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After last week’s Cosatu strike against labour brokers and e-tolling the question of the future of the relationship between the Cosatu and the ANC has again consumed public debate.

I have quickly jotted down some of the issues as I see them and how I think the situation might play out in the longer term (and apologies for scruffiness – I am under the whip):

It is necessary to understand what these organisations are and how they differ – before we think about what they might do

Cosatu is a federation of trade unions (trades union, actually … but that always sounds a little pompous) and therefore represents employed workers while the ANC is currently the ruling political party in this country and as such represents a much broader set of interests, especially, in this case, the unemployed and business – and is additionally obliged to balance these interests against each other.

It is obvious why Cosatu must oppose labour brokers. Cosatu has spent considerable energy in influencing the ANC to structure the labour market in a way that strengthens it’s cartel-like hold on the supply of labour. Labour brokers are a way in which the unemployed and potential employers can circumvent some of the strictures of the regulatory environment. Labour brokers have helped create a shadow duality in the market – and have thus caused Cosatu to lose some control over supply.

Another way of saying this …. If you have one set of workers that are employed with the full  protections and benefits afforded them by legal and regulatory structuring of the labour market and another set who are essentially desperate enough to work for less money and with less job security, then those who cannot find a place in the first set have the option of joining the second set – and employers who cannot afford to shop in the first set will shop in the second … meaning Cosatu loses control over supply.

Cosatu argues that if you make the existence of the ‘second set’ illegal it will force employers to shop in the ‘first set’ – thereby creating permanent ‘quality jobs’.

The eternal wrangle is that most economists and several ANC thinkers believe that what actually would happen (and is happening) is employers, at some difficult to determine point, decide that the costs and hassles of only having the ‘first set’ to shop in incentivises them to “shop elsewhere” – shift parts of the labour process to other countries where labour protections are less onerous on the employer, or they mechanise the labour process – hence the structural nature of our unemployment.

The ANC, on the other hand, is under the whip to create more employment – and that pressure comes directly from the unemployed. The youth wage subsidy scheme was correctly understood by Cosatu to be seen as a threatening – to its interests – attempt to create duality through the back door. The ANC agrees with Cosatu that many labour brokers are guilty of the worst excesses of free market exploitation, but propose to remedy the situation by regulating the labour brokers more carefully … not removing them completely from the market.

But what about the e-tolling?

Essentially the e-tolling issue was serendipitous timing for Cosatu. Completely separate disputes occurred in Nedlac over e-tolling and labour brokers so Cosatu had the right to declare protest strikes and marches under section 77 (1) (d) of the Labour Relations Act against either, neither or both issues – they did both. Essentially the melding of the actions allowed Cosatu to win a few class allies to its cause of opposing labour brokers. Not that e-tolling is not genuinely hated by Cosatu and the federation believes that its members will be worst effected … which should give you an insight into just who Cosatu’s members are and the difference between them and the marginalised and unemployed majority who would invariably use un-tolled public transport (mostly taxis) or travel on shank’s marewhich takes another kind of toll entirely.

Cosatu and Zuma

Cosatu clearly backed Zuma against Mbeki because it believed either that Zuma would be beholden to it and therefore allow it more policy access (which I think has essentially been true) … or just that Mbeki was a more dangerous enemy of Cosatu’s narrow agenda (something I also believe was true). There can be no argument that Zuma was more likely to hold ideological or policy agendas that were essentially closer to Cosatu’s. To my mind Cosatu was opportunistic and unprincipled – whichever way you spin it – in backing someone so clearly hell-bent on extending his control over patronage networks and making his family and friends fabulously wealthy.

One way to understand what is happening in Cosatu now is that one faction is trying to withdraw from the strategy because the Nkandla chickens are coming home to roosts, while the other faction is sticking to its guns.

I think, however, that both factions have realised that they have put too much energy into influencing national politics in the ANC and not enough energy into building up the federation’s grass-roots and factory-floor structures, membership and leadership. Trade unionism is on retreat globally – because of the globalisation of the labour market – and Cosatu is worried about not having stuck to its knitting (sorry for all the awful clichés here, but I am in something of a hurry.)

