Introduction
In 1981, South Africa's corporations faced a political conundrum. Apartheid was becoming a serious impediment to their profits and perhaps even their survival, but they harboured deep suspicions that majority rule, unless ‘managed’ very carefully, could lead to the appropriation of their assets. John Saul and Stephen Gelb (1986) used a neo‐Gramscian framework to analyse the ‘organic crisis’ facing South Africa's racial capitalism and employed the concept ‘formative action’ to interpret the efforts of business leaders to shape a political settlement that would reconsolidate corporate power. At the time, business leaders pulled back from supporting majority rule, perpetuating the political crisis and economic stasis. In this paper, I revisit Saul and Gelb's neo‐Gramscian framework to analyse the role South Africa's largest corporations played in shaping the country's transition in the years since the 1980s. Capital's strategic intervention in support of majority rule, I argue, set the groundwork for a new economic framework that re‐secured the conditions for capital accumulation, but also fostered a political crisis in the ANC that raised broader questions about the stability of the neo‐liberal programme.
As much of the first half of the paper shows, despite their successful formative action, the ‘historical bloc’ of core social actors underpinning the new economic framework has been so narrow that it appears to be inherently unstable. As a result, the ANC has been forced to rely upon ‘domination’, more than ‘hegemony’, to consolidate the new economic order. The second half of the paper analyses efforts by the state to broaden the perceived beneficiaries of post‐apartheid economic reform enough to secure the active consent of the majority to the neo‐liberal programme, while maintaining the essence of the programme intact. I suggