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A couple of things about the current wave of strikes.
Firstly, a strike entails costs for all parties involved in the collective bargaining process. We tend to think of the costs to the company and the customers of the company. But equally significant costs are born by the union and its members. Generally they don’t get paid while on strike and the strike incurs the hostility of management - for the union and leading elements amongst the workers. Management will weed out the workforce first chance it gets. In strikes the victory is never certain and if management can hold out the unions can incur the hostility and disappointment of members and potential members. A bad strike can break the back of a union.
Secondly, these strikes should not be understood as significantly unusual or confrontational. As Jacob Zuma is paraphrased by Wall Street Journal a few minutes ago: “… the strikes are a normal aspect of the bargaining season between unions and companies”.
The withholding of labour has been a right and a duty of workers for as long as capitalism has existed. It is how the system balances itself and without strikes and the right to strike the labour/management relationship would be uneven and unhealthy. Given a completely free hand (free from state regulation and free from collective worker and consumer action) management will create sweatshops every time a coconut – it’s the logic of the system.
Thirdly, strikes – particularly big national affairs – play to the middle ground (or rather they should, but they don’t in South Africa). The workers, in a confrontation with the bosses or government - are struggling for the support of the classes of people that fall between: the middle classes, professionals and unemployed. In South Africa, the racial dimension of historical exclusion meant that prior to 1994 Cosatu had little potential support outside of organised workers and the unemployed. Trashing the streets and high levels of violence in industrial action was one of the results of Apartheid’s racial and class gettoising of South Africa. The same is not true today. Cosatu often fails to heed the changed circumstances and almost seems to be inviting growing social hostility and their own isolation as a result of their tactics. They should remind themselves that it was the daughter of a grocer that crushed the flowering of British trade unionism. Maggie Thatcher closed pit after desperate pit and the petit bourgeois stood by and cheered her on. Over a long period United Kingdom trade unions had lost the support of the middle ground and they lost the coal industry and the government as a result.
Fourthly, in the grand scheme of things, Cosatu is on a hiding to nothing. Globalisation essentially means that capital, goods and services can move swiftly anywhere in the world, making it impossible for anyone or anything but “best in the world” to compete. Globalisation essentially reduces local advantage. The same is true for labour markets. It is not that the individual (cheap and efficient) labourer is now internationally mobile – although this is sometimes the case. The labour or production process itself becomes broken up in ways that place the actual work where it can most efficiently performed. Imagine cotton grown and picked by children in Uzbekistan, dyed and woven in India; and the garment designed in Milan and manufactured in Jiangsu, China. How do trade unions lock down that labour process? The fact is they don’t and this means trade unions are up against history.
Finally, something that irritates me: Cosatu’s endlessly talks “for” the poor and unemployed. The truth is, frankly, the exact opposite to what Cosatu claims. The individual spokesperson or leader is probably speaking from the heart but this claim of brotherhood is actually a denial of the true nature of Cosatu’s relationship with the poorest and marginalised. Cosatu would like to end unemployment; because the logic of Cosatu’s business entails working to establish a monopoly on labour – to increase bargaining power with management. This means the imperative of the union is to control the labour market i.e. control the supply of labour. Ideally Cosatu would like 100% employment in the economy, then the “good” Cosatu controls would be in short supply. But when there is a large pool of unemployed structured into the economy, the trade union strategy must be to deny the unemployed access to the labour market or deny management access to the unemployed. And that is exactly what Cosatu has done since 1994. Cosatu cannot end unemployment so instead it supports legislation that “locks out” the unemployed from the labour market and “locks in” its own members in a highly regulated “labour aristocracy”. Thus there is no group more hostile to the interests of the unemployed and marginalised than Cosatu. The Basic Conditions of Employment Act, the Labour Relations Act and the various other aspects of law that structure the labour market are less victories for human rights in South Africa and more victories for those already employed over those who hope to be employed in future.
… probably Johnny Walker Blue Label …
The leadership of the African National Congress are feeling quite satisfied with themselves – and they have some justification.
They have finessed both the SARB governorship and the transition at the Treasury and everyone, apparently, feels like a winner. For now.
Trevor Manuel as Minister of Finance was the focus (along with Thabo Mbeki) of the attack on the Growth Employment and Redistribution macro-economic policy. Tito Mboweni was the focus of the attack on inflation targeting.
Within a few short months the Zuma administration has appeased the unions and the communists by shifting/shafting Manuel and Mboweni; and they have appeased the financial markets by appointing individuals likely to emphasise continuity and “market friendly” policies.
The finesse shows the depth of skills and ‘people of good reputation’ the new management can call upon; and shows their calm and unhurried gravitas. But it is also just too clever by half. At some point the Zuma administration is going to have to reveal its own colours. When they do, Cosatu and its ideological partners are all going to be disappointed.
On one side of the great divide of ideology and policy (the divide the Zuma administration hopes to ‘straddle’ – so to speak) is the family of ideas generally thought of as “socialist”.
Cosatu and the South African Communist Party have declared against inflation-targeting and privatisation and for nationalisation of the mines, increased state expenditure (preparedness to maintain higher budget deficits), lower interest rates, more assertive tax policy – including higher taxes on the wealthy and companies, greater tariff protection for vulnerable industry and more directed industrial policy.
Up against these views is the more diffuse, but infinitely more powerful, force that is the aggregation of the actions of those who buy and sell shares in South African companies, debt of the South African government and South African corporations and those who decide to invest or disinvest directly in the South African economy more generally. The set of ideas that tend to characterise this pole includes the strict protection of property rights, low inflation, low government borrowing, minimal state interference in the economy, a low tax regime, open markets – including labour markets – and privatisation.
So which side does the new administration (of the party, government and state) side with?
It is crucial to understand that these poles are not, in fact, the same “category of thing”. On the one hand are actual organisations and parts of organisations (Cosatu, the SACP and the ANC’s own left flank) and their ideologies and policy preferences – ultimately the set of interests they represent.
But the other pole is the global capital market; the ebb and flow of wealth and money and investment. This pole is not an organisation or a set of policy formulations. It is a system for aggregating the way people behave. It is immune to appeal or argument. It has no manifesto – except to favour security of ownership and the freedom of its own movement
When the draft Mining Charter (government proposals for BEE in the mining sector) leaked into the public domain in 2002 fund managers around the world sold R54bn worth of South African mining stocks which took 10% off the resource index in a matter of hours. It is only in the fevered imagination of infantile leftists that this was a co-ordinated and caucused political action by “monopoly capital”. Instead, it was the the cold and implacable logic of aggregated human fear and greed – that’s all.
Looking at the appointments of Marcus and Gordhan more closely something that should have been obvious emerges: they do not represent a change in direction, but they do represent historical distance from, or hostility to, Mbeki.
Pravin Gordhan was key to Operation Vula – Jacob Zuma was one of only three top ANC leaders who even knew of that overambitious adventure - and most of that crew fell foul of Mbeki after 1999.
Mbeki – as I understand it; admittedly not perfectly - became irritated by his sense that Marcus lost herself in details and failed to see the bigger picture. This is not a view of Marcus I am propagating, but she was shifted out of Mbeki’s government and into the SARB in 1999.
The Spirit of Polokwane
Polokwane and its famous victories and defeats was never about ideology. It was always about power. The appointments of Gordhan and Marcus strengthen the power and stability of the new management but do nothing to advance a left agenda. Cosatu and the SACP might draw comfort from the appointment of Ebrahim Patel and Rob Davies (to the new Economic Development ministry and Department of Trade and Industry respectively); but it can’t have escaped their notice that those with a “left” mandate are technocrats in undefined or specifically technical positions. No-one from the left is anywhere near real power or any of the security portfolios.
Cosatu, the SACP and those who share their ideological orientation thought Polokwane was an important victory over the “1996 class project“. They have misunderstood. That project was nothing more than the ANC giving obeisance to global capital markets; a kind of lifting of the skirt and tilting of an ankle towards the passing trade. If the Zuma government changes anything it will be to wear a more expensive and revealing dress.
