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No party will significantly change the crisis of neoliberalism austerity

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Zwelinzima Vavi is the general secretary of the South African Federation of Trade Unions (Saftu)

The drive to register candidates is admirable but the opposite trend - increasing apathy – will likely be evident on Monday, as more South Africans lose hope.

More than 325 parties are contesting the 2021 local government elections (out of the country’s 504 registered parties) with a record 95 427 candidates contesting up from 63 000 in 2016. This represents an increase of 51%.

The resounding majority asks a simple question: who is representing us? The chorus from the disappointed voters is revealing: ‘we won’t vote, it makes no difference to vote’.

In the last national elections, registered voters represented 74,6% of the eligible voting population of over 35,8 million. But only 17,7 million actually exercised their right to vote. 

The most worrying part is that we have reached the global average of apathy, despite being one of the youngest democracies.

This is the trend because most of the citizens have not seen their votes turning to be an instrument to build a better life for all.

Although the end of apartheid and the introduction of democracy gave us dignity and representation, the neoliberal policies adopted during the 1990s failed the poor majority where it matters most, in improving the quality of life in material ways. Unemployment has soared since the low of 16% in 1995, and is more than twice as high today, at 44% including people who have given up looking for work. 

For young people, it is over 80%.

Poverty has soared to more than two-thirds if we use the Upper Bound Poverty Line adjusted to R50/person/day. Inequality was already the world’s worst and soared during Covid-19, as most rich people insulated themselves and as the Johannesburg Stock Exchange doubled in value since its low point in April 2020.

The rich and middle classes opt-out of public security, public education, public transport and public health. This has helped public education and healthcare get even worse, because the political class is mainly drawn from these sections of the society.  

Rates of crime and violence compete only with countries in civil war and or with failed political and economic system. Every day, on average, we pick up 58 bodies in our streets. We have one of the highest rates of rape incidents. Yet our criminal justice system has almost ground to a halt, producing only a mere 15% conviction rate and a scandalous 11% conviction rate for the victims of rape. This, combined with the appalling state of municipal services, and with Eskom and most other state-owned enterprises, as well as water and sewage treatment facilities in disrepair, is a clear set of indications that we are sliding towards a failed state. We are not yet there, nor are we a banana republic, but if we allow these trends to continue we will reach that destination in the next ten years.

What is at the centre of this decay, in a country which is the most recently liberated on the African continent? Why have negative trends here set us on course to follow Zimbabwe and Mozambique?

The answer was predicted in the African National Congress’ 1969 Morogoro Strategy and Tactics document: 

“to allow the existing economic interests to retain their interests intact is to feed the root of racial supremacy and does not represent even the shadow of liberation”.

The country remains a neo-colonial outpost whose main productive activity now is the extraction of mineral resources, mostly exported raw or smelted in a rudimentary, and sent to former colonial powers and increasingly now, to the new African colonisers, the Chinese and Indians, who consume so much of our coal, iron ore, platinum and gold exports. Multinational mining corporations dominate these four main mineral exports aside from coal, where now local black-owned businesses were recently saddled with the “pass the trash” liabilities from AngloCoal, Glencore and BHP Billiton.

South Africa’s economy has not been restructured, as it centres on domination by two main sectors: the minerals-energy-complex including petro-chemicals, and financial speculation, which has nearly doubled as a share of GDP since the early 1990s to absurd levels, with the Johannesburg Stock Exchange now having a Buffett Indicator measuring market capitalisation to GDP at 400%, with the highest sustained rate of any national economy in history.

Meanwhile, we are still deindustrialising, as manufacturing has fallen nearly in half as a share of GDP since 1990. We have lost the industrial capacity that made South Africa the biggest economy on the African continent. The labour-intensive sectors – clothing, textiles, footwear, appliances, and electronics – were simply destroyed by ultra-cheap imports from countries where labour cannot organise freely and where safety, health, environmental and social policies are atrocious, especially in East Asia. Our industrial policy has not been robust enough to stop this from happening, in spite of the slight encouragement we have by recent localisation rhetoric.

