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Do we have to choose between a predatory elite and white monopoly capital? (Part One)


Neil Coleman is Co-Founder and Senior Policy Specialist Institute for Economic Justice. @NeilColemanSA

On 26 March, shortly before the firing of Finance Minister Pravin Gordhan, I tweeted in response to a column which argued that Gordhan was an agent of White Monopoly Capital: “Don’t make the mistake of forcing people to choose between a corrupt predatory elite, and parasitic big capital. Both must be opposed.” This two-part article attempts to unpack the implications of that 133-character tweet.

If Facebook, Twitter and other social media are a true barometer of the state of the nation, then we appear to be rapidly dividing into two camps: those who believe that the ruling party and the state, in particular the President, have been captured by a predatory elite, which must be fought at all costs, and that key institutions such as Treasury must be defended; and those who believe that white monopoly capital is the real enemy, which is behind the mobilisation against the President and the ruling party, because of its nervousness about the ANCs drive for radical economic transformation. By implication, we all have to choose one side or the other.

To attempt to pose current battles as giving people a choice between supporting a predatory elite, or monopoly capital, and their allies, is to create a false binary. The vast majority of ordinary working-class and middle-class South Africans cannot identify with either of the self-serving or corrupt elites. But the abuse of power by these two key economic centres in South Africa – one emerging, and one well established – has huge ramifications for their lives, and for the future of the country.

An emerging predatory elite abusing its proximity to state power threatens to turn our democracy into a full blown kleptocratic state. It leeches or undermines public funds and services to ordinary people at the altar of a selfish accumulation agenda. To promote its agenda, it threatens to corrupt and capture all key organs of state. Surely this threat must be opposed with all the power at our disposal.

At the same time, established big capital, which has grown on the back of a vicious accumulation path under apartheid and colonialism, continues in the most parasitic way, to extract South Africa’s resources, exploiting the economic vulnerability of the majority. It diverts the social surplus out of the country, or into speculative economic activity which only benefits a tiny but extremely powerful elite. Big business continues to refuse to invest in the country’s development. Surely this agenda must also be opposed?

The question many legitimately ask is what is the most immediate and urgent challenge which we need to confront, given the current crisis in our country, and given the emerging conflict between these two camps.

Clearly, the most immediate danger which must be confronted is the emergence of a full blown kleptocratic state. International experience suggests that once a society degenerates to this point, it is extremely difficult if not impossible to recover. Thus the defence of democratic institutions against capture by corrupt private interests is an absolutely urgent task, which should unite South Africans across a broad front, or spectrum. But it is ordinary working-class South Africans who have most to lose from such a development, and who therefore have to lead the struggles to defeat this predatory elite.

At the same time the major strategic challenge in the medium term, without which real development in South Africa will be impossible, is to disrupt and transform the structure of a parasitic form of (monopoly) capitalism which blocks social development. This must be managed in a way which ensures massive investment in the productive economy, and society. This objective is what must drive any genuine programme of radical economic transformation – not the selfish accumulation agenda of a small elite.

There is a connection between these two challenges: as we have seen in many colonised states, the lack of real economic development creates the conditions for the degeneration of society. Kleptocracy is an extreme manifestation of this reality. And as we argue below, there is often a perverse dependency relationship between these two economic power centres. In fighting the toxic combination of a corrupt predatory elite and parasitic big capital, we are ultimately forced to confront the challenge of what would constitute a sustainable development path for our country.

After considering the challenge of confronting the predatory elite in Part I, Part II will look at the challenge of transforming capital, and suggest some interventions which could assist in driving a developmental agenda.

  1.   The Predatory Elite and state capture

In a 2010 discussion paper Cosatu described the emerging phenomenon of a predatory elite and expressed concern that if not stopped, we were heading to “a predator state where a powerful, corrupt & demagogic elite of political hyenas use the state to get rich”.

Then in 2016/ 2017 widespread reports suggested that a predatory elite had indeed established itself, to an alarming degree, in the ruling party and government, and threatened to control key institutions of the South African state, corruptly using its proximity, through the ruling party, the Cabinet, or through leading state officials, to gain access to state procurement, state-owned enterprises, local and provincial government. Further, that it has abused this access to either directly steal from the democratic state, or to semi-legally but illegitimately accumulate economic power through building parasitic enterprises which leverage their access to people in power through unfair or corrupt means. This is what is meant by state capture. A selfish accumulation agenda which has nothing to do with national development.

