Opinionista Neil Coleman 26 April 2017

On the side of the Angels or the Predators? Big business and its role in the current crisis (Part Two)

In Part One of this article I argued that it was a false binary to force people to choose between: the predatory elite – a class of corrupt “emerging” business people, bureaucrats, and politicians who were abusing their access to the state to loot resources from the people; and white monopoly capital, or established big business, who had a parasitic relationship to the economy and to society, in that they extracted the country’s resources, but refused to invest in the people or the economy. In this second part I focus on the role of business, and the imperative for a socio-economic transformation that sustainably meets our developmental challenges.

Part One focused on unpacking the implications of the predatory elite, their attempts at state capture, and the imminent threat of the emergence of a kleptocratic state, which completely subverts and hollows out our democracy, and eliminates the possibility of real social and economic development. Or as Mcebisi Jonas so powerfully said last Sunday, resisting a de facto coup where our state economy and society are captured.

Summarising the argument on state capture

I argued that dealing with this threat of state capture is the most important immediate challenge facing us. Further that despite the rhetoric, there are systemic links between this emerging predatory class, and established capital. Perhaps most critically, any hope for a sustainable answer to this phenomenon, requires both a conscious, mobilised society, and a real solution to the socio-economic crisis underpinning the rise of this kleptocratic elite, who in part represent a coalition frustrated by the lack of avenues for legitimate forms of accumulation. This in no way implies the need to go soft on tackling this phenomenon. To borrow an ANC saying- we need to be tough on crime and tough on the causes of crime.

Feedback from the first article inter alia indicates concern it may have created the impression that all those engaged in operating state tenders are regarded as part of a corrupt grouping of tenderpreneurs. Despite widespread abuse of tenders, this is certainly not the case, as there are obviously legitimate business people who use ethical practices. But tenders and outsourcing are a critical part of the path which political and business predators use. The danger is that increasingly the logic of these practices will become systemic, ie infect the system as a whole, including the political and bureaucratic leadership. We don’t need to look far to see how this has happened with key parastatal corporations, such as Eskom, with allegations of massive corruption involving Gupta linked companies.

The perception also arose that the article was suggesting that BEE practitioners formed part of the predatory elite. A commentator points out  that contrary to public perceptions, BEE practitioners aren’t always connected to the political elite. While the issue can be debated as to whether the manner of empowerment of BEE business people has always been legitimate, I wish to stress a different point: that the narrow avenue which BEE created to empower an elite, left little space for the many thousands of people excluded from the mainstream economy, who may otherwise have pursued more legitimate means of accumulating capital and building businesses. The elite political settlement therefore contained within it the seeds of the phenomenon which has exploded in the last few years.

Further there is a connection between the virus of predatory behaviour, and the fundamental problem of how the modus operandi of big corporations combines with the dominant economy policy paradigm to reproduce poverty, the marginalisation of the majority, and obscene levels of inequality.

If we don’t recognise this connection, there is a real danger that everybody takes comfort from bashing the obvious evil – corruption, predatory conduct, and state capture – while ignoring the need to transform the practices of established corporations, and the serious structural socio-economic roots of SAs current crisis. Even if an honest, corruption-busting president is installed, and the ANC and government turned around, such a one-sided focus on defeating a predatory state, while critically important, will not resolve the most pressing challenges the country is facing. This second part of the article therefore focuses on the role of business, and the imperative for a socio-economic transformation which sustainably meets our developmental challenges.

A Parasitic or Patriotic Big Capital?

A public perception has been generated among some South Africans, perpetuated by the commercial media, of a vibrant ethical innovative and productive big business sector which makes a major contribution to the country’s economy in terms of employment, taxes, infrastructure etc.

Unfortunately this picture of a “patriotic business sector” is far from the hard reality of established big business, which fails to invest in decent employment, has destroyed jobs on a large scale (more than a million jobs in 2009 after the Global Financial Crisis); perpetuates highly exploitative labour practices; is involved in ecologically ruinous activities with disregard for the health and well-being of affected communities; systematically avoids and evades tax; is anti-competitive; has engaged in a major strategy of export of the economic surplus, inter alia through economic disinvestment from democratic South Africa since the early 1990s; and yes, has engaged in extensive corrupt and collusive activities in cahoots with elements in the state. Some will argue that this is a harsh generalisation, but numerous studies bear this picture out.

South African big business, therefore with very few exceptions, fails to qualify for the title of a “patriotic business sector” which is deeply committed to the country’s development, and more appropriately can be described as predominantly a form of parasitic capital, because of its extractive approach to economic activity, without reinvestment.

Post 1994, a key centre of big capital has developed a multi-pronged strategy to cream off the surplus, maintain it in a liquid, mobile form, and diversify their holdings, outside of the country. This has taken several key forms:

  • Financialisation of assets, through a range of speculative instruments, and building up of large cash reserves, rather than reinvesting profits into productive investment and employment;
  • Setting up dual, or primary listings outside the country;
  • Shifting of the surplus to finance offshore operations; and
  • Tax evasion, the use of havens, and various illegal and semi-legal means to facilitate capital flight.

This was not all, as some argue, the natural outcome of “market forces”. The double whammy is that these actions of capital were facilitated by political decisions. Government, driven by Treasury has made choices which facilitate capital’s parasitic relationship to the economy, including: macroeconomic policies which promote financialisation and the diversion of resources from the real economy; and liberalising capital controls which has allowed South African assets and capital to be shipped out of the country through through legal and illegal means, including tax evasion, transfer pricing, foreign listings and shifting the operations of South African-built firms.

At the same time, despite progressive labour laws, their voluntarist character, and lack of enforcement, allowed business to consolidate apartheid super-exploitation of cheap black labour, particularly through strategies to entrench atypical forms of work, leading to the shocking reality that over half of SA’s workers currently earn less than R3,500 per month. Deracialisation at the higher levels of the workforce, and the creation of a new black elite, superimposed on this cheap labour structure, gave it an appearance of greater normality.

It is not as if this accumulation trajectory was geared towards financing industrialisation, or investment into the productive sectors of the South African economy. A barometer sometimes used to measure the shift to financial speculation is the fact that an estimated R1,4-trillion of uninvested capital (as at 2013), or more than the 2016 national budget  lies on the balance sheets of corporations. This contradicts the claim that our levels of savings are too low to finance investment.

And according to the Reserve Bank quarterly bulletin in June 2016 for example, corporate fixed investment was in continuous decline into 2016.

The extent of capital outflows from South Africa is illustrated by a report from the Reserve Bank which shows that a large part of our current deficits are as a result of dividend payments to ‘foreign’ companies, which totalled R174-billion in 2016. This represented an all time high, and was the major cause of a 5% current account deficit – dangerously high levels. And these figures don’t capture the illegal and semi-legal flows. Patrick Bond states that some of the same firms removed from South Africa an additional R330-billion offshore annually as “illicit financial flows” through tax-dodging techniques from 2004-13, according to the Washington NGO Global Financial Integrity.

The excuse that recent developments in relation to state capture etc. have led to an investment strike, because they make South African investors nervous, doesn’t wash. What is described above has been big capital’s deliberate strategy since the early 1990’s, in cahoots with policies designed by the first finance ministers and Treasury DG, in collaboration with the financial sector and the World Bank.

The devastating impact of this extractive growth trajectory is that, as the owners of capital cream off the social surplus, it results in the ever-increasing concentration of wealth in their hands, and therefore in the deepening of already obscene levels of inequality.

The process of South African de-industrialisation is in part the impact of businesses long-running investment strike, the massive accumulation of financial assets in South Africa and abroad, as well as relocation of investment in productive capacity outside of the country in sectors such as mining, chemicals and steel.

The alarming speed with which our economy has been hollowed out is both a result of decisions taken by big capital before the democratic transition, and pursued relentlessly since; as well as the political choices made by government in an attempt to appease business.

The big question in the face of this co-ordinated strategy to leech economic assets from South Africa, is how the state can intervene to discipline and regulate this footloose extractive capital. Can the state now act to reverse the flow, and force accountability and reparations for this large-scale corporate fleecing of our new democracy. Some argue that its too late, and not possible, but there’s been no serious discussion in the country of the possibilities, despite calls for an “economic Codesa” to deal with these and other issues.

Black capital versus white capital?

Thabo Mbeki, and now the current government, argued for a deliberate strategy to create a black bourgeoisie, who he argued would be more “patriotic”, and presumably drive a strategy of domestic investment and development. However the BEE experiment has been a failure in that regard, since its structuring has tended to make BEEntrepeneurs dependent on white capital; combined with the fact that leveraging of HDI status often gives rise both to fronting, as well as perverse practices such as the importation of goods, to meet contracts, rather than investment in local productive capacity.

So it is clear that the conduct of “black capital” or black capitalists is not necessarily different from ‘white capital’ or white capitalists. The issue is to transform the character and behaviour of capital not merely to change its colour. So it is not helpful to debate what percentage of the JSE is owned by black capital, if there is no change in behaviour, as ownership increases.

The debate about “white monopoly capital”, or more accurately monopoly capital (despite the use of this term on fake sites to distract from debates on state capture), nevertheless raises major issues relating to its role: Firstly, the enormous degree of concentration of economic power and wealth, enables large corporations to ride roughshod over SA consumers, workers, as well as the state. Despite the unbundling of conglomerates such as Anglo since the 1990’s, which was done to facilitate entry into the international market, different economic sectors still remain highly monopolised by large corporations. Secondly, as described above, the large corporations which dominate various sectors (eg banking, mining, construction, chemicals, retail, telecommunications) have driven a variety of strategies, before and after democratisation, which are more extractive than developmental in character.

Note: contrary to how the debate on monopolies is currently understood, the extreme concentration of economic power which this concept denotes, doesn’t necessarily mean the existence of only one player in a particular sector. Monopolistic practices can occur eg in the banking sector, with four major players. It could be argued that it would be more accurate to describe these as oligopolies, but this is a less known and understood term.

The challenge monopoly capital poses therefore is not so much about the colour of the capital involved – it would be equally problematic if black capital reproduces these patterns. But it is undeniable that there is a large overlap between race and class in South Africa, and that the historical position of large white monopoly capital has been entrenched in the current era.

Given the behaviour of “big white capital” since 1994, it is understandable that those wanting a patriotic business class to invest in development, look to the development of a “patriotic black bourgeoisie”. It has been a characteristic of apartheid capitalism that white business owners were insulated from working class communities, and therefore immune to the impact of their practices. In theory, from a social point of view, black capitalists should be more attuned to the need for investment and development in black working class communities, with whom they have historical and family connections. So cultivation of “black business with a conscience” seems an attractive option. The jury is out however as to whether this approach is realistic.

Capital is notoriously fickle everywhere: in New Deal US, Roosevelt had to force business to come on board; similarly with post-war Europe; the Asian Tigers; or Brazil under Lula. But in all such cases capital has eventually seen the business advantages of rising living standards, and growing markets… until economic crises have hit, which has led to the unravelling of this compact.

At the same time, it is dangerous to “read off” the attitudes of individual capitalists based on the colour of their skin. It may indeed be that some white business leaders in manufacturing are more progressive in their approach to economy, than many black leaders in say finance – because of the nature of the productive economic activity the former are undertaking, and their understanding of what is required. This has actually been labour’s experience in dealing with the different business organisations. Practical expression was given to this in 2010 with the signing of a Declaration with the Manufacturing Circle in which labour and the manufacturers were able to reach agreement on a number of tough matters of economic policy.

So the building of a “patriotic business sector”, to the extent that such a thing is possible, must be an outcome of the restructuring of the way in which the SA economy operates. Of course, transforming the structure of the economy, must involve a far greater role for black business. But to paraphrase the ANC’s famous Morogoro conference statement this should not be about replacing a white elite with a black elite, who carry on exploiting the masses as before.