Cosatu has always had an ambiguous relationship with the ‘political movements’ – be those the United Democratic Front, Azapo or the ANC … perhaps even Inkatha should be included here. When Cosatu was established in 1985 out of the unions that had made up Fosatu (the Federation of South African Trade Unions) it immediately inherited the main debates and factions that had characterised trade unionism for years in South Africa.

The divisions centred around:

  1. whether to register and thereby co-operate with the Apartheid state
  2. whether white workers could be organised into progressive unions
  3. the desirability of general unions versus industry based unions
  4. ‘workerists’ versus ‘populists’ – which boiled down to a debate about whether unions should be involved in national politics and be in a formal relationship with the national political movements; whether they would be sucked into the agenda of those political movements and should therefore focus instead on ‘shop floor’ issues and maximum worker unity.

From the start the National Union of Mineworkers was a pro-ANC/SACP bastion within Cosatu and the National Union of Metal Workers of South Africa, formed out of at least 6 other unions, came to represent a position more cautious and suspicious of the political movements.

Thus we have an emerging consensus in the press that Zwelinzima Vavi, Irvin Jim and the National Union of Metalworkers of South Africa (Numsa) have upped the ante against Zuma and ‘corrupt ANC leaders” while an SACP aligned faction including Cosatu president Sidumo Dlamini and the powerful National Union of Mineworkers is firmly behind Zuma.

Currently Cosatu seems – to my mind – to have finessed an internal agreement between its factions to back Zuma for re-election at Mangaung in exchange for a more vigorous opposition to corruption generally in the ANC and to campaign for a more worker friendly ANC NEC to emerge out of Mangaung.

Ahead  … (remember ‘tomorrow’ is the country from which no-one has ever returned … so take this all with the appropriate pinch of salt):
  1. The struggle will continue. Cosatu has fought with the ANC since 1994 and strong suspicions existed between much of the trade union movement and the ANC before that. This is normal, natural and appropriate given the diverging interests of the people represented by each organisation. The relationship has always contained the seeds of its future breakdown.
  2. Zwelinzima Vavi’s faction is most similar to a combination of European social democrats, labour parties and green parties. It is radical and anti-capitalist, but it is also modern, deeply opposed to corruption and authoritarianism, has consistently taken the right line on Zimbabwe and HIV/AIDS, is protective of the constitution and freedom of speech and is most likely to seek alliances with anti-ANC ‘civil society’ groups over single issue campaigns (right to know, freedom of speech, corruption, HIV/AIDS etc.)
  3. The tension is inbuilt … the ANC will never give into Cosatu’s full set of demands – if anything it will go the other way – and Cosatu will  never stop making the demands, louder and louder.
  4. At some future time – probably way down the road –  the Numsa faction will ally itself with those attempting to organise the constituency the ANC Youth League aspires to represent and break out of the ruling alliance to form a new left opposition. For the foreseeable future (and remember none of the future is actually foreseeable) the advantages of staying in the alliance with the ANC outwieghs the losses and gains that would be realised by setting off on their own.
  5. The SACP will increasingly concern itself with trying to mediate the relationship between Cosatu and the ANC – which effectively means it will support the Num faction or tendency in Cosatu. This is not a basis upon which a political party can sustain itself. The SACP would have to split from the ANC and fight elections on its own – essentially capture the space that a Numsa/ANCYL type breakaway might have occupied – if it was to grow and prosper. I don’t think this will happen and therefore I think the SACP will be gradually squeezed into irrelevance.

Two brief thoughts – on a rainy Cape Town Sunday:

Firstly – a by-product of Malema’s (possible) retreat

I have a feeling that debates ranging from mine nationalisation, land distribution and continued white economic dominance in the South African economy have just been saved from the gangsters in the ANC Youth League who have been using these as a cover for looting.

It has been difficult not to lump every statement about ongoing race based inequality with the smokescreen slogans used by the ANC Youth League leadership – and many equally corrupt politicians.