It became clear in 2016 that this was becoming a systemic threat, and was more than an inchoate network of unscrupulous individuals. A series of disturbing but well-substantiated allegations of systematic abuse of state institutions culminated in the statement by the Deputy Minister of Finance that the Gupta family had attempted to bribe him to replace the sitting Minister; and the State of Capture report by the Public Protector suggesting that this same family with direct ties to the President – the Guptas – together with the President’s own family, were now systematically engaged in State Capture, through inter alia directly influencing appointment of Ministers, DGs, members of parastatal boards, and other key strategic positions in the state, such as those in charge of procurement, to drive their accumulation agenda.

In short, this suggested that the entire state is under threat of being controlled by a predatory elite, and democracy itself is being hollowed out and rendered irrelevant as the state, the ruling party and those in positions of power become increasingly captured by private predatory interests. As this permeates all levels of the state and the ruling party, every aspect of politics becomes infected by this virus of greed and accumulation by any means possible. Democratic contestation in the ruling party at local, provincial and national level becomes replaced by slates who are vying for control of patronage and tenders.

Some would argue that this picture is alarmist and exaggerated. And indeed it has been recently argued that while we are seeing alarming signs of a movement towards a kleptocratic state, we are not there yet. But the signs are extremely worrying.

There are few serious analysts of SA politics and society today who would lightly dismiss the emerging threat of South African democracy being driven off the rails by a ruthless, corrupt elite, who are prepared to sacrifice everything from social grants to children’s education to pursue their accumulation agenda.

An extremely worrying pattern has begun to emerge from the various exposes, which suggest that a number of key institutions have been captured or are under threat of being captured by this predatory project. These include key departments and leaders in government, including the Presidency under Zuma, SARS under Tom Moyane and more recently the possible capture of Treasury under Malusi Gigaba; critical parastatals, such as Eskom, Prasa, SAA, Denel, and Transnet have been implicated in dodgy patronage-linked transactions worth many billions of rand; public institutions such as SABC and the Public Protector are perceived to have been captured, and compliant leadership placed in key institutions in the security sector to give cover to these often criminal and definitely nefarious activites, including the Hawks, the NPA, NIA etc.

This alarming and rapid degeneration threatens to turn the dream of one of the great democratic revolutions of the 20th century into a nightmare for the majority. The question is: first, how was this allowed to happen? And second, what is the relationship of this predatory elite to the parasitic form of capitalism which has developed in South Africa? Third, what do we do to reverse this trend?

How was this allowed to happen? What led to the emergence of this predatory elite?

Ronnie Kasrils, former ANC Minister in two Cabinets, has argued that a ‘Faustian Pact’ was entered into in the early 1990s. This pact was in essence an agreement by the new elite not to fundamentally challenge the old economic order, in exchange for a junior partnership with white capital, in the form of BEE enrichment of a handful of well-connected individuals. This was a cynical but transparent insurance policy, which was as good an investment by the capitalist oligarchy as any of their previous investments in the apartheid state. The outlines of the elite pact was suggested in the highly revealing document tabled by Thabo Mbeki in 1994 (anonymously at the time), significantly titled Unmandated Reflections.

According to Kgalema Motlanthe, the BEE policy was “the brainchild of the mining industry, which deliberately went out to select blacks who could serve as insurance against possible nationalisation. They basically went out in search of blacks who were ‘connected’ and therefore could guarantee some kind of protection. And that is why they had a small pool of people that they could rope into the first BEE deals. And they were debt-funded – the deals were structured such that payment for those shares would have to come off the profit.”

The rerouting of a revolutionary agenda of fundamental transformation into an elite pact meant that the avenue of a social project which collectively improved working people’s lives was cruelly dangled before ordinary people in 1994 in the form of the RDP proposals for social redistribution, only to be snatched away by the neoliberal GEAR programme in 1996.

Even for the black middle class, BEE was a huge disappointment, both for its narrow base in empowering a small number of the black elite as well as the indebtedness which resulted particularly from the Global Financial Crisis in 2008, which some have argued underpinned the BEE moguls’ support for nationalisation promoted by Malema and the ANCYL in the run-up to the 2010 ANC National General Council (as a way to bail them out).

If the BEE route to a better life was a mixed blessing for the middle class, it was a cruel illusion for the majority of ordinary working-class and unemployed cadres of the liberation movement, and was always out of their grasp. So how could their expectation that the ruling party deliver a better life to all be met?

According to an internal discussion document apparently drafted by disgruntled ANC members in 2016 , an ANC survey carried out in Gauteng in 2006 revealed that some 42% of ordinary members and 31% of office-bearers were unemployed. As many as 45% of ordinary members and 36% of leaders surveyed said that they experienced periods when they had to go hungry. Slightly over half the members earned between R299 and R2,999 per month and only 24% had a post-matric education.

