budget shift from curative care to PHC, with the latter projected to increase by 8.3 percent in average real terms annually. Closures of hospital facilities in several cities were anticipated to save money and allow for redeployment of personnel (although they also affected access, since many consumers used these in lieu of clinics).
But other areas of implementation – the District Health System especially for rural areas; clinic building; free primary health care, maternal and child health and reproductive rights; child nutrition; staffing – relied not only on provincial departments taking the vast bulk of resource, planning and implementation responsibilities. At a micro level, the rapid establishment of a District Health System was also required.
Personnel constraints were also severe. On the one hand, transformation of Department of Health senior management was relatively rapid, with a reduction in the number of white male managers from 99 percent in 1994 to 50 percent in 1997. But of great concern was the difficulty in staffing new clinics (particularly those in isolated areas). There were serious shortfalls in medical personnel willing to work in rural South Africa, requiring two major programmatic initiatives: the deployment of foreign personnel (especially several hundred Cuban general practitioners) in rural clinics; and the imposition of a two-year Community Service requirement on students graduating from publicly-subsidised medical schools.
Yet if the personnel issue remained a barrier to implementation, regrettably the Department of Health was ambivalent about mobilising civil society in areas where Community Health Workers could have supported service delivery. The RDP had suggested that “Communities must be encouraged to participate actively in the planning, managing, delivery, monitoring and evaluation of the health services in their areas”. But Community Workers were excluded in the policy document Restructuring the National Health System for Universal Primary Health Care, denying the system a potential source of both enthusiastic people and community eyes and ears.
The most severe blight on South Africa’s post-apartheid record of health leadership was, without question, its HIV/AIDS policy. This could be blamed upon both the personal leadership flaws of presidents Mandela and Mbeki and their health ministers, and upon features of the socio-political structure of accumulation. With millions of people dying early because of AIDS, and approximately five million HIV+ South Africans by 2000, the battle against the disease was one of the most crucial tests of the post-apartheid government.
Pretoria’s problem began, arguably, with Mandela’s reticence even before 1994. As he told one interviewer regarding hesitation to raise AIDS as a social crisis,
“I was very careful because in our culture you don’t talk about sex no matter what you do.” He remarked on advice he received in Bloemfontein by a school principle after asking her, “Do you mind if I also add and talk about Aids?” As Mandela recounted, “She said, ‘Please don’t, otherwise you’ll lose the election.’ I was prepared to win the election and I didn’t talk about AIDS.”
If Mandela was too coy, and prone to accepting quack solutions like the industrial solvent Virodene proposed by local researchers – and apparently financed with Mbeki’s assistance – then Pretoria’s subsequent failure in the early 2000s to provide medicinal treatment for HIV+ patients led to periodic charges of “genocide” by authoritative figures such as the heads of the Medical Research Council (Malegapuru William Makgoba), SA Medical Association (Kgosi Letlape), and Pan Africanist Congress health desk (Costa Gazi), as well as leading public intellectual Sipho Seepe. Beyond the oft-cited peculiarities of the president himself, there were three deeper reasons why local and global power relationships meant that the battle against AIDS was mainly lost in the first years of liberation.
One reason was the pressure exerted by international and domestic financial markets to keep Pretoria’s state budget deficit to 3 percent of GDP, as mandated in GEAR. As evidence, consider the telling remark of the late Parks Mankahlana, Mbeki’s main spokesperson, who in March 2000 justified to Science magazine why the government refused to provide relatively inexpensive anti-retrovirals (ARVs) like Nevirapine to pregnant, HIV-positive women: “That mother is going to die and that HIV-negative child will be an orphan. That child must be brought up. Who is going to bring the child up? It’s the state, the state. That’s resources, you see.”
The second structural reason was the residual power of pharmaceutical manufacturers to defend their rights to “intellectual property”, i.e., monopoly patents on life-saving medicines. This pressure did not end in April 2001 when the Pharmaceutical Manufacturers Association withdrew their notorious lawsuit against the South African Medicines Act of 1997, which permits parallel import or local production, via “compulsory licenses”, of generic substitutes for brand-name anti-retroviral medicines.
The third structural reason for the elongated HIV/AIDS holocaust in South Africa was the vast size of the reserve army of labour in South Africa. This feature of the socio-political structure of accumulation allowed companies to readily replace sick HIV+ workers with desperate, unemployed people, instead of providing them treatment.
In 2000, for example, Anglo American Corporation had 160,000 employees. With more than a fifth HIV+, the firm began planning “to make special payments to miners suffering from HIV/AIDS, on condition they take voluntary retirement.” Aside from bribing workers to go home and die, there was a provisional hypothesis that “treatment of employees with anti-retrovirals can be cheaper than the costs incurred by leaving them untreated.” However, in October 2001, a detailed cost-benefit analysis showed the opposite. As a result, “the company’s 14,000 senior staff would receive anti-retroviral treatment as part of their medical insurance, but the provision of drug treatment for lower income employees was too expensive.”