The class base of the ANC is ever more firmly rooted in the emerging political/business elite, whose interests, in turn, are firmly with the traditional preferences of global capital markets. There is almost no difference between the 1996 and 2009 class projects. Cosatu and the SACP have again extended themselves and sent their brightest and best into government and the state in the belief and hope that they can affect the policy outcomes. In the 1990′s they lost successive levels of leadership to government, the state and the realm of fabulous wealth. There seems little doubt that we are witnessing the start of an almost identical process.
The Alliance is not built on a falsehood. The individuals that make up the leadership of the ANC, Cosatu and the SACP share the hope that they can use their holding of state power to advance the interests of the poorest and most marginalised South Africans. It’s just that those who actually get down to do the job soon learn the limitations on what is possible. The biggest limitation is imposed by the seamlessly integrated and internationalised global capital markets.
Cosatu and the SACP represent the energy and sentiments of where the ANC came from. Business and global capital markets represent the power and reward of where the ANC is going.
- A cartoon I commissioned in Feb 1997 by Cathy Quickfall (thanks Jenni B) – at least I’m consistent!
President Zuma’s announcement yesterday (Sunday) that Gill Marcus will replace Tito Mboweni as Governor of the SARB in November is likely to feed anxieties about policy continuity – despite reassurance that policy at the SARB will not change under Marcus.
The issue is not that Marcus is less competent or more likely to side with organised labour’s attacks on inflation targeting or that she would join the ANC’s leftwing allies and support forcing down interest rates and the currency. If anything Marcus’s experience as outgoing Chairperson of ABSA and the markets’ experience of her in previous positions as a SARB deputy governor and deputy minister of Finance are positives.
The issue is rather one of timing. Zuma’s Sunday press conference came out of the blue and his explanation for why the sudden announcement was awkward:
I have re-appointed Mr Mboweni as Reserve Bank governor. However, he has indicated his wish to leave in November 2009 to pursue other interests.
Given the indication from Mr Mboweni, I have therefore decided to designate Gill Marcus as governor of the Reserve Bank with effect from the 9th of November 2009.
Markus was in exile with the ANC and played an important role at ANC headquarters in Lusaka in the 1980′s. She was a member of the ANC NEC from 1991 until 1999. This makes her a more senior ANC politician than the deployed Tito Mboweni. There is speculation that Marcus fell foul of Thabo Mbeki before she left government and the ANC NEC in 1999 - which, in and of itself, could put her closer to the “Zuma Camp”. However, these relatively deeper ties into the ANC and its current leading faction, will not necessarily make her a more compliant SARB governor.
The problem with the timing of the appointment is that Cosatu has been pushing for the non-renewal of Mboweni’s contract and doing so by marching on the SARB to hand over petitions and by threatening mass strikes. In an environment where macro-economic policy (including monetary policy, nationalisation and privatisation and aspects of trade policy) are less certain than they have been since 1996, appearing to give in to this trade union demand is not going to do much for financial market confidence.
This surprising appointment is a useful microcosm for perceptions about policy instability in South Africa under the Zuma government. The appointment is a good one (as far as it goes) but by making it now government has essentially deposed the person who has come to represent policy certainty (in this case inflation targeting). The action fails if it is seen as part of a strategy of communicating with financial markets.
Nelson Mandela’s 91st birthday
Symbolic events usually have more than one meaning. For those who comment on South African financial markets, Nelson Mandela’s 91st birthday (today) is probably “investment neutral”.
However, financial markets do not list the price of everything.
Born in Mvezo on the banks of the Mbashe near Qunu in the rural Transkei Nelson Mandela has become a perfect mirror of the struggle of black South Africans for liberation.
His biographer, Anthony Sampson, points to two events at the time of his birth that for the historian are real gifts:
- the African National Congress – formed 6 years before, sent a delegation to London to plead for the rights of black South Africans;
- Hendry Mandela, the boys father, was stripped of land, cattle and income by a white magistrate for refusing a summons.
