The death of development economist Prof Vishnu Padayachee on 29 May 2021 was a blow to the working class because he stood up for the kinds of social-democratic reforms that labour has long championed as a minimum programme. One of his most important papers, for the Wits Southern Centre for Inequality Studies in 2018, elaborated “progressive macroeconomic policy interventions based on a state-led investment and ‘crowding in’ approach to development in direct contrast to a private finance, market-led and ‘crowding out’ neoclassical orthodoxy.”
It is long overdue to revisit Padayachee’s ideas, including the need for capital controls to prevent the leaching of the economy that we see worsening.
The politics behind political economy play out in ways that are often ignorant of the knowledge Payadachee passed to his readers and students at UKZN and Wits. This is abundantly evident in the impoverished lines of debate now evident within the ruling party.
The African National Congress is suffering a strange internal political split, one that at first blush appears to revolve around ideology. It reflects our society’s valid concern about South Africa’s ongoing economic inequity, debilitating unemployment, worsening poverty and durable racial injustices, which no one can deny.
The Radical Economic Transformation (RET) group still complains bitterly about the overarching power and whiteness of corporate capital, which no one can deny.
And because President Cyril Ramaphosa was a tycoon — one whose awesome accumulation of wealth over the past two decades flowed from serving the likes of Lonmin, Standard Bank, Coca-Cola, McDonald’s, Alexander Forbes, MTN, South African Breweries, Macsteel and countless others partly through his Shanduka empire and tight links to government (as was revealed in August 2012 at Marikana) — he regularly stands accused of helping the “Oppenheimer-Rupert-WMC” white monopoly capital crew advance corporate profits ahead of the public interest, labour rights, social welfare, racial justice, gender equity and the environment.
Again, given the brutal turn in Treasury’s neoliberal economic policy since he took power in 2018, including ever-tougher austerity for the masses simultaneous with corporate tax cuts and looser exchange controls to funnel wealth offshore, this cannot be denied. True, there was a brief promise a year ago to supply R500-billion in fiscal stimulus especially to aid the most vulnerable as Covid-19 hit hard, but that the promise was at least four-fifths broken, no one can deny.
If Ramaphosa’s economic recovery strategy actually worked instead of making ongoing promises no one now believes, things would be different and RET would not be an operative ideology. No one can deny, though, that the period since 2018 has been one of declining income per person.
The rebuttal from the pro-Ramaphosa camp is that the Ace Magashule camp has amped up this kind of RET rhetoric because the ANC secretary-general is being charged with corruption — hence this is a talk-left ruse, a common refrain since the likes of Jacob Zuma began using more radical-sounding rhetoric. This also cannot be denied.
And although Ramaphosa’s reign of corporate-neoliberal power since 2018 has also coincided with a long depression, starting not in March 2020 when the economic lockdown was imposed to halt Covid-19’s spread, but at least two years earlier when the decline in per-person GDP became decisive, those supporting his leadership promise better days ahead. And indeed, there are encouraging signs which cannot be denied:
- The Gross Domestic Product — which is a terrible indicator of welfare given its treatment of women’s unpaid labour and declining mineral wealth, both completely ignored — is going to rise in 2021 by at least 3.5%, with the Reserve Bank predicting 4.2%;
- The Reserve Bank’s (“Repo” or Repurchase) interest rate charged on inter-bank loans is going to be kept at 3.5%, which is lower than at any time during democracy;
- The global commodity price rise helps firms that are drawing down non-renewable minerals including coal, iron ore, palladium and rhodium — the last two of which are critical ingredients for a new hydrogen-based energy system;
- The relatively high commodity prices have pushed the currency above R14/$, after it fell to R19/$ in April 2020;
- In spite of the strong rand, thanks to the commodity boom the trade surplus has outrun the official outflow of profits, dividends and interest so the current account remains stronger than any time since the 1990s; and
- The stock market has soared to record levels, having risen 47% since the crash of April 2020.
Contradictions are deeply rooted, beyond petty ruling-party rivalries
Can we trust these indicators to affirm the economic recovery strategy of Ramaphosa and Finance Minister Tito Mboweni?
No. In reality, the current economic upturn is actually a fantasy, reserved for those at the commanding heights of two industries — mining and finance — which have for 150 years been looting our economy and degrading our society and politics.
To see a stock market boom during a real economic decline is sickening. It is measured by the Buffett Indicator (stock market capitalisation over GDP) which now at just over 400% is the highest ever recorded in any single country since the records began.
The problems of financialisation and excessive reliance on minerals discussed below were not addressed when the RET faction’s Zuma team were in command; they actually became much worse during the 2010s. And the weakness of the recovery is seen in how little either manufacturing or retail sales have picked up in recent quarters.
Something more serious than either faction would ever consider needs to be done, and that starts with a proper diagnosis far deeper than RET or Thuma Mina factions will contemplate.
Because it is not only the ANC factions who are bringing the country to its knees. South Africa’s capitalist class is failing workers and the entire society, as well as the capitalist economy itself. There are two reasons:
- First, as socialists, we are concerned that capitalism’s internal contradictions are increasingly evident, especially when we look at the rising gap between profiteering by the financial elites and stagnation in the real economy; and
- Second, the way in which South African capitalists have followed up the crime against humanity in which they participated prior to 1994, apartheid, with new crimes involving theft and corruption, must now finally be halted.
To some extent, South Africa’s problems are overdetermined by global capitalism. A million workers lost their jobs between 2008 and 2009 when the impact of the world financial crisis reached our shores. Those jobs have not been replaced.
In 2015, as the end of the commodity super-cycle hit South African exports, yet again we suffered, this time due to a damaging mining industry downturn which rippled through the rest of the economy as a result of our continued over-reliance on exporting raw, unprocessed minerals.
The 2015-20 economic malaise was unforeseen because the anticipation was that China could continue growing internally and demanding raw materials. But this should have been a lesson to not become so dependent upon these primary products within the economy and to instead make more progress on reindustrialisation and localisation.
South Africa’s notorious job massacres and working-class misery worsen
Just before the 2015 commodity super-cycle crash, South Africa hit the maximum “absorption rate” — 45% — of the working-age population who could find what StatsSA terms “employment” (itself very misleading since so much is informal sector survivalism). This was shockingly low, but was the best rate over the past decade that capitalism has had to offer our society — a profound reflection of the limits of this mode of production.
Then in 2020, the economy lost another 1.5 million jobs. So, the absorption rate fell to 36% and notwithstanding the recovery, it only bounced back to 38% at the end of 2020. What that means is 12 million people who wish they could be gainfully employed, are not, thanks to South African capitalism’s incapacities.
For youth below the age of 24, unemployment has increased to 63%. Overall, counting people who have given up looking for work, a staggering 43% of the South African population is unemployed. In the poorest province, the Eastern Cape, 52% of the people are in dehumanising unemployment. A shameful 47% of black African women are unemployed.
The SA Reserve Bank’s March 2021 Quarterly Bulletin provides the latest 2020 official economic statistics, and it tells us more about our natural enemy: the super-speculative, under-investing, unpatriotic bourgeoisie.
In the world’s most unequal country, one suffering extreme state austerity, it is very revealing that the Reserve Bank fails to mention inequality or social policy even though our economy is suffering from extreme Covid-positive capitalism: coughing harshly, running a high temperature, in desperate need of respiration, and mostly killing poor and working people, especially those with darker skins.
Like StatsSA, which the SA Federation of Trade Unions (Saftu) criticises regularly for misinformation — for example, using Gross Domestic Product calculations without acknowledging the bias GDP introduces against the working class, against women and the environment — the Reserve Bank is extremely biased. It needs not only to be nationalised (since private shareholders own it in what is a highly unusual arrangement), but decolonised.
Nevertheless, the Reserve Bank reveals a bit about proletarian suffering. First, there were massive unemployment increases in 2020 that simply cannot be ignored, even if the wrong statistic is used here by the bank (thereby neglecting millions who have fallen out of the labour market or given up looking for jobs).
South African inequality and financialisation soar
Meanwhile, the Reserve Bank report provides yet more evidence of a bourgeoisie that is:
- Super-speculative, as the bourgeoisie’s main casino — the Johannesburg Stock Exchange (JSE) as measured by the Buffett Indicator (national stock market capitalisation/GDP) — rose to the highest level for any country ever recorded (again bearing in mind GDP does not tell us what we need to know about working-class suffering, women’s social reproduction and ecological destruction — so the Buffett Indicator alignment with working-class reality would be even more extreme under-investing, as the bourgeoisie is unwilling to put money into the real economy’s plant, machinery, equipment and infrastructure; and
- Unpatriotic, as licit financial outflows flood away, mostly to transnational corporations — think Naspers/Prosus, Anglo, De Beers, SAB/ABH, Liberty, South32, Investec, Didata, and so on — according to SARB statistics that ignore the illicit financial flows estimated by Treasury at 3-7% of GDP annually.
All of these indicators — provided by the SA Reserve Bank (which cannot be accused of anti-corporate bias) — suggest that our capitalist class is utterly parasitical and incompetent at the most crucial function it has: accumulation of capital in the real sector of the economy, through the extraction of surplus value from the working class. It is a class not serious about production.
We will campaign for genuinely radical change in our economy
Since South African capitalism cannot fulfil the basic functions of employment and cannot guarantee basic survival for the majority of South Africans who suffer below the poverty line, it is now best characterised as suffering from dementia, wandering aimlessly and doing itself damage.
The situation Karl Marx described has arrived: the capitalist forces of production are being held back by the capitalist relations of production. So, like the transition from feudalism to capitalism three centuries ago, we are overdue for a democratic, ecologically sound socialist mode of production.
Saftu continues campaigning to genuinely place the economy on a fundamentally different trajectory, towards that end. By that we mean, in summary:
- Nationalisation of the mineral wealth of the country to be placed under the democratic control of the working class, so that we do not continue to lose these resources to multinational corporations with inadequate compensation for the depleted materials, and so that instead we can use this vast wealth to create jobs and rebuild our industrial sector;
- Overhaul the economy to end the domination of what is now often termed the minerals-energy-finance complex, and instead direct the country’s highly liquid capital into environmentally conscious industrialisation and creation of decent work;
- Nationalisation of the Reserve Bank and the oligopolistic banks, so that exchange controls and tighter regulations halt the criminal levels of illicit financial flows and allow us to have a much lower interest rate without fear of capital flight; and
- Taking back the arable land, as part of a deliberate strategy not only to reverse colonisation but to ensure that the black majority has property and food sovereignty, and hence can become active participants in the new economy, not as slave labourers or migrant workers, but as the owners and community leaders they once were.
So we are yet again rejecting the president’s so-called recovery plan, because yet again, it does not go anywhere close to offering a real shift in our fortunes, based on the fundamentally different economic value system we so desperately need.
In the meantime, as our socialist forces recover and the working class achieves more awareness of the need for a revolutionary movement led by a worker’s party and strong, radical trade unions and social movement, Saftu must continue unveiling capitalist crimes against our economy, politics, society, and environment. Campaigning is vital, because, in spite of the Covid-19 lockdown, our society is engaged in what scholars identify as unprecedented levels of protest.
A united front of all those with economic grievances — not the RET fakery we see in ruling-party politricks — will be needed, and Saftu’s own strategies to gather the progressive forces will be announced in coming weeks. DM