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Radical economic transformation: Padlock to poverty or key to prosperity?


Jeff Rudin works at the Alternative Information & Development Centre (AIDC)

Even more improbable than Jacob Zuma putting the public interest before his own is the international rating agencies not punishing any South African government that dares prioritise a radical economic transformation that meaningfully addresses the needs and wishes of the working poor, the unemployed, the under-employed and the unemployable; the young; the sick; the homeless and the slum dwellers; the hungry and those who hunger for quality education for everyone. And those still resilient enough just to want to be able to – hope.

The tragedy for most South Africans is the punishment now imposed on everyone of junk status has nothing whatsoever to do with any of these objectives.  The tragedy is compounded by an ANC that publicly dismisses President Zuma’s “intelligence report” accusing Pravin Gordhan of treason but then accepts – without question – his assurance of there being an “irretrievable breakdown” in his relationship with his then Finance Minister; it being public knowledge that Gordhan’s “treason” was his upholding of the law.  Zuma did not even deign to give a reason for his sacking of the Minister of Tourism or the Deputy Finance Minister.  More pertinently, the ANC does not seem to have asked him for an explanation. 

The President did, however, offer a general explanation for his Cabinet changes:  he told us it was in the interests of efficiency and effectiveness.  But he insulted his own explanation by promoting the then Minister of Communications who, besides many scandals, brought the SABC to the point of bankruptcy. Adding to the insult, he retained the Minister of Social Development, despite her having left the Judges of the Constitutional Court dumbfounded by her ineptitude. And the ANC says nothing.

Yet the ANC expects dutiful silence from the rest of us who are now left having to pay for the junk status.

Despite knowing what would happen, President Zuma went ahead with his Cabinet manoeuvrings to protect himself and further promote the privileges of those he favours or to whom he is beholden. 

The misfortune for everyone else is the lost opportunity.  The rating agencies’ guaranteed displeasure at anything remotely resembling the reality of radical economic transformation is arguably a price worth paying.  Instead, we are now left having to pay for the sham rhetoric repeatedly being offered as Zuma’s ‘new’ policy. According to the likes of the ANC’s Youth and Women’s Leagues and the proudly black supremacist Black First, Land First group, the wrath of the rating agencies arises from Zuma’s commitment to radical economic transformation, with its integral attack on “white monopoly capital”.

Pravin Gordhan is clearly an honourable person.  He is also a very brave one.  And he is undoubtedly the Rating Agencies’ preferred Minister of Finance.  Open only to limited speculation is how long this preference would have lasted if Pravin Gordhan had been equally principled and brave when introducing any one of the many basic first steps to a radical economic transformation of any substance.

All parliamentary political parties agree that unemployment, poverty and inequality are a triple blemish on democratic South Africa.  It is accordingly fitting for the focus of any radical economic transformation to be on addressing these conditions and, all the more so, because they have been impervious to all the many interventions since 1994. 

Before doing so, however, it is necessary to distinguish between revolutionary and radical economic transformation.  The former refers to a conscious and planned replacement of capitalism; a replacement made necessary because, in terms of this understanding, it is capitalism that creates and reproduces unemployment, poverty and inequality, as part of its natural functioning.  A revolutionary transformation would, accordingly, not leave white monopoly capital to be swopped for black monopoly capital.  Monopoly, in this view, is the unavoidable condition of mature capitalism.  This means the abolition of monopoly cannot be achieved without simultaneously being the removal of capitalism itself.  Similarly, the problem of the Johannesburg Securities Exchange (JSE) being insufficiently black owned would be resolved by dismantling the entire JSE and transforming it into a museum.  As an historic artefact, it would remind people of what used to be considered a central – and unavoidable – feature of advanced civilisation. 

Radical economic transformation, by contrast, involves reforms that many critics of capitalism argue are compatible with capitalism. Among the best known of the many people eager to give capitalism a humane face are the American Joseph Stiglitz, the Korean Ha-Joon Chang and Thomas Piketty, the French author of the global best-seller, Capital in the Twentieth Century.

What, then, could a programme of a genuine radical economic transformation involve?  This is a huge question.  The constraints of this piece allow for only an outline of some of the vast number of issues that make up a comprehensive answer. 

Historian Colin Bundy describes the mass of the South African population as being “padlocked to poverty”.  The escape key must, in my view, include the following; some to be introduced immediately, others as part of a planned programme:

To demonstrate that the radical economic transformation is more than rhetorical, the immediate introduction of a maximum monthly salary, applicable to all public officials, including elected representatives beginning with the President, of R50,000.  At a stroke, this measure would counter such concerns as: The well placed scepticism born from the plethora of failed plans since 1994; the transparent hypocrisy of the self-serving President who now champions radical economic transformation in the name of  “the people”; and the duplicity of Black Economic Empowerment (BEE) that invokes the constant of black poverty to legitimise black wealth for the politically connected elite.

South Africa is blessed with wealth in many forms:  minerals below our soil; sun and wind above it for affordable renewable energy to meet our energy needs; a land mass large enough both to accommodate and feed our population; a still largely young population; a developed infrastructure and manufacturing base.  The final form of our wealth is financial.  (If in doubt on this score just look around, when in the next traffic jam, at the size and newness of the cars whose sheer number exceed the limit of our already extensive and modern road network.)  Alongside all this wealth is enormous, unmet need – for virtually every basic requirement:  employment; housing; schools, hospitals; universal in-house piped water; universal household connections to the electricity grid; sport and leisure facilities.  It doesn’t take a rocket scientist to conclude that we ought to be using our wealth to meet our unmet basic needs.  And, thereby, transform (if not eliminate) unemployment and poverty.

Meeting these still largely unmet or under met basic needs automatically creates a domestic market of sufficient size to be economically viable.  The domestic market also equals jobs.

One essential way of kick-starting this domestic market is to pay a living wage, not the apology of the national minimum wage that even the government recognises will still keep large numbers of workers in poverty.  Without a living wage there can be no domestic market, notwithstanding the needs of 55 million of us, for the workers would not be able to buy what they would be producing. Even the World Bank now recognises that cheap labour contributes significantly to economic stagnation.

A living wage would need to be supplemented by measures aimed at the 40% amongst us who are currently unemployed.  This means dusting down BIG – the basic income grant for all adults long promoted by the trade unions, faith-based organisations and various NGOs.  No radical economic transformation is possible without BIG support for the development of a domestic market, at least initially.   

Moving away from the premise of export-led growth – an economic fantasy central to government policy since 1994 – to the primacy of a viable domestic market additionally requires a radical overhaul of a multitude of trade agreements designed to prevent the development of any domestic market in South Africa.  These agreements begin with the World Trade Organisation (WTO) and its many subsidiary agreements such as the General Agreement on Trade in Services (Gats) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (Trips).  These various agreements all have one overarching purpose:  to one-sidedly force open national borders for the profit of the global transnational corporations (TNCs) – the genuine ‘monopoly capitalists’ – that increasingly dominate all aspects of our lives.  For radically different reasons, President Donald Trump wants to protect the US domestic market.  Nonetheless, he is giving currency to the previously forbidden word – protectionism.

Exchange control is another of the words not spoken in polite society.  Yet, foot-lose capital would be guaranteed to start running at the first serious talk of a serious radical economic transformation.  Imports – and thus foreign exchange – would need to be tightly controlled as part of exchange control protective measures.  Japan and South Korea, among other countries, serve as models for what can be done in this regard.

Land and a different agriculture are central to addressing unemployment and poverty.  Commercial agri-businesses, including some of the ones that produce for exports, would, for the immediate future, remain as the main suppliers of urban food.  Priority, however, would be given to a rapid promotion of small-scale, labour-intensive farms practising agro-ecology for food sovereignty, as well as local markets.  The over-riding lesson from the previous 23 years of land restitution is that having land is no more than the first requirement.  Intensive and extensive technical and financial State-support, along with protected markets, are imperatives for success.

The prevailing truisms of neoliberalism need to be pricked and replaced.  Foremost amongst these are shibboleths such as:  the smaller the state – and the public service – the better; leave as much as possible to ‘the market’; economic growth, with GDP as the measure, is the basis of a sound economy and the source of wealth to finance all public services; inflation must not exceed 6% of GDP; the national budget deficit must not exceed 3% of GDP; growth is best served by radical de-regulation; commodify and privatise whatever might be profitable; turn citizens with rights into commodified customers.

A tenet so central to South African neoliberalism that it merits separate mention is the idea that growth is entirely dependent on foreign investment.  This means appeasing the international financial institutions (IFSs) and the rating agencies; anything not “investor friendly” must be avoided.    

Saying that South Africa is not completely or even mainly dependent on foreign investment begs the question:  Where is the money to come from to pay for the radical economic transformation.

Re-enter Thomas Piketty.  Karl Marx, who spent most of his adult life studying 19th century capitalism, would have been eager to read Piketty’s analysis of 20th century capitalism.  Marx can be expected to have been pleased that a non-Marxian economist had confirmed his prediction of ever increasing inequality being a consequence of the inner logic of capital accumulation.  However, based on an understanding of capitalism different from Marx, Piketty’s proposed remedy to the global phenomenon of greatly increasing inequality is simple:  Vigorous taxation of the rich on a vastly increased scale.

South Africa makes radicalising progressive taxation (relatively) easy.  This is because it is both rich and one of the most unequal countries in the world. 

Alerting us to the opposition to be expected from the rich is the complaint from the ubiquitous Mzwanele (Jimmy) Manyi that the new, upper tax bracket of a taxable income larger than R1.5-million, introduced by Gordhan in his February Tax proposals, was anti black.