But if ANC members lacked access to the fruits of BEE and traditional business, what they shared (in some cases literally) with the leadership was access to the levers of local provincial and national government, as well as certain state institutions. While this wasn’t necessarily always an openly corrupt relationship, the networks of patronage underlay the hollowing out of democracy in the movement, and mobilisation of members to support certain slates, in return for access to a share of the goodies.

According to the discussion document cited above, “A position in a local council has been described as the difference between poverty and putting something on the table for one’s family – an indication of how high the stakes are here, leading often to violence and even assassinations.”

Over time, as the values of the movement are corrupted, and the state fails to create real alternatives, a culture of legitimising and justifying shady or even corrupt practices begins to take root in the movement and the state. Even more so when the leadership of the movement and government is seen to be spearheading these predatory practices. In the face of “the establishment” denying a legitimate means to accumulate (and here it is easy to target the economic establishment or White Monopoly Capital), it is a short step to arguing that “it is our turn to eat”. This creates a culture of nepotism, patronage and outright corruption, which is tolerated whether big time at the top, or small scale at the bottom.

Therefore, while morality and the need for ethics in politics and governance is important, the battle to combat this phenomenon must be connected to the socio-economic transformation required to provide a route out of poverty, and a legitimate path for accumulation. This is the implication too of the writings of key developmental theorists such as Mushtaq Khan who argue that combating corruption cannot be effective outside of this developmental challenge.

None of this analysis is intended to justify patronage and corruption, or to suggest that the entire cadreship and membership of the movement is embroiled in corruption. Rather it is to understand the socio-economic roots of patronage and corruption and how it becomes part of the fabric of the political process. This has to be considered in the South Africa of 2017, when patronage has become so systemic that even top leadership elements with integrity will be unable to counter it effectively, without a coherent strategy to address its roots.

Is big business serious about its zero tolerance approach to the predatory elite?

Big business has found its voice against the predatory elite, and state capture, with the dismissal of Finance Ministers Nene and Gordhan. There is debate however whether business will be able to find some modus vivendi with these forces. Steven Friedman argues that they are likely to: “In reality, market economies can co-exist with all manner of favouritism, patronage and even dodgy dealing.”

Historically, during colonialism and apartheid, big business in South Africa was prepared to tolerate extreme abuse of state power (both in the form of human rights abuses and extensive patronage networks to feed the trough of the white minority, and political leaders) to further the interests of a minority, because this wasn’t so dysfunctional as to threaten the underpinnings of their economic power and interests. Indeed, it was expected that the state use its ruthless organisational machinery and repressive apparatus to ensure the subjugated state of the majority to service the super-profits of large corporations, particularly through an abundant supply of cheap black labour. History records that it was the mining industry which designed much of the repressive apparatus, later institutionalised by the apartheid state.

The organisation of first colonial and then apartheid society was designed to maintain this subordinated position of the black working class to supply the needs of capital, while at the same time allowing for the development of a sufficiently advanced infrastructure to service an increasingly sophisticated economy. In the 1980s the excesses of the apartheid regime started to become dysfunctional to capital, not because they were morally repugnant, but because they threatened to provoke a social revolution which would lead to the destruction of capitalism itself.

Fast forward to the democratic era. We still see a perverse symbiotic relationship between large corporations and the predatory elite. For example, major alarm bells were rung in 2010 when a blatantly corrupt deal involving the Guptas and President Zuma’s son being allocated iron-ore mining rights was reached with large multinational Arcelor Mittal. The extent of such linkages still has to be fully documented in relation to other deals, but there is little doubt that this is not an isolated case.

Most recently the crisis in the payment of social grants exposed the manner in which the most outrageous predatory practices, at the expense of the poorest South Africans, have been driven both by large, in this case foreign capital in the form of CPS and Net 1, together with politically connected tenderpreneurs, and government leaders at the highest level, and was only exposed through the vigilance of civil society, together with honest public servants. 

Therefore, it is likely that established capital can tolerate a degree of abuse by the predatory elite, and that while opposition to corrupt practices is welcome from any source, the battle for ethical business practices, in the state and outside it, has to be driven by progressive civil society.

How should we respond to this challenge?

“Our nationalism must not be confused with chauvinism or narrow nationalism of a previous epoch. It must not be confused with the classical drive by an elitist group among the oppressed people to gain ascendancy so that they can replace the oppressor in the exploitation of the masses.” — 1969 ANC Strategy and Tactics document

The recent paper by adviser to Finance Minister Gigaba, Professor Chris Malikane, which caused such controversy, raises a number of important issues which are legitimate questions to debate. However, in my view he makes a fundamental error in arguing that because the predatory elite, or the ‘tender based capitalist class’ as he calls them, is at odds with monopoly capital, they in some sense represent a progressive force.

He states: “Insofar as the tender-based capitalist class has begun the war against the dominant white monopoly capitalist class, it has to be encouraged”. But because “the tender-based black capitalist class is not likely to win this battle without the support of the mass of the black and African working class” they need to be supported to that end.

This raises the fundamental question as to whether a progressive domestic business sector, or the so-called “patriotic bourgeoisie”, which will be committed to developing the South African economy, can be created on the basis of a predatory tender based elite. This is to misunderstand the nature of predatory capital. By definition they have a parasitic relationship with the state, and therefore with the people: they suck value out of the system, and make goods and services more expensive for ordinary people, or result in those being denied to the people.

Therefore it is an error to conflate the creation of a patriotic capital with tenderpreneurs. The latter are rent-seekers who steal from the state and the public; the former would invest in productive capacity. As someone who has worked with Prof Malikane, I don’t believe that he intends to defend predators per se, but is rather arguing that tenders and public procurement are a more viable route to accumulation for black business than BEE, and that it breaks their dependence on white capital. A fundamental problem for this argument is that this class has become so infected with predatory behaviour. It is not predisposed to develop productive capacity, but rather is prone to fronting.

Malikane is more accurate when he states that “neither of these capitalist groupings posit a programme whose outcomes favour the black and African majority, which is working class”.

We must give primacy to the battle against state economic capture, and capture of the ruling party. If this is not defeated, then we face the danger of systematically hollowing out the state and all democratic institutions, and the economy. If we fail to stop this downward spiral, our children will inherit a wasteland, a failed state, hyperinflation, deindustrialisation of our economy… the classic “Third World basket case”.

We need to ensure that a systemic linkage between the political system and predatory accumulation does not become “irreversibly entrenched”. This is certainly not in the interests of the poor or the working class. Apart from the economic costs, this would be a rapid road to authoritarianism or fascism, in which workers would be the primary victims.

It is important to note how populist demagogues have around the world, and throughout history, cynically exploited popular discontent to mask nefarious and immoral agendas. As the global economic crisis deepens this is becoming more common, as we currently see with Trump, Le Pen, Temer and others.

The failure to transform the structure of our economy has given oxygen to elite demagogues who want to seize the commanding heights of the economy for selfish accumulation agendas, in the name of the people, as other avenues for legitimate development and accumulation are blocked. In this context, calls for nationalisation are not necessarily progressive in themselves. International experience shows plenty of examples where it is used to feed an elite predatory agenda. Strategic nationalisation and deliberate state intervention in the economy to drive industrialisation and development, however, is a different story, which we return to later.

Demagogues are beginning to use the bogy of white monopoly capital (WMC) to deflect attention from the battle against a corrupt predatory elite. But doesn’t mean that WMC, and particularly a parasitic big business elite which is draining the country of its resources, is not a very serious threat. In a complex but real way, these challenges are two sides of the same coin. We deal with this in Part II of this article.

How should we combat the rise of a predatory elite?

A coherent response to the curse of patronage, nepotism and predatory practices cannot be limited to the removal of one person, no matter how important he may be, or the severing of the corrupting influence of a predatory family on the state. It has to ensure:

  • A comprehensive set of measures, with an element of independent oversight, aimed at rooting out these practices. We need to review whether existing measures to combat corruption, abuse of procurement etc. are adequate or whether the problem of non-enforcement suggests the need for a new approach, including different institutions to drive compliance;
  • A vigilant civil society which mobilises a popular front of a wide spectrum of society, but ensures that organisations of working people drive this programme, to avoid domination by unreliable elites;
  • Deployment of honest and committed people to key state institutions infected by this rot, to turn these institutions around, and return them to genuine service to the people.

All of this needs to be combined with a concrete set of socio-economic policies and interventions which ensure that ordinary people, including members and cadres of the ruling party, see and have real possibilities for improving their lives in a productive and honest way. DM

This article is written in Neil Coleman’s personal capacity, and doesn’t reflect an organisational position

  1. 1. Wikipedia defines Kleptocracy as a government with corrupt leaders (kleptocrats) that use their power to exploit the people and natural resources of their own territory in order to extend their personal wealth and political power. Typically this system involves the embezzlement of state funds at the expense of the wider population, sometimes without even the pretense of honest service.
  2. 2. Wikipedia defines state capture as: “A type of systemic political corruption in which private interests significantly influence a state’s decision-making processes to their own advantage through unobvious channels, that may not be illegal.”
  3. 3. Thin edge of the wedge: Seeking ways to reset SA’s ethics and politics, ensuring inclusive economic growth” June 2016

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