The latest Commission of Employment Equity Annual Report says whites still occupy 73.1 percent of top management positions – and blacks 12.7, Indians 6.8 and coloureds 4.6?  Yeah, well they would say that wouldn’t they – after all, that is (one of) Jimmy Manyi’s old outfits and he is the grandmaster of running racial interference for pillaging resources destined for development!

Willing-seller, willing buyer policy of land distribution responsible for only 5 percent of redistribution targets met? Yeah, well, guess who are trying to get themselves a portfolio of farms a la Zanu-PF?

Nationalise the mines? Yeah, so you can rescue your BEE backers and get a piece of the action yourself?

But that was last week.

Those issues are back on the agenda, but this time the discussion might be led by people genuinely looking to harness the country’s resources for development and transformation – not looters, corrupt tenderpreneurs and “demagogic populists” disguising their true intentions.

If anyone thought we could go on with the levels of unemployment, inequality, poverty and racially skewed distribution of ownership and control of this economy I suspect they will find they have been very much mistaken.

One of the consequences of the retreat of the Malema agenda is that we will all have to deal with the issues we have, up until now, been able to dismiss or deflect because they were ‘owned” and propagated by thugs.

Itumeleng Mahabane says it like it is

In a similar vein – and my favourite read of the week – was Itumeleng Mahabane’s column in Friday’s Business Day.

He deals with a variety of aspects of the country’s debates about development and transformation.

In tones that have been tightly stripped – of anger, I suspect – Mahabane appeals for the debate to lose the “prejudicial invectives” and that participants should “desist from creating cardboard villains”.

He makes 4 main points (actually he makes a whole lot more, and it is not impossible that I misinterpret him here – and he is certainly more subtle and nuanced than my summary below – so read the original column – the link again.)

Firstly he suggests (although in the form of a question, not the statement as I have it here) that we have to acknowledge the damage our Apartheid past has done our country, leaving “the inequity of our income distribution and the historic systematic destruction of black capability”.

Secondly he hints that the state cannot assume more economic responsibility before we have fixed accountability – and thereby arrested corruption.

Thirdly he appeals for a sophistication of our views on the labour market – I think by suggesting that a degree of duality is crucial.

But, he warns:

I do not subscribe to the simplistic and questionable idea that the inability to hire and fire people is the core cause of structural unemployment. The balanced high growth would create demand for labour, regardless of labour rigidity.

Fourthly he asked us analysts why:

we casually, without considering the social implications, vilify workers and the working class, making them useful villains for complex economic challenges? We almost never give view to the body of evidence that shows that market rigidity and anticompetitive behaviour is a significant factor in deterring investment and output and that, in fact, it contributes to SA’s excessive business and skilled-labour rents.

Those are important views – and an important corrective to aspects of our debate about development.

You might have picked up from warm and welcoming statements by the Democratic Alliance and a flood of beaming news stories that our Minister of Finance Pravin Gordhan said something slightly more exciting about economic policy than the bland pap from the policy kitchen of the increasingly awkward compromise which is the Ruling Alliance.

But before anyone gets too excited we should look at exactly what he said.

First up, in the main body of his speech to the 14th annual conference of the Board of the Institute of Internal Auditors – a body I suspect has hitherto not been allowed to bask at the centre of an important breaking news story – he suggested as part of his list of things that need to be done to “energetically reposition, restructure and reform our economy” :

Lower the cost of young, inexperienced low-skilled workers for firms to stimulate the demand for labour

That is from the paper as published on the the Treasury’s website – catch that here – it is well worth a read.

Then press stories – this from the New Age – seem to imply that he took things a little further in discussion. I give you the full text below, especially as the journalist has left off quotation marks on the key sentence, making me wonder if this is more a case of hearing what you want to hear than it is an accurate reflection of exactly what the minister said:

The New Growth Path envisages the creation of five million jobs by 2020. Gordhan suggested that South Africa might have to relax its labour laws in certain cases to grow jobs. “We may have to change the way we see the labour dispensation in South Africa,” he said.

For example, a balance needed to be found to retain the jobs of the 10,000 people working at clothing factories in Newcastle, KwaZulu-Natal, while still allowing them to earn a reasonable wage and keeping the factories open.

There is no doubt in my mind that the inflexibility of our labour market is partly responsible for the high levels of unemployment in this country.

I have tired of pointing out that as the representative of the ‘already employed’ Cosatu is not to be trusted to talk on behalf of the ‘unemployed’ – with whom its interests often conflict (see here, but a number of other places as well).

The Minister of Finance’s job is to find an economic policy that somehow reflects the national interest – and not the sectional interest of organised labour.

The most important government priority is to find ways to grow the economy in a manner that helps create the greatest number of jobs.

With a government gone soft in the middle, led by a compromised and beholden president, it is a relief to hear someone in power, however tentatively, at least name the nettle if not actually grasp it.

A guest post from my friend and colleague Sandra Gordon. Sandra is a respected financial market economist and we increasingly present work as a team in what is often called “a dog and pony show” … although in our case there is some disagreement over who will be the dog and who will be the pony. Sandra is an excellent market commentator and I have known and respected her views since she was my client on the “buy side” at Nedcor Investment Bank Asset Management (Nibam) in the mid-90s.

My friend, colleague and author of this post on the National Budget, Sandra Gordon

Over to Sandra:

If there was one message from this year’s budget it is that, despite all the hype that economic transformation has finally arrived (the dreaded “shift to the left” which tends to give the financial market types sleepless nights), it’s actually probably more of a case of business as usual.

In the wake of the global financial crisis, there was serious debate worldwide about the merits of various economic growth models. In the 2010/11 Budget, Minister Gordhan noted: “The recent crisis and its aftermath have led to a serious introspection and rethinking of what were thought to be robust and superior economic models.” With the Washington Consensus in disgrace, South Africa was able to signal its intention of shifting towards a “developmental state” (essentially a more active role for government in the economy).

So it seemed South Africa was headed for a developmental state and real economic transformation. The new model was finally outlined by the New Growth Path (NGP), which was released by Minister Patel late last year. The primary aim of the NGP was the creation of five million new jobs by 2020.

This theme was echoed in the recent State of the Nation address, in which President Zuma announced a range of measures to encourage job creation.

Yet, despite all the talk of economic transformation – and the ongoing tsunami of change in the global environment – this year’s budget is essentially unchanged from the previous. The critical issues facing our economy were again identified as the twin evils of unemployment and poverty, while the best way to address them is to focus on job creation and encouraging growth in those sectors most likely to generate employment.

Admittedly this year’s budget had a greater focus on jobs than last year – with a grocery list of programmes and measures totalling R150 billion over the next three years. A key difference was also the absence of any mention of the “developmental state” – with government’s role limited to the provision of incentives and the creation of an environment conducive to growth – such as the easing of transport and logistic bottlenecks etc. Other than that, the key measures were familiar – more social spending to support the poor, huge sums for investment in infrastructure and a focus on skills development and training.

Essentially the budget delivered on the priorities laid out by the NGP – with one glaring exception: demands for a weaker rand. Minister Gordhan neatly sidestepped this particularly contentious issue by noting that government had already responded to excessive rand strength by easing exchange controls and accelerating the accumulation of foreign exchange reserves in October last year. Beyond those measures, Treasury will be “monitoring” the measures adopted by other countries – including Brazil and Thailand – which have had similar struggles with massive capital inflows and excessive currency strength. So effectively, “we’re looking into it.”

The other political hot potato that was neatly avoided in the budget was the issue of the National Health Insurance. This year’s budget included measures which “lay the foundations” for NHI. The implementation progress is going to take time – but things are undoubtedly going to get more interesting when the debate shifts to how the NHI is to be funded. Gordhan listed a range of possible funding sources including a VAT hike, a surcharge on personal income or a payroll tax. None of those options are likely to be particularly well received.

Essentially then, Gordhan was able to address all the priorities outlined in the NGP (barring rand weakness), while maintaining an element of fiscal discipline. With the deficit remaining at 5.3% of GDP in the new fiscal year – in line with the previous fiscal year but above expectations – debt servicing is now the fastest growing spending category.

While we are in a far better position than countries like America, the UK and various European economies which are slashing government spending and raising taxes, it could well be that this is our last chance to really get the economy moving. If the measures in this year’s budget deliver growth, tax revenues will ultimately rise and fiscal discipline will be maintained.

If, however, growth stagnates – perhaps due to a deterioration in the external environment – the state may find its finances stressed, providing less scope for social spending and job creation initiatives. As one analyst put it in the press this morning, this could be “the last throw of the dice”.

And it is on this front that the news is a little less reassuring.

It is positive that – amidst the global turmoil – the centre is holding and our basic economic policies remain on course. But our key weakness has always been not our policies but our inability to implement those measures. So for all the good news in this year’s budget regarding measures to encourage job creation and infrastructure investment, there have been no developments which would lead one to think that there is going to be any significant improvement in implementation and delivery.

In an increasingly unstable global environment, it is becoming ever more important that we finally start making significant progress on reducing our unemployment rate and pervasive poverty. We have the money, for now, but the ability to implement and deliver is becoming ever more critical.

With so much at stake, it looks set to be another interesting year.

Capitalism, at its most basic and unbridled, is a system that says: okay, the king is dead and therefore no longer owns all this stuff; take what you can … if you can hold onto it, it’s yours. Oh yeah, and you can pay the people who don’t manage to hang onto any stuff to work yours … because if they don’t they will starve.

On your marks, get set … go!

The system is extraordinarily productive, driven as it is by those gargantuan twin-thrust engines: human greed and human fear (you can keep what you can take/failure means death).

One of the great political achievements of the last 300 years has been the refining, softening and regulating of this system so that it maximises the good it can produce for as many as possible.

But note this: it can’t produce the same amount of good for everybody – because its fundamental driver is that it allows the hungriest, cleverest, most creative and most intelligent to keep what they can take. That’s why those people build the enterprise. So they can keep what they can get out of it. That’s the creative heart of the system.

(One of the many flaws of capitalism is it also allows those who have become powerful for reasons other than those listed in the last sentence to “keep what they can take”. Thus both Apartheid apparatchiks and New Elite cronies are (still) living high on the hog for reasons that have nothing to do with the unleashing of their creative spirit and more to do with their ability to cheat and steal. But that is another story.)

The point I wanted to make, is that in its most basic and unregulated form capitalism will allow the owner of the factory or mine to extract the last drop of blood from the worker – and the last drop of blood from his children, his old mum and his maiden aunt.  Without regulation the only thing that will stop the capitalist working the worker to death is the need to have him come to work tomorrow and for his children to come to work in ten years time. The history of capitalism has demonstrated this unfortunate truth about humans time and time again.

Thus we have labour market regulations: minimum wages, basic working conditions, rights to dignity, rights to organise and strike. These are amongst our greatest achievements – and they are all there on the law books of the new South Africa.

But there is a line over which we must not cross.

When the law, in effect, demands that the capitalist share equally the profits of the enterprise with the workers, the enterprise is over.

If local regulation means the capitalist can’t make sufficient profit here he (or she) will go elsewhere or will spend his or her time doing something else. That’s it; end of factory, end of jobs and end of story.

"Not only are the proposals contained in these draft bills a staggering contradiction of the government’s economic and social objectives with the potential to destroy hundreds of thousands of jobs, but they are also poorly drafted and difficult to interpret." Michael Spicer, CEO of Business Leadership South Africa

Michael Spicer, as CEO of Business Leadership South Africa, is the perfect person to listen to if you want to get an average signal of what South African capitalists are feeling.

His comment in today’s Business Day about the conflict between the flood of proposed changes to labour and employment equity laws and government’s job creation agenda is well worth a read. Catch it here.