The second reason why we are marching in the direction of a failed state is corruption, mainly in the private sector. Our local bourgeoisie is ranked the second most corrupt in the world by the PwC Economic Crime report for 2020, tied with China, behind only India. We allow them to move out of the economy up to R400-billion annually through illicit cash outflows. Our government will not stop them from looting the procurement budget, which according to the Treasury officials, suffers a staggering 35-40% which runs up to R250-billion annually embezzled through systemic overcharging. This government is allowing corporates to continue with the nefarious tax dodging schemes which, according to Judge Dennis Davis, cost the fiscus a “conservative” R50-billion annually

When it had a golden opportunity and rare honour to drive growth of the economy through redistribution, the government cut corporate taxes from 52% in 1992, to 27% today, in the middle of the worst crisis to have visited our country in our living memory.

Not even the coronavirus pandemic would shift the government from pursuing its neoliberal approaches and austerity. A brutal austerity programme was imposed, though it has been briefly interrupted by two ‘fiscal stimuli’: in June 2020 a reported R500-billion but in reality, only around R100-billion of new spending offset the pandemic-induced economic crisis; and in July 2021 after the week of mayhem when the powder keg exploded, a R30-billion addition to social welfare grants.

But the overall trend has been to lower social spending (especially by raising grant levels at less than inflation), to destroy the possibility of state housing (instead, promoting apartheid-era ‘site and service’), to defer a genuine National Health Insurance and impose cuts on the health budget even in a pandemic, to starve schools of funds needed for quality education, and to raise costs of basic services – especially electricity – far higher than the overall inflation rate. This cut back on spending accompanied an increase of the regressive Value Added Tax (VAT) from 14 to 15%. It’s unbelievable that the ANC is now to the right of US President Joe Biden.

Faced with this unfolding crisis, the ANC government has recently responded to pressures from credit rating agencies – which in 2017 and 2020 downgraded South Africa to junk status – and after getting a dreaded International Monetary Fund loan in mid-2020, adopted the policy of fiscal consolidation, which is a nice word for budget cuts in even the most basic of the frontline service areas. This austerity combined with neoliberalism that has witnessed government retreating from the economy, to become now merely a hapless referee, a ‘captive regulator’ under the thumb of big business, as the Reserve Bank deputy governor just illustrated at the behest of AngloGold Ashanti’s chair Maria Ramos.

These state-business relations combine with everything we have mentioned above to spell disaster for our people, particularly the majority of black people who were supposed to have been enjoying fruits of liberation, the working class, including the poor masses in the reserve army of labour. Big chunks of the working class were pushed into the underclass, which is now facing structural unemployment, poverty, and inequalities.

In the 2020 Budget, the main budget deficit was projected at 6.8 per cent of GDP in 2020/21, narrowing to 5.9 per cent of GDP by 2022/23. This included a proposed net reduction of R156-billion over three years, targeted at the goods and services the citizenry needs most. Furthermore, an additional R160-billion was cut from the public sector wage bill over the next three years – more than 9% cut in real terms – just when our basic education and health sectors have required more workers to deal with the ongoing Covid catastrophe, and when we need to beef up the public service for Just Transition decarbonisation and climate adaptation investments that are always promised but never provided for.

Cabinet has endorsed the target of a primary surplus by 2023/24, meaning revenue will exceed non-interest expenditure. This will require spending reductions and revenue adjustments amounting to R240 billion – not including personnel pay cuts – over the next two years, which will cause even more acute pain in our society.

 

Last November, the medium-term budget policy statement (MTBPS) proposed by Tito Mboweni imposed cuts (in real terms) to social spending across the board. The MTBPS states that: 

“Compared with the 2020 Budget, main budget non-interest expenditure excluding technical adjustments is reduced by R60 billion in 2021/22, R90 billion in 2022/23 and R150 billion in 2023/24.”

To illustrate the hardships, the government was spending R20,300 per learner on basic education in 2019/20. If learner numbers continue to increase by a similar amount in 2022/23 as they did in the previous two years, the austerity budgeting reduces this amount to R18,549. This means that the government plans to spend R1,751 less per child enrolled in public schools in 2022/23 compared to 2019/20.

The desperate need we have to spend more and to spend much more effectively, is reflected in South Africa’s continual inability to turn out qualified graduates – some 40% of our entering school children never make it due to culling before they reach matric stage – and to teach even rudimentary science, technology, engineering and math, and even language, writing and reading skills. These are not yet at the level necessary for South Africa to prosper under conditions of a new supposed fourth industrial revolution.

The municipalities have also taken hard budget hits, which explains so much of the service delivery failures, and demands that aggrieved citizens blame not only corruption, incompetence, capacity shortcomings and lack of consultation for their woes – but also national government policies and especially Treasury’s fiscal austerity, which Enoch Godongwana appears hell-bent on continuing from his predecessor.

It is from this standpoint that we can say without fear of contradiction, that none of the 95,427 candidates contesting the 2021 will address the crisis at the local level. The crisis is structural and can only be addressed by structural change in state policies and practices going all the way to the Treasury.

The austerity is far worse for far-flung dorpies and ex-Bantustan rural areas with no tax base. Without a change in national policy and funding, they stand no chance to turn the current situation around. Not even the cleanest, most incorruptible will provide acceptable service delivery in an environment where combination of shrinking tax bases and cuts in local government transfers will drain municipal capacity.

And to the terrible new municipal austerity imposed by Treasury and by local economic hardship, we suffer extremely high tariff increases imposed by Eskom due to corruption and incompetence, mainly reflecting the ruling party’s Medupi/Kusile deal between Hitachi and Chancellor House as well as other outsourced procurement contracts full of fraud.

Then the crises households are suffering due to dramatic electricity tariff increases and unemployment, for which they are not responsible, is felt especially by the women who are too often responsible for the unpaid “social reproduction” work within our families and communities. When electricity prices soar, so too do disconnections as a result of inability to pay. And then for the necessary energy to cook and heat a house, a women cannot use clean electricity, but now must turn to wood, coal, or paraffin, resulting in more particulates in the air, and hence airborne diseases including Covid-19, as well as increased shack fires.

If our citizenries turn out to vote on November 1 in lower numbers, it could partly be because of an implicit realisation that the main political parties will not or cannot adjust the structural austerity that will be reconfirmed by Finance Minister Godongwana on November 11. When Godongwana against presents austerity in his annual budget speech in February 2022, we will be confirming our national protests – uniting workers and progressive social movements across our country – so as to address the root causes that will make all the candidates and their parties to fail build a better life for all – neoliberal capitalism. DM

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All Comments 6

  • Excellent article that pinpoints the structural issues which bring down our new democracy. Clem Sunter cautioned our leaders more than 30 years ago with the highroadlowroad scenarios. Sadly, the neoliberal agenda was one to pick the low hanging fruit. I think they call it Dutch disease, and I think we have it.

  • “The rich and middle classes opt-out” – oh yes, I’m sure that’s the reason, a simple “opting out”, because middle and upper class are just wonderfully stupid and want to pay twice for something, the one thing they don’t get because it’s so kak.

    Vavi, you are so separated from reality, but that’s probably because you’ve been isolating for 2 years and have forgotten there’s a real world full of real people out there. Just another politician trying to remain relevant when the main issues are staring him in the face.

  • This wide ranging and serious analysis fails to provide any real solutions … because people like the author have abdicated, and failed with their abstention and cynicism stance ! What I am curious about is who will Vavi be voting for … if he plans to ? Most likely that woke EFF …is my guess !

  • I’d love to get a stat on on what percentage of the country understands what “neoliberalism austerity” even means.

    This country is screwed for one single reason only:

    The ANC has completely abused its power.

    Vote DA.

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