From circumcision to missionary school, from Fort Hare to the ANC Youth League and the Defiance Campaign, Nelson Mandela’s life is the movement of the ANC from polite deputation to the British government, through peaceful resistance and on to the massive repression of the late fifties, the growing rapprochement between the African nationalists and the South African communists, the decision to launch armed resistance and the finding of comfort and succour with the Soviet Union.
Then prison for Mandela and exile for Oliver Tambo and 27 years in which the African National Congress travailed in these parallel wildernesses.
The rest is recent history.
For the last 6 years the Mandela heritage has been marketed by the slightly tacky 46664 campaign (it’s his prison number and the campaign is Disneyesque with an aging “Live Aid” feel about it; completely divorced from the culture and issues of the South African liberation struggle).
Today 46664 is punting another clunky number: 67 minutes. This is the number of years Nelson Mandela performed “unbroken and dedicated community service”. The idea is that those who support him will do 67 minutes of community work in honour of the great man … and a worthy thing it undoubtedly is.
Despite all of that, Nelson Mandela is the last symbolic link to the full ambit of the ANC’s struggle – which is the struggle of most black South Africans. Crucially, he also represents the compromises and tolerance that characterised the negotiations from 1990 and the election in 1994.
With each passing moment Mandela’s death is closer and this gives focus to anxiety about South Africa’s future.
Our feelings about the lives and deaths of “great” men and women allow us an emotional link to the grand scope of the history we live in and through.
The death of Pope John Paul II and of Diana Spencer gave a sense of how, in the age of celebrity, the so called general public become emotionally connected to the grand human drama that can usually only be understood a long time afterwards and at many degrees of abstraction.
Nelson Mandela’s death will be such a moment for humanity, because it will represent the drawing together of important threads of the last several hundred years of human history.
The point, however, for the investment specialist in South African financial markets is that the real running of the country and the dealing in the compromises between the old South Africa and the new, has long moved on from Nelson Mandela. It has now become a truism that even in his last years as president Nelson Mandela was already more important as a symbol than as a politician and statesman.
When he dies there will be real and visceral grief from comrades, friends and citizens who have participated with him in the struggles for African liberation. I imagine too, that throughout the world there will be an unprecedented outpouring of emotion that will will elevate the symbol even higher than the man.
When Nelson Mandela dies the South African financial markets – the currency, the equities and the bonds and products that derive from these – will not falter. But that only tells us a small thing: the ticker tape does not list the price of every important thing.
Architects of Poverty by Moeletsi Mbeki (Picador Africa – Pan Macmillan 2009) R152 at Exclusive Books in the V&A Waterfront
…it was the Africans who caught the people in the interior and sold them to the owners of the ships that transported them to the Americas to be sold into slavery. So it was the Africans who needed the guns to protect themselves against the communities they raided for people to sell. (Preface; page x)
Moeletsi Mbeki’s new book is not a scholarly work. It is, instead, an angry tirade against “BEE and its subsidiaries – affirmative action and affirmative procurement”; and a warning that these policies are at the root of the de-industrialisation of the country.
The underlying metaphor for Mbeki is the slave trade with the high consuming black elite implicitly compared to the tribal chiefs who conspired with the slave traders to deliver the flower of Africa’s youth into the holds of the slave ship. Those who actually ran and directly benefited from the trade – the slavers and plantation owners – become, in Mbeki’s analysis, the resource extraction industries, the dreaded “Minerals-Energy Complex”.
At the outset he makes it clear that his complaint is something more than a moral critique of the corruptions and conspicuous consumption of the new elite. The consequences for Mbeki of the system that has “BEE and its subsidiaries”; at its heart is the condemnation of the vast majority of South Africa’s people to poverty and marginalisation.
The two crucial players in Mbeki’s drama are, firstly, the black upper middle class, which:
… dominates the country’s political life today but … plays next to no role in the ownership and control of the productive economy of South Africa; its key role is overseeing the redistribution of wealth towards consumption. It manages (or should that be mismanages?) a few state-owned enterprises inherited from the National Party era. (page 73)
The second set of crucial player are “the “oligarchs” – an unfortunately loose concept in Mbeki’s lexicon, referring to “big business” and foreign investors, specifically those involved in the extraction industry:
The South African economy is dominated by the extraction of minerals from the ground, processing them into metals through the use of electric power and chemicals and selling them to the rest of the world. Most of the assets of the economy are devoted to these activities, which also account for most of the country’s exports
The “oligarchs” are at the centre of the Minerals-Energy Complex web and represent the overwhelmingly dominant set of interests in determining key aspects of policy, according to Mbeki’s analysis.
Other groups and sets of interests: organised workers, peasants and farmers, manufacturing capital and the poor and unemployed are all losers in the division of spoils between the MEC and the black elite, who between them are the “architects of poverty”.
The precise mechanism through which the narrow self interests of the MEC and the black elite converge to the detriment of the country as a whole is through a system of what can best be described as bribes.
The primary object of the economic oligarchy during the Codesa II negotiations was to ensure the preservation of the MEC. The quid pro quo for representatives of the black upper middle class, the ANC politicians, who agreed to the preservation of the MEC was the creation of BEE.
Thus BEE is, at its heart, a bribe intended to pay off – and ensure the corruption of – the political elite, and to cause it to drop its demand for nationalisation of the mines. However there is a hidden quid pro quo as well that is at the heart of Mbeki’s fears. The MEC is, in Mbeki’s analysis, addicted to cheap labour. One of the ways to keep down the price of labour is to subsidise its reproduction by supplying it with cheap manufactured goods. According to Mbeki, beyond the preservation of the MEC “the emerging black political elite” also agreed to strip open South Africa to cheap Asian manufactured goods and thereby maintain the supply of cheap labour to the MEC.
The consequences of this bribe is the hollowing out of the South African manufacturing sector – and Mbeki’s explanation of why the ANC elite and the MEC excluded the domestic manufacturing sector from the Codesa II negotiations. Thus the BEE bribe is the direct cause of the de-industrialisation of South Africa.
The second level of the “bribe” is the payment of social grants to the poor. Increased public spending on welfare has increased, according to “the doubters” (the group to which Mbeki clearly belongs) not out of the goodness of ANC leaders hearts:
… it has been done to placate the poor so that they do not rebel and, most importantly, it has been done to buy the vote of the poor. (p84)
Mbeki argues that a country develops when it is able to harness the energies of its people and put them to productive use. (P85) But that the “resource curse” is allowing/causing South Africans to live off the fat of the land – and not as a result of their own work and ingenuity:
This is precisely the trap into which the ANC government has fallen. At least a quarter of the population receives social grants that would not be available if South Africa were not rich in minerals. Without mineral wealth to redistribute government would have to work harder and be more creative about finding solutions to unemployment and poverty. Resource wealth makes it possible for the government not to have to put an effort into redeveloping the economy to create more jobs.
There is a psychological injury entailed in the bribe of social grants:
Grants also add to and/or accentuate the humiliation that unemployed people feel about being dependent and unproductive and therefore unable to look after themselves and their families.
Moeletsi pushes his analytical luck – and helps to explain why he is under the hammer of the Alliance at the moment – when he goes on to argue that the poor, in a futile effort to regain their self-respect:
… support demagogues who claim they, too, are marginalised and therefore want to replace the ruling elites with people-friendly governments. This, in a nutshell, is what happened at the ANC conference in December 2007, when delegates voted out their president and most of his cabinet.
It seems justified to challenge Mbeki and ask what alternative he would pose to Black Economic Empowerment. Given the racially skewed system of ownership and control inherited by the ANC government, was redistribution not an inevitable priority? Even if purely for the purposes of containing political risk? Some of Mbeki answers to similar questions from journalists and at conferences imply that redistribution is, in his opinion, in and of itself, a bad thing.
In fact, it strikes a fatal blow against the emergence of black entrepreneurship by creating a small class of unproductive but wealthy black crony capitalists made up of ANC politicians, some retired and others not, who have become strong allies of the economic oligarchy this is, ironically, the caretaker of South Africa’s deindustrialisation (61)
Architects of Poverty takes many digressions into broader African politics – especially exploring the failure of Zimbabwe and of various strategies for regional integration, as well as the evils of dependency on donor aid. But Mbeki keeps circling back to his consuming theme:
With the advent of parliamentary democracy in 1994, South Africa’s real bourgeoisie, (i.e. the “oligarchs” - ed) through the process of Black Economic Empowerment …. created a new class from among the African National Congress (ANC) politicians. But it is a pseudo-bourgeoisie whose purpose is to act primarily as an interlocutor in the inner circles of the new political elite on behalf of the real bourgeoisie. Like the pseudo-states in sub-Saharan Africa, these pseudo-bourgeoisie are not a class of entrepreneurs. At best they are crony capitalists who are patronised by the economic oligarchy, just as Africa’s pseudo-states are patronised by Western powers through foreign aid. (p157)
Mbeki’s book is great as a moral critique of the excesses of the new South African elites; but suffers from a weak and haphazard use of theory. ‘The political elite’ is an easy concept, not entailing great abstraction and ‘the beneficiaries of BEE’ can be named by a glance through the Financial Mail’s Little Black Book; but Mbeki should take more care when collapsing these commonsense concepts with “the black middle class” or even “the state”, “the bourgeoisie”, “the peasantry” and the Mineral-Energy Complex.
In general Mbeki casually slips in and out of the language of a Marxist critique and analysis of the contending interests in South Africa, but he appears to mean a slightly different thing almost every time he uses a concept. How an economic class emerges and comes to articulate its interests (in Marxist theory) is a useful (but strictly circumscribed) contribution to economics and social theory. But the “bourgeoisie” is not, for example, just another name for the secret meeting of a couple of businessmen getting together to advance their narrow interests. Unfortunately Mbeki’s lackadaisical use of theory is going to strengthen the hand of the communists, trade unionists and ANC heavyweights who are already baying for his blood.
So do not read the book for its accuracy and theoretical precision. Read it as the honest and angry critique it appears to be. Read it because Mbeki has dared to speak what he sees as the uncomfortable truth to the new and the old powers in South Africa.
An interesting aside is that Moeletsi is the brother of Thabo, South African president ousted from leadership of the country last year (and from the party at Polokwane in 2007). It is clear from much of the book that Moeletsi has made his views clear to his brother and that he blames him for putting in place the cornerstones of the system. But Moeletsi is even more strongly critical of the new ANC leadership and he is clearly angry with them for their ousting of his older brother. There is an interesting story published in the Citizen based on Moeletsi Mbeki’s comments at a recent conference in Johannesburg:
He said that the ANC had been “very good” at establishing a political system and the Constitution, but had not done well in economics.“I never expected them to because they have never run a business.” He said that at least he and his brother, President Thabo Mbeki, had worked in the family’s spaza shop as children.“But when my brother gets kicked out as head of government, you won’t have anyone there who has actually managed even a spaza shop.
It is difficult to imagine Thabo and Moeletsi Mbeki running a spaza shop – and even more difficult to imagine that this equips anyone to run an economy. However Moeletsi Mbeki’s critique is, at it heart, an assertion of the simple virtues, usually ascribed to the petit bourgeoisie: thriftyness, hard work, frugality and respect for the property of others and for your own. In this assertion the book succeeds.
Architects of Poverty by Moeletsi Mbeki (Picador Africa – Pan Macmillan 2009) R152 at Exclusive Books in the V&A Waterfront – if you can find it where they are hiding all their copies under a table right at the back … conspiring with the evil Minerals-Energy Complex (MEC), no doubt.
- Time and tide have intervened and I am not going to be able to publish a review of this book before I leave in a few hours for the Otter Trail with my son where, as Paul Simon might have said: I have reason to believe, we both will be received, in Graceland.
- I have read the book twice in preparation for reviewing it here – which I will do on my return – but for now let me urge you: buy this book. It is simple (sometimes simplistic) but it bravely and clearly rips the heart out of the body of wheedling and lies that underscores the system of crony capitalism and corruption which is becoming the dominant mode of existence in South Africa. For his pains Moeletsi Mbeki is going to fall as foul as it is possible to fall (even more foul than his brother fell) of the ruling elite.
- Herewith is an extract from the book as a taster:
Black Economic Empowerment(BEE) has not proved to be the fatal blow to South Africa’s oligarchs that Nelson Mandela and black nationalists of his era once envisioned. In fact, it strikes a fatal blow against the emergence of black entrepreneurship by creating a small class of unproductive but wealthy black crony capitalists made up of ANC politicians, some retired and others not, who have become strong allies of the economic oligarchy that is, ironically, the caretaker of South Africa’s de-industrialisation. BEE in South Africa is, in reality, another attempt to siphon savings from private-sector operators in an environment where there are no peasants and where most of the private sector is locally owned.
The fact that BEE is an uphill battle for South Africa’s political elite is the result of the ability of the private sector to resist dispossession. But these are early days. Time will tell who will emerge best from what could be a titanic struggle by the political elite – recently joined by organised labour – to confiscate the wealth of South Africa’s current private-sector owners. An even bigger question, however, is what impact these struggles will have on the growth potential of the South African economy.
Most people in South Africa, in Africa, and the rest of the world naively believe that BEE was an invention of South Africa’s black nationalists, especially the ANC, which won the first democratic election in April 1994, leading to Nelson Mandela becoming the country’s first black president. This could not be further from the truth. BEE was, in fact, invented by South Africa’s economic oligarchs, that handful of white businessmen and their families who control the commanding heights of the country’s economy, that is, mining and its associated chemical and engineering industries and finance.
The flagship BEE company, New Africa Investments Limited(NAIL), started operating in 1992, two years before the ANC came to power. It was created by the second-largest South African insurance company, SANLAM, with the support of the National Party government-controlled Industrial Development Corporation(IDC), a state-owned industrial investment bank created in 1940. The formation of NAIL was soon followed by the creation of Real African Investment Limited (Rail), sponsored by mining giant Anglo American Corporation through its financial services subsidiary Southern Life. The object of BEE was to co-opt leaders of the black resistance movement by literally buying them off with what looked like a transfer to them of massive assets at no cost.
To the oligarchs, of course, these assets were small change. SANLAM created NAIL by transferring control of one of its small subsidiaries, Metropolitan Life, 85 percent of whose policy-holders were black, to several ANC and PAC affiliated leaders. The device used was to split shares of MetLifeinto a small package, dubbed high-voting shares which gave the politicians (funded by a loan from the IDC) control of the company. Overnight the politicians were transformed into multi-millionaires without having had to lift a finger because all the financial wizardry was performed by Sanlam’s senior executives. All the politicians had to do was show up at the party to launch NAIL and thank their benefactor. Even the debt the politicians incurred was largely fictitious because it wasMetLifethat had to pay it back to the IDC.
This financial razzmatazz was designed to achieve a number of objectives. It was intended to:
- Wean the ANC from radical economic ambitions, such as nationalising the major elements of the South African economy, by putting cash in the politicians’ private pockets, packaged to look like atonement for the sins of apartheid, that is, reparations to black people;
- Provide the oligarchs with prominent and influential seats at the high table of the ANC government’s economic policy formulation system;
- Allow those oligarchs who wanted to shift their company’s primary listings and headquarters from Joburg to London to do so;
- Give the oligarchs and their companies the first bite at government contracts that interested them; and
- Protect the oligarchs from foreign competition while opening up the rest of the economy, especially the consumer goods and manufacturing sector, to the chill winds of international competition.