It seems to me we are carelessly testing for the “tipping point”, the point beyond which the capitalists mechanise their plants or leave.

This is the first of three articles that look at the political and policy bloodline of the New Growth Path and the main criticisms that have emerged about the policy in the public domain over the last few days.

This first post is a summary – using quotes and paraphrasing – of Ruling Alliance statements about macro-economic policy since 1990.

To understand the policy we have to understand:

  • firstly how the policy fits into the discussion/dog fight in the Alliance over the last 20 years;
  • and secondly the fact that the policy comes from Minister of Economic Development, Ebrahim Patel, whose department and position, in my opinion, was a last-minute structural compromise to reward Cosatu (and to a lesser degree the SACP) for having backed Jacob Zuma against Mbeki.

So the big bulls (ANC and the SACP) have been butting heads for 20 years (see below) and now the little bull is trying to horn in on the action.

20 years in the trenches of the ideological squabble

Since the release of Mandela from prison in 1990 (and, in fact, well before that – mostly behind closed doors) different factions of the ANC, the SACP and Cosatu have had a sometimes productive and sometimes vicious policy debate about economic policy. At issue has always been the stance the state should take towards private business and the appropriate amount of persuasion and coercion required to achieve redress and redistribution.

The first sign of things to come was the speech Nelson Mandela made on his release from prison in 1990.  After the excerpt from Mandela’s speech I will let the comments flow and tell their own story of the conflict within the Ruling Alliance.

A history of the conflict in quotes and paraphrases

“The nationalisation of mines, banks and monopoly industry is the policy of the ANC and the change or modification of our views in this regard is inconceivable”

Nelson Mandela paraphrasing the Freedom Charter on his release from prison in 1990

“We are convinced that neither a commandist central planning system nor an unfettered free market system can provide adequate solutions.”

The 48th ANC National Conference, July 1991 from a conference resolution

“It was a demand-led and internal infrastructural development proposal, which envisaged less immediate concern with budget deficit reduction and inflation.”

African Communist No 147, third quarter 1997 discussing the Macro Economic Research Group’s (MERG’s) proposals from 1993

“Of particular importance was the proposal to restructure the economy by way of a policy of ‘growth through redistribution in which redistribution acts as a spur to growth and in which the fruits of growth are redistributed to satisfy basic needs’. This proposal was predicated on the central policy idea that the state needed to boost demand, primarily by ensuring that greater amounts of income would be received by the poorer sections of the population, which in turn would stimulate output and hence economic growth.”

Dennis Davis in From the Freedom Charter to the Washington Consensus 2002 discussing the RDP proposal of 1993

“Despite its ideology while in opposition, once in power the ANC government implemented an orthodox macroeconomic policy which stressed deficit reduction and a tight monetary policy, combined with trade liberalisation. The stated purpose of this package (the Growth, Employment, and Redistribution programme, or GEAR) was to increase economic growth, with a 4.2% rate programmed for 1996-2000. At mid-term of the programme, growth remained far below this target. The GEAR’s lack of success cannot be explained by unfavourable external factors; rather, the disappointing performance seemed the result of fiscal contraction and excessively high interest rates”

A standard left criticism of GEAR from: Stuck in Low GEAR? Macroeconomic Policy in South Africa, 1996-98 John Weeks Cambridge Journal of Economics, 1999, vol. 23, issue 6, pages 795-811

“Faced with deepening unemployment, poverty, and inequality, and with disappointing growth and investment, the GEAR policy framework has met with persisting criticism from COSATU and the SACP in particular. From the side of its principal proponents within the government, there have been several adjustments in the face of disappointment. Increasingly, GEAR has been redefined as a conjunctural stabilization program and not what its acronym suggested it once aspired to be (a growth, employment and redistribution strategy). In this rereading, GEAR was necessitated by global turbulence and by a very precarious foreign currency reserve situation in 1996. Its “success” is now measured not in terms of growth, employment, and redistribution outcomes, but anecdotally and by way of comparison—“whatever our problems, South Africa’s economy is not in the same predicament as Argentina, or Turkey, or Zimbabwe,” or “GEAR has helped us to survive the worst of global turbulence” (which may not be completely incorrect).”