This remark summed up so much of post-apartheid South Africa’s approach to poor and working-class people: human expendability in the face of corporate profitability.
Commercialisation of the state
It is important to add that the government’s regular claim of “insufficient state capacity” to solve economic, social and environmental problems was matched by a willingness to turn resources over to the private sector. If outsourcing, corporatization, and privatization could have worked anywhere in Africa, they should in South Africa – with its large, wealthy markets, relatively competent firms and advanced infrastructure. However, contrary evidence emerges from the four major cases of commodification of state services: telecommunications, transport, electricity, and water.
In the lucrative telecommunications sector, 30 percent of the state-owned Telkom was sold to a Houston–Kuala Lumpur alliance in 1996. The cost of local calls skyrocketed, leading the vast majority of new lines to be disconnected. Meanwhile, twenty thousand workers were fired. Attempts to cap fixed-line monopoly pricing by the regulator were rejected by the Texan-Malaysian joint venture via both a court challenge and a serious threat to sell their Telkom shares in 2002. As a result, Telkom’s 2003 Initial Public Offering on the New York Stock Exchange raised only $500 million, and so, in the process, an estimated $5 billion of Pretoria’s own funding of Telkom’s late 1990s capital expansion evaporated. A pact on pricing and services between the two main private cellular operators and persistent allegations of corruption combined to stymie the introduction of new cellular and fixed-line operators.
In the field of transportation there were a variety of dilemmas in the first years of democracy associated with partial privatizations. Commercialized toll roads were unaffordable for the poor. Air transport privatization led to the collapse of the first regional state-owned airline. South African Airways was disastrously mismanaged, with huge currency-trading losses that continued well into the 2000s, and an inexplicable $20 million payout to a short-lived US manager. The Airports Company privatization led to security lapses and labour conflict. Constant strife with the ANC-aligned trade union threw ports privatization into question. The increasingly corporatized rail service shut down many feeder routes that, although unprofitable, were crucial to rural economies.
As for the electricity sector, Pretoria announced in 2004 that 30 percent of the Eskom parastatal (the world’s fourth largest electricity producer) would be sold. That position shifted after a Cosatu protest, and soon state policy was to allow 30 percent of generating capacity to come from new Independent Power Producers. Meanwhile, still anticipating deeper institutional privatisation, a corporatizing Eskom fired thirty thousand electricity workers during the 1990s. While a tiny pittance was invested in renewable energy, the state expanded spending on nuclear energy research. This occurred first through pebble-bed reactor technology in partnership with US and British firms and then after that investment (in the range of $2 billion) was written off, ordinary nuclear reactors were authorized that were estimated to cost $60 billion or more. At the same time, tariffs for residential customers rose much higher as cross-subsidies came under attack during the late 1990s, and the process would intensify dramatically a decade later.
As a result of increasingly unaffordable tariffs, Eskom slowed the extension of the rural electricity grid, while millions of people who fell into arrears on inflated bills were disconnected – leading to massive (often successful) resistance such as illegal reconnections. With TB and other respiratory illnesses reaching epidemic levels, those who did not reconnect their electricity illegally were forced back to paraffin or coal fires for cooking, with all the hazards that entailed.
The drive to privatize was not only manifest at national level. Virtually all local governments turned to a 100 percent cost recovery policy during the late 1990s, at the urging of central government and the World Bank, largely to prepare for a wave of water and solid waste commercialization. Attempts to recover costs from poor communities inflicted hardships on the most vulnerable members of society, especially women and those with HIV+ family members susceptible to water-borne diseases and opportunistic AIDS infections.
Although water and sanitation privatization applied to only 5 percent of all municipalities, the South African pilot projects run by world’s biggest water companies (Biwater, Suez, and Saur) resulted in a number of problems related to overpricing and underservice: contracts were renegotiated to raise rates because of insufficient profits; services were not extended to most poor people; many low-income residents were disconnected; prepaid water meters were widely installed; and sanitation was often substandard. It was simply not in the interests of Paris or London water corporations to provide water services to people who could not afford to pay at least the operations and maintenance costs plus a profit mark-up. Cost-recovery policy applied in northern KwaZulu-Natal led to the continent’s worst-ever cholera outbreak, catalyzed by mass disconnections of rural residents in August 2000, for want of a $10 per household connection fee, which forced more than a thousand people to halt consumption of what had earlier been free, clean water.