All these machinations were eventually incorporated into South Africa’s democratic constitution by the creation of a category of citizens, apparently 91 percent of the population, to be known as previously disadvantaged individuals (PDIs). The ingenious legal notion of previously disadvantaged individuals created the impression that all black South Africans could or would benefit from BEE. This legitimised the co-option payment to the black political elite by dangling before the black masses the possibility that one day they, too, would receive reparations for the wrongs done to them during the apartheid era.
BEE and its subsidiaries – affirmative action and affirmative procurement – which started off as defensive instruments created by the economic oligarchs to protect their assets, have metamorphosed. They have become both the core ideology of the black political elite and, simultaneously, the driving material and enrichment agenda which is to be achieved by maximising the proceeds of reparations that accrue to the political elite. This has proved to be disastrous for the country. The black elite, which describes itself as made up of PDIs, sees its primary mission as extracting reparations from those who put it in a disadvantaged position. To achieve this requires the transfer of resources from the wrongdoer – perceived to be white-owned businesses and the state – to the victim, the PDIs. By this logic the state owes the PDIs high-paying jobs. This transfer of wealth from the strong to the weak is what has come to be known as BEE.
Enormous consequences follow from this apparently simple formulation:
- In order for the wrongdoer to be able to pay reparations, the wrongdoer has to maintain a privileged position. This is the principle of fattening the goose that lays the golden egg.What this means is that the corporations that were allegedly responsible for victimising the PDIs must not be transformed beyond putting a few black individuals in their upper echelons. The protection of these corporations has gone so far as to allow them to move their head offices and primary listings from Joburg to London to shield them from possible economic and political upheaval in South Africa.At a broader level, the battery of Washington Consensus policies – which include trade liberalisation, balanced budgets, privatisation, inflation targeting, as well as the small state – all serve to protect the interests of South Africa’s big business, one of the two main payers of reparations.
- For the victim to continue to draw reparations it is critical that he or she remains perceived as a victim and as weak. This means that the former freedom fighter must be transformed from a hero who liberated South Africa into an underling.The payment of reparations to the black elite thus achieves the opposite of what it is claimed it was designed to do, that is, make its members leading players in the economy. In reality, it makes members of the black elite perpetual junior support players to white-controlled corporations.
# One of the most destructive consequences of the reparations ideology is the black elite’s relationship with, and attitude to, the South African state. As the state is said to have been party to the disadvantaging of the PDIs it is therefore also perceived to owe them something. By way of reparations the state must therefore provide PDIs with high-paying jobs. By extension, the assets of the state are seen as fair game. The approach of the black elite to the state is, therefore, not that of using the state to serve the needs of the people but rather of using it, in the first instance, to advance the material interest of PDIs.Not surprisingly, corruption under the ANC government has grown by leaps and bounds, leading Transparency International – the worldwide watchdog on corruption – to downgrade South Africa in the world’s corruption tables. According to the Transparency International Corruption Perceptions Index, South Africa dropped from No 34 in 2000 to No 54 in 2008. In 2008 the least corrupt countries were Denmark, New Zealand and Sweden and the most corrupt country was Somalia, ranked at 180.Ironically, one of the most important restraining influences on the abuse of the state for the self-enrichment of the black elite is the white-controlled corporations – the abovementioned layers of golden eggs – because these corporations need the state to function efficiently in order to provide a stable business environment as well as functioning transport and communication infrastructure. The judiciary and the independent mass media also play an important role in this regard.
The ideology of reparations traps members of the black elite into seeing themselves as the beneficiaries of the production of other social groups and therefore primarily as consumers. To facilitate their role as consumers the black elite sees the state essentially as distributive rather than developmental. Most importantly, the black elite don’t see themselves as producers and therefore do not envisage themselves as entrepreneurs who can initiate and manage new enterprises.At best, they see themselves as joining existing enterprises, the process of which is to be facilitated by the distributive state through reparations-inspired legislation. This is the most striking difference between the black elite of South Africa and the elites of Asia, where the driving ideology is entrepreneurship.