Jeremy Cronin rephrasing GEAR as a conjectural stabilisation strategy – 1998

In an address to the Socialist International October 2003 and then in various speeches in 2004, Thabo Mbeki argued that solving unemployment, poverty and low levels of black participation in ownership and control of the economy had become very urgent. Further, he argued that to solve these problems an effective, strong and interventionist developmental state was needed – just proving that there is nothing new in heaven and earth. He put the case for improving the public service and extending the state’s influence and ability to lead the economy. “Influence” meant keeping hold of strategic state assets (and therefore a partial withdrawal from the privatisation specified in GEAR) as well as a detailing of micro-reforms including BEE. He placed a strong emphasis on private public partnerships as well as on galvanising a collective consciousness about the “common good”. From this shift the Accelerated and Shared Growth Initiative for South Africa (AsgiSA) was codified in 2005/2006. While it set targets for growth and employment, Asgisa was primarily an infrastructure investment programme combined with various (mostly supply-side) measures to remove impediments to growth – much of which the economy continues to benefit from today.

My own summary of Thabo Mbeki’s initial motivations for AsgiSA

In the lead up to Polokwane this was the definitive statement from ‘the left’ attacking the direction that the Mbeki government had taken: “The post-1996 class project” was led by a “technocratic vanguardist” state with the mission for “a restoration of the conditions for capitalist profit accumulation on a new and supposedly sustainable basis” (as opposed to “a revolutionary … transformation … to resolve the .. contradictions in favour of .. the working class ..”). The document argued that “The post-1996 class project” rests on three pillars: Firstly, the ANC leadership has mistakenly bought into a myth of a gentler, kinder world, but imperialism is stronger and more hostile to popular democracy than ever; secondly, to fit into this world “the second pillar of the project is a powerful presidential centre” that necessarily installs a top state/ leadership group of state managers and ‘technocratically’-inclined ministers and (often overlapping with them) a new generation of black private sector BEE; and finally, the project calls for the organisational modernisation of the ANC … “to transform the ANC from a mobilising mass movement into a ‘modern’, centre- left, electoral party”. There is a “manifest inability of capitalist stabilisation and growth to resolve the deep-seated social and economic crises of unemployment, poverty and radical inequality in our society. The ravages to the ANC’s organisational capacity and coherence (are caused by) “the attempts to assert a managerialist, technocratic control over a mass movement, and in the crises of corruption, factionalism and personal careerism inherent in trying to build a leading cadre based on (explicit or implicit) capitalist values and on a symbiosis between the leading echelons of the state and emerging black capital.”

My paraphrasing of the SACP Central Committee Discussion Document. Bua Komanisi – Volume 5, Issue No1 May 2006 – difficult to read but a perfect summary of the position that exists to this day in the SACP

Then came the answer to the ‘left critique’ from the central ANC leadership: “…the trapeze act here is to co-opt the ANC, formally, as an organisation pursuing socialism; and then condemn it as having betrayed the socialist project”. First, and most importantly the ANC denies that it ever was or should have been an organisation whose objectives was to achieve socialism. The ANC, the document claims, is the organic result of the struggle of black South Africans for national liberation and redress for what they suffered and lost under Apartheid. Additionally the ANC prioritises the poor and the working class. Once this point is made, the ANC argues, all the rest of the SACP critique falls away. The ANC accuses the authors of the SACP document of “ahistoricism, subjectivism and voluntarism”. This is more than just name calling. In the argument of the authors of this document:  ahistoricism refers to the SACP’s alleged  failure to understand what led to the present conditions as well as the character of the historical moment in which they find themselves, subjectivism means that the SACP has used its own preconceptions to guide its views and has seen the world as they wish it to be rather than how it really is; voluntarism  means the SACP believes that through pure force of will, hard work and determination it can achieve socialism in South Africa, whatever limitations the domestic or global environment and balance of forces, especially the strength of global capital markets, impose on possible outcomes.