For the 10 percent or so wealthiest whites and a scattering of rich blacks who, throughout, enjoyed insulation from crime and segregation from the vast majority, lifestyles remain at the highest level in the world, however. This was evident to any visitor to the slightly-integrated suburbs of South African cities. The residential “arms race” – private security systems, sophisticated alarms, high walls and razor wire, gated communities, road closures and booms –left working-class households more vulnerable to robberies, house-breaks, car theft and other petty crime (with increases of more than 1/3 in these categories from 1994-2001 and only slight declines since), as well as epidemic levels of rape and other violent crimes. In sharp contrast, escalating corporate crime (including illicit capital flight) was generally not well policed, or suffered from an apparently organized penetration of the South African Police Service’s highest ranks, especially during the reign of Jackie Selebi as police commissioner.
Racial apartheid was always explicitly manifested in residential segregation, and after liberation in 1994, Pretoria adopted World Bank advice that included an avoidance of public housing (virtually no new municipal or even cooperatively-owned units have been constructed), smaller housing subsidies than were necessary, and much greater reliance upon banks and commercial developers instead of state and community-driven development. The privatization of housing was, indeed, one of the most extreme ironies of post-apartheid South Africa, not least because the man taking advice from the World Bank, Joe Slovo, was chair of the SA Communist Party. (Slovo died of cancer soon thereafter and his main ANC bureaucrat, who was responsible for designing the policy, soon became a leading World Bank functionary.)
With privatization came more intense class segregation. By 2003, the provincial housing minister responsible for greater Johannesburg admitted to a mainstream newspaper that South Africa’s resulting residential class apartheid had become an embarrassment: “If we are to integrate communities both economically and racially, then there is a real need to depart from the present concept of housing delivery that is determined by stands, completed houses and budget spent.” His spokesperson added, “The view has always been that when we build low-cost houses, they should be built away from existing areas because it impacts on the price of property.” However, the head of one of Johannesburg’s largest property sales corporations, Lew Geffen Estates, insisted that “Low-cost houses should be developed in outlying areas where the property is cheaper and more quality houses could be built.”
Unfortunately it was the likes of Geffen, the commercial bankers and allied construction companies who drove housing implementation, so it was reasonable to anticipate no change in Johannesburg’s landscape – featuring not “quality houses” but what many black residents term “kennels.” Several hundred thousand post-apartheid state-subsidized starter houses were often half as large as the 40 square meter “matchboxes” built during apartheid, and located even further away from jobs and community amenities. In addition to ongoing disconnections of water and electricity, the new slums suffer lower-quality state services ranging from rare rubbish collection to dirt roads and inadequate storm-water drainage.
Ecological decay and Resource Curse
The story is the same when we consider the environment, for South African ecology degenerated in many crucial respects – e.g., water and soil resources mismanagement, greenhouse gas contributions to global warming, fisheries, industrial toxics, genetic modification, the early manifestations of Acid Mine Drainage – in the years immediately after apartheid. Official research conceded this point by 2006, when the Environmental Outlook report acknowledged “a general decline in the state of the environment.”
For example, in spite of water scarcity and water table pollution in the country’s main megalopolis, Gauteng, the first two mega-dams within the Lesotho Highlands Water Project were built during the late 1990s, with destructive environmental consequences downriver, and the extremely high costs of water transfer deterred consumption by poor people in Gauteng townships. One result was the world’s highest-profile legal case of Third World development corruption.
Another result was the upsurge of social protest in which Africa’s main “water war” – between Soweto residents and their municipal supplier outsourced to a Paris water company, Suez (whose construction subsidiary was one of the firms prosectured for corruption in Lesotho) in the early 2000s – can be traced to the higher prices and commercialized system that protesters objected to. The wealthiest urban (mainly white) families continued to enjoy swimming pools and English gardens, which meant that in some of the most hedonistic suburbs water consumption was 30 times greater each day than in low-income townships (some of whose residents continue doing gardening and domestic work for whites).
Rural (black) women still stand in line for hours at communal taps in the parched former bantustan areas. The location of natural surface and groundwater remained skewed towards white farmers due to apartheid land dispossession, and with fewer than 2 percent of arable plots redistributed by 2000 (as against a 1994-99 RDP target of 30 percent), Pretoria’s neoliberal land policy had conclusively failed.
Other examples of residual apartheid ecology could be cited, including numerous unresolved conflicts over natural land reserves (displacement of indigenous people continues), deleterious impacts of industrialization on biodiversity, insufficient protection of endangered species, and state policies favoring genetic modification for commercial agriculture. Marine regulatory systems became overstressed and hotly contested by European and East Asian fishing trawlers, as well as by local medium-scale commercial fishing firms fending off new waves of small-scale black rivals.
Expansion of gum and pine timber plantations, largely for pulp exports to East Asia, remained extremely damaging, not only because of grassland and organic forest destruction – leading to soil adulteration and far worse flood damage downriver, as Mozambique suffered in 2000–2001 – but also due to the spread of alien invasive plants into wate