The development of a programme to promote black industrialists, is a response to the failure of BEE to drive investment and ownership in the real economy, by black business people. On paper this concept appears to be a step forward, but raises serious questions. These include ensuring value for public money invested in the programme, through reciprocal conditions for state support, including specific job targets, observance of labour standards etc.; and support for black industrialists must be for genuine companies driving the development of new productive capacity, and expanding investment, not front operations for established corporations or importers, or vehicles for patronage. Equally this programme can’t be an isolated intervention if it is to succeed on scale as part of the programme of industrialisation. It must be accompanied by a broader shift in economic strategy, including on macro economic policy, which raises domestic demand in SA and the region, ensures access to affordable capital.

The challenge of Industrialisation

South Africa continues to face the challenge of de-industrialisation. According to a recent study, the combined industrial sector in South Africa (mining, manufacturing, utilities & construction) declined from over 40% of GDP in 1980, to 29,9% of GDP in 2008, and comprised less than half of the share of services (which stood at 67.5%). Post 2008 critical areas of industry have faced further threats of de-industrialisation. This has devastating implications for jobs, as well as the structural transformation we seek.

Deep problems have begun to emerge in certain sectors of the economy, particularly the primary and related sectors, since the end of the commodity super cycle: including mining, steel, and agriculture – the latter in part related to the drought.

Progressive interventions agreed with government, on a well resourced and high impact industrial policy (including a developmental agenda for the region, a local procurement target of 75%, a new developmental mandate for SOE and Dis, a beneficiation programme etc.) have not materialised on anything like the scale that was envisaged. They don’t appear to be seen as a priority commitment of government as a whole, but are rather regarded as the focus of a single government department, and are not supported by large scale fiscal funding. The macro-economic policy of government driven by Treasury and the SARB continues to undermine, and in some instances directly oppose, these progressive policies.

Some successful interventions have been made to stabilise sectors particularly clothing and auto, and interventions announced to stabilise steel. We need to look at what lessons can be learned from these interventions, and how they can be upscaled and improved, particularly to maximise their jobs impact.

The success or failure of industrialisation and diversification continues to disproportionately depend on the market, and private investment decisions, with the state tending to take the back seat. Commitments to use state leverage or ownership in strategic sectors does not appear to have gone beyond rhetoric. State ownership in steel, mining, pharmaceuticals etc is still insignificant. Large volumes of capital in the state, whether in government, DFIs, SOEs or the public sector pension funds, are not being systematically deployed for this purpose. At the same time, “fiscal consolidation” means that there is no real increase in public spending.  There is therefore little “crowding in” effect of private sector investment (whereby the private sector takes advantage of the impact of economic stimulus injected by state spending). Infrastructure spend has also not materialised on the scale envisaged.

The real economy in South Africa, which is already verging on recession, is being hit by the double whammy of contractionary monetary policies, and increasingly austere fiscal policies. Monetary policy continues to be tight, with a cycle of rising interest rates, in significant part aiming to attract speculative capital flows, inter alia to counter the structural balance of payments constraint. By making borrowing more expensive, this stifles economic activity & investment. This is now complicated by the ratings downgrades.

Fiscal policy is increasingly contractionary over the last few years. There have been no real increases in per capita spending since around 2012/13, and the trajectory going forward in the MTEF is for real declines in spending. This macroeconomic policy (MEP) is what economists call procyclical- it deepens the cycle of economic contraction. Therefore actual macroeconomic policy, as practised by Treasury and the SARB, is contrary to official government policy in the MTSF, and even the NDP, which both commit to supporting a counter cyclical macroeconomic policy (meaning that MEP should stimulate growth in periods of economic stagnation or contraction).

This inconsistency in our economic posture goes to the heart of the contradiction in the stance of ratings agencies, multilateral bodies such as the IMF, and South African business.  On the one hand they want government to impose a full blown austerity package, and were unhappy that the contractionary budget of 2017 didn’t go far enough in imposing cutbacks. But at the same time the ratings agencies, IMF et al, state that their main concerns are the prospects for economic growth, together with the implications for social stability of rising inequality and poverty, rising unemployment etc. But it is not possible to have it both ways.