Managing National Democratic Transformation – ANC response to SACP discussion document – probably the last time the ANC spoke plainly and confidently about economics and the class struggle – 19 June 2006 the official NWC response to the above quoted SACP Central Committee discussion document

The next post will summarise the actual policy contest (from an economists point of view) of the last 15 years. This will essentially be the actual macro-economic policy of the ANC (run from the Treasury) and the SACP’s consistent “industrialisation” alternative (proposed from the Department of Trade and Industry).

I phrase it like that deliberately to suggest that the Department of Economic Development and the New Growth Path Framework represents a new political assertion even if the policy formulation ultimately turns out to be a hodgepodge of previous proposals – as suggested by my summary of Thabo Mbeki’s AsgiSA policy above.

If you thought the interminable debates about

  • the laws and institutions that structure our labour market and
  • government subsidies for first time youth workers

were just silly ideological wrangling then take a look at this graph from the OECD economic survey of South Africa. Let the extraordinary relative numbers speak for themselves.

1. Persons aged 15-24 years, 2007 data for Brazil. Source: OECD, Labour Force Statistics Database; ILO, Laborstat Database; and Statistics South Africa, Quarterly Labour Force Survey.

Youth unemployment seems to me predictive of so many societal and personal ills – the high increase of interpersonal crime, especially rape; generally increased mortality figures – especially as a result of HIV infection and non-compliance with treatment regimes and homicide; social unrest, that in our case easily turns into service delivery protests and xenophobic violence; the rise to prominence of politicians in the mould of Julius Malema … I am sure we could all thumb suck a list that could go on and on and on.

The point, confirmed by the OECD study – the executive summary is here and the main findings and recommendations are here – is that GDP and employment growth must be lifted and obstacles placed in the way of our doing this by the vested interests of the trade union movement and the crony capitalists must just be shoved aside.

The quarterly Labour Force Survey from Statistics SA is a timely reminder of what really matters when assessing political risk associated with investing in South Africa.

Julius Malema’s predations,  Jacob Zuma’s extraordinary sex life, Cosatu’s and the SACP’s millennial economics would just be irritating noise, unless they relate to the country’s chronic levels of unemployment, poverty and inequality – and the racial overlay of the same.

Think of society as a complex system and unemployment, poverty and inequality as deep tectonic stresses that honeycomb and hollow out the underpinnings and foundations of the system. As the stresses grow so does the potential for catastrophic events.

South Africa has the highest jobless rate of the 62 counties tracked by Bloomberg and the unemployment rate rose for a fourth consecutive quarter in the first three months of this year – that’s a 1.3% contraction in employment or the loss of 171 000 jobs in that period. The following graph shows the general trend – and also demonstrates slight seasonal increases in the fourth quarters of 2008 and 2009, the result of the obvious stimulations from the holiday season and the rush to get things done.

Employment contracted in all industries but Agriculture, Private Households, Transport and Community and Social Services.

Read this alongside these points:

  1. More than 50% of South Africans live within the most common definitions of “poverty” or “below the poverty line”,
  2. South Africa has dropped approximately 30 places in the UN’s  Human Development Indicators index (to 125) since 1990;
  3. South Africa shares with Brazil and a few other Latin American countries the highest measures of inequality (the “Gini-coefficient“) in the world.

Add to this the dismal outcomes of Affirmative Action and Black Economic Empowerment and you have a system shot through with instability.

When we worry about the ANC and its performance – and the increasingly profound failures of its key leaders –  when we worry about State Owned Enterprises like Eskom being hijacked by a predatory new elite, when we worry about the collapse of governance and service delivery in poor townships; our worry is actually about the impact on the deep, underlying trends in unemployment, poverty and inequality- and the possibility of fixing these problems.

When the bombast coming from the political and economic elite draws the national focus away from the real issues and challenges, then the trouble we are in becomes more threatening and more concerning to investors.

I am a political analyst focusing on Southern Africa and I specialise in examining political and policy risks for financial markets.

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