Drawing on work by my Alternative Information & Development Centre (AIDC) colleague, Dick Forslund, the following are among the abundance of possible tax and finance measures:

Increased taxation of companies including a compulsory 10% tax on the several hundred billion rand that is hoarded by non-financial private companies;

Tax high incomes including a rolling back of a third of the cuts in the personal income tax since 2000 which could raise some R60-billion a year;

Tax Bond Sales including a small ¼ percent tax on bond sales, which should raise some R20-billion a year;

Close Tax Haven Loopholes by inter alia requiring full public disclosure of the finances of all the daughter companies of corporations in South Africa; announcing the end to corporate secrecy and “The Right 2 Know”; requiring that the audited financial reports of entities in tax havens that receive regular payments from a daughter company in SA be handed in to the authorities by the mother company that owns them both;

Use the Underspend of the money paid by workers to the Unemployment Insurance Fund. The fund presently under spends R20-billion a year and it has been growing every year for ten years;

Pension Funds and Prescribed Assets. Government could declare that 10% of the Public Investment Corporation’s R1.8-trillion funds and 5% of the private retirement fund industry to be prescribed as assets promoting radical economic transformation. Today, this would raise over R220-billion in loans at prescribed interest rates, still leaving more than enough to safeguard pensions.

There is one other source of money, in very large numbers, that was not recognised by Piketty.  The historic compromise between the ANC and capital that lead to the birth of a democratic South Africa in 1994 was anchored in the preservation of capital and the class divisions to which it gives rise.  The ANC’s only insistence in this respect was the agreement with the previously all white ruling class that only the privileges of wealth would be “non-racialised”.  Implicit in this agreement is that the conditions for the production of that wealth would remain untouched: above all, this meant the continuation of a working class fed on cheap labour, along with a suitably large number of unemployed to keep wage-demands suitably realistic.  BEE and affirmative action (AA) are the names given to the creation of a black elite within the belly of the capitalist beast.  A pertinent reminder of South African inequality and the often unrecognised extent of black privilege is that the richest 10% of all households – black and white – own almost half of all income and 90% of financial assets.  Half of these privileged households are black.

BEE & AA mark the ANC’s unannounced abandonment of its commitments made at its historic conference in Morogoro in 1969:

The correction of …centuries-old economic injustices lies at the very core of our national aspirations. We do not underestimate the complexities which will face a people’s government during the transformation period nor the enormity of the problems of meeting economic needs of the mass of the oppressed people. But one thing is certain — in our land this cannot be effectively tackled unless the basic wealth and the basic resources are at the disposal of the people as a whole and are not manipulated by sections or individuals be they white or black.

BEE & AA are designed precisely to “manipulate” the people’s “basic wealth and resources”. And they do so at enormous cost. Comprehensive quantification of the financial cost has, significantly, never been done.  However, it can safely be said to be, if not one trillion rand, then very close to this number with its unimaginable zeros.  This money can be re-directed to serve the intentions of the Morogoro conference, which are, of course, a genuine radical economic transformation.

With 9 April being the 24th anniversary of the assignation of Chris Hani, it is appropriate to recall his fears about the class-collaboration between rich whites and blacks. 

What I fear is that the liberators emerge as elitists… who drive around in Mercedes Benzes and use the resources of this country… to live in palaces and to gather riches.

Finally, there are two issues that need to be recognised.  They are so well known that they need no elaboration once they have been identified.  I refer to the current dysfunctionality of the State and to what Richard Poplak calls “the industrial grade looting machine” that is now the modern ANC.  It is self-evident that nothing progressively radical can happen without radical political changes.

None of the above is intended to make light of the enormity of the challenge posed by any attempt to take radical economic transformation seriously.  Giving any proper meaning to radical economic transformation that expressly aims at reversing the triple afflictions of poverty, unemployment and inequality is not for the faint-hearted.  The question is whether the pressing need for these changes can be avoided.  For those who answer “yes”, one is bound to ask:  For how long and at what human cost?

The boldness with which we therefore face the challenge and the urgency and consistency we give to doing what can’t be avoided depends, ultimately, on our individual views of the South Africa we’d like to see and live in.

The cost of the junk status President Zuma has chosen to inflict on us grows ominously as more and more of the implications sink in and are quantified.  My modest proposals are born from this unconscionable Zuma-reality. 

The rich may well recoil as an immediate response to the content I’ve given to radical economic transformation.  The changes here proposed will indeed impact on them; they will certainly bear the main cost, in monetary terms.  But they are already bearing that cost in different ways but with only Zuma, his masters and acolytes, as the beneficiaries.  Moreover, their benefits can, at best, be short term only.   

The benefits of a fairer and more just South Africa will also mean a much safer South Africa.  And who would dare put a price on the luxury of enjoying personal safety and in a South Africa more at peace with itself.  A South Africa, moreover, which invites pride. 

South Africa is at an historic crossroad:  Do we keep the poor padlocked to poverty by allowing Zuma, in the name of the poor, to promote the narrow class interests of an already privileged black elite?  Or, hearing the cry of anguish and anger from most of us, do we demand a different radical economic transformation; one that, by radically tackling our unsustainable inequality, might be the key to a better future for all?

Who can deny that the struggle against poverty, unemployment and inequality would be a just one. DM


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