It is self-defeating to adopt policies which have the effect of worsening the economic situation. Policies which deepen economic contraction, by reducing the tax base, make it more difficult to deal with debt in a sustainable way. The critical issue is to adopt an economic strategy which places our economy on a sustainable growth and development path. Central to this is a concerted industrialisation effort.

State capture and the role of Treasury

The question of the role of National Treasury has been a highly charged debate, and it is risky to enter into it in the current environment, either because it may be seen to give ammunition to those wanting to capture Treasury; or because it may imply uncritical endorsement of the problematic policies Treasury has advanced over the last 20 years. But refusal to confront certain harsh realities relating to Treasury will not assist in moving us forward.

The first thing that needs to be made clear is that the firing of the Finance Minister had nothing to do with his and Treasury’s purported support for WMC, but everything to do with the fact that he and Treasury were seen as the major obstacle to various programmes the corrupt predatory elite wanted to execute. Whether in relation to control of state owned enterprises such as Eskom, driving through the R1-trillion (R1 thousand billion) nuclear deal, or unfettered access to state procurement, among a number of areas.

The conservative policies of Treasury and the minister has been used as a populist fig leaf by these elements in a transparent attempt to mask their true agenda. But the question that needs to be asked is why such an obvious ploy has resonance amongst certain echelons of the state, the ruling party, and parts of the population? This has everything to do with the role Treasury has played in the democratic transition.

Treasury is widely disliked (not just because it has frustrated the predators), but because of the negative socio-economic impact its policies have had. We need to disaggregate this discourse to understand which aspects have substance, and which are merely being used to deflect attention from the looters. This is not always easy. Much of the critique articulated by the Minister, and Chris Malikane, raises legitimate issues. It lacks credibility however because Minister Gigaba is perceived to be advancing a tainted agenda.

But the statement by the minister that widespread perceptions exist that “Treasury… belongs primarily and exclusively to ‘orthodox’ economists, big business, powerful interests and international investors” reflects a harsh truth.  Treasury were seen in the most arrogant and brutal way in 1996 to impose the Gear macro-economic policy, in direct defiance of ANC and Alliance policies and processes, and since then have engaged in a long catalogue of policy interventions in opposition to the political mandate of the movement. Who can forget the DG Maria Ramos (an unelected technocrat) announcing that the introduction of Gear was non-negotiable? Or President Mandela publicly conceding that the adoption of Gear (and the replacement of the RDP) was not discussed by the ANC NEC before it was introduced?

The full extent of Treasury’s interventions in policy still has to be catalogued. But as someone who has dealt over many years with policies driven by over 20 government departments, and someone who has witnessed Treasury in action from within government, I can attest to the fact that these interventions have been deep and wide-ranging, in diverse areas of government policy. Often these interventions have gone against the mandate of the ruling party & the executive, contrary to the view that government departments only act on the instructions of Cabinet. Examples of such interventions, which have delayed, blocked or derailed policy, have been on: National Health Insurance; Social Security; Labour market policies; procurement policy etc. and the NDP itself. These are a few examples of a much longer list.

How does it do this? Control of the fiscus gives Treasury access to the critical levers to dictate policy, in simple terms by using its veto powers over money and appropriation which policy requires. It has done this clinically, and this is how Treasury came to be known as a government within government or a “super Ministry”.

Its close relationship to big business, particularly financial institutions, has provided an effective conveyor belt to ensure that business has a major say not only in areas of Treasury’s direct preserve, such as financial market policies, but on the economy as a whole. Its cosy relationship with the financial sector has been seen with the revolving door syndrome between financial sector and Treasury officials, who seamlessly slip from one institution to the other. The same applies to its relationship with the Reserve Bank.

For purposes of simplicity, Treasury has two functions: a good governance function; and an economic policy function. It is on the former that it has mainly antagonised the predatory elite; and mainly on the latter that it has abused its power, and antagonized many genuine cadres of the movement. There is a grey area: complaints have been made that it sometimes abuses its good governance role to impose a policy agenda- usually frustrating policies through processes. So there have been complaints, some more genuine than others, that procedures of Treasury eg on the PFMA and local government MFMA are abused to drive a austerity thrust, by imposing requirements which are impossible for entities to meet.

But the role of Treasury in gate-keeping fiscal prudence, procurement etc has also meant it is well placed to detect and block corruption in Departments and SOEs. This is what the predators hate, and this is where Treasury must be supported, to the extent that it continues to defend good governance under the new regime. Most important here, is to resist the nuclear deal which would be disastrous for the country and the poor by swallowing up national resources; and the wholesale takeover of SOEs and procurement by the hyenas.

On the face of it, it may be confusing that genuine progressives simultaneously defend and criticise Treasury. We need to support Treasury to the extent that they detect and oppose corruption.  In that respect Zwelinzima Vavi was correct to call on treasury officials on April 3 to stay at their posts after the dismissal of the minister, and to resist and expose corruption.

But Treasury must also be opposed to the extent that they impose inappropriate economic policies on the country, which deepen the problems which help to generate the very predatory practices they claim to oppose. So there is no contradiction between supporting and opposing Treasury, if this is done for the right reasons.

Unfortunately it is exceptionally difficult now to push for the transformation of Treasury, and its policies, given that people will assume that this is being done as a cynical ploy and for nefarious reasons, driven by those now wanting to capture Treasury. Nevertheless it needs to be done in the short- to medium-term, once the situation has been stabilised.

On the side of the angels? Supporting real economic transformation

“By saying we want radical economic transformation, we mean fundamental change in the structure, system, institutions, patterns of ownership, management and control of the economy in favour of all South Africans, in particular the poor and the working class” – government definition of RET articulated by economic cluster ministers and the Presidency.

Instead of railing against the need for radical economic transformation, the critical test for business is whether it is prepared to abandon its current practices, and begin to support a strategic posture which decisively shifts our current growth trajectory, and tackles rising inequality. Failure to address the socio-economic crisis in the country will give space to demagogues to exploit growing frustration to justify their predatory behaviour, and can only end with us landing up in a fully-fledged kleptocratic state.

Analysis of our economic situation suggests that an industrialisation agenda, in South Africa and the region, must constitute the core thrust of economic policy. This requires a shift in emphasis to regional and internal economic stimulus, as China has done, given that global demand is so unreliable and volatile. We need to reduce excessive dependence on primary commodity exports, as well as excessive dependence on imports, including those capital and intermediate goods which we are able to produce (and imports of luxuries, which deepens our balance of payments problems). Our drive towards industrialisation must be combined with measures to lessen vulnerability to financial volatility. This also requires far more effective harnessing of internal investment resources, public and private.

In June 2016 Labour proposed to the Presidency a number of interventions which could advance such an industrialisation agenda, as a critical element of a broader economic development strategy. These include the following areas, some of which may be uncomfortable for business, but we believe need to be implemented, if we are to turn the situation around:

  • Interventions to scale up and intensify a South African and Regional Industrial Policy, through ensuring adequate fiscal resourcing, targeting of sectors, and value chains in a way which maximises the jobs impact. The industrial strategy needs to look at innovative ways for SA to produce capital, intermediate, and consumer goods for the region. South Africa should become the ‘workshop of Africa’. Possibilities for this are created not only by SAs infrastructure and procurement programme, but the growing infrastructure build which is unfolding in the continent. A jobs rich industrial policy needs to focus on labour intensive sectors, which maximise linkages, and help to diversify the economy.
  • In crisis hit sectors a comprehensive programme of assistance is needed to save jobs and productive capacity. As part of this resources must be released on an adequate scale to make a meaningful impact. This requires the necessary fiscal flexibility. Selective use of tariffs to protect sectors in crisis.
  • Channelling and regulating private sector investmentmeasures must be introduced to deal with the investment strike by the private sector. This includes the introduction of prescribed assets; the introduction of lending requirements to ensure bank lending to the productive sector; strategies to force a more significant degree of local investment by “multinational” South African corporations, and placing of strict conditions on continued outward investments, dual listings etc. Support needs to be given to trustees of retirement funds to drive job creating investment strategies. Instruments to contain dividend outflows, and capital flight need to be explored, including capital controls. Action is needed to deal with illegal and semi-legal outflows.
  • State investment strategy: The state needs to be far more proactive in driving an investment and jobs strategy, and an overarching state investment plan should be developed. This needs to include a coherent approach to investing and channelling resources in the SOEs, DFIs such as the IDC, and a strategy to use the potentially huge economic leverage of the PIC to promote employment and economic transformation. We await a coherent strategy as to how the BRICS Bank is going to promote economic transformation. A plan is needed on the strategic role of state steel, pharmaceutical, financial, mining etc initiatives- to use these companies strategically to intervene in a way which promotes structural economic change.
  • Developmental Infrastructure: We need to ensure that we maximise the developmental, economic diversification, and jobs impact of this programme. Refocus the infrastructure programme to have a greater developmental impact, including in areas such as housing, education and health. Secondly, maximise the jobs impact of the infrastructure roll out. Thirdly, avoid promoting the existing economic structure of exporting raw materials, and rather using the infrastructure programme to promote economic diversification and beneficiation.
  • Measures to combat corruption in the economy, private and public sectors: The scourge of corruption is a crisis. We need to go beyond policy pronouncements. There must be seen to be ruthless enforcement of existing policies and legislation, and the introduction of new measures where necessary. We need dramatic action to demonstrate that government is serious about fighting corruption in all its forms, such as setting up special anti-corruption courts to expedite legal processes. Commitments to reform procurement processes, and end outsourcing, beef up competition policies etc are all important interventions which need to be given full support.
  • Developmental macro economic policies: Excessively conservative thinking in Treasury and the SA Reserve Bank is stifling the use of macro-economic policy as a developmental tool. The fiscal consolidation package contradicts governments official policy of deploying countercyclical strategies to revive economic activity. A bolder discussion is needed on progressive tax interventions, including a wealth tax, and a financial transaction tax. The mandate of the SARB must be changed, putting job creation at centre. Inflation targeting prevents monetary policy from promoting growth and jobs as key objectives. Macro economic policy currently favours finance and related sectors over the productive sectors. This must change.
  • An approach to addressing income inequality: A new Wage Policy is needed, which addresses the current excessive levels of wage inequality in the economy. Raising the income of low paid workers, and poor communities, should be seen as an integral part of an economic strategy of stimulating demand. A more equitable wage and income structure is a critical component of an income led growth path, which generates greater demand for locally produced goods and services. A package is required to raise the incomes of those at the bottom, combined with a freeze on the salaries of high income earners.

There has been a lot of talk in recent years of the need for a social accord between labour and business, an economic Codesa etc. To be a starter, and to have a meaningful impact on the structural economic problems we have identified, such agreements would need to incorporate practical solutions to the challenges outlined above, as well as other critical areas eg promoting rural development and land reform.

If anything good is to come out of this crisis, hopefully it will be that it focuses our collective minds on meaningful and sustainable solutions to the underlying issues which are now flaring up in all sorts of unpredictable, and dangerous ways. History shows that those in power will not act without mobilisation of an active civil society, in particular the working people who have the most to gain if crises are to be resolved in a way which tackles the fundamental issues at stake. As for big business, they need to accept that this can either be an unmanaged, or a negotiated process. But as with the political settlement, there has to be acknowledgement of the massive damage which has been inflicted on society, as well as a preparedness to right the wrongs of the past.

Finally, this is a period of massive confusion and anxiety for many South Africans. In assessing whether any grouping or protagonists in the current battles genuinely stand for progress, we all need to ask two fundamental questions:

  • are they directly or indirectly advancing the agenda of a predatory elite, or actively combating it;
  • are they advancing the narrow interests of the dominant class of big capital, or are they promoting an agenda to transform the accumulation path, and ensure real economic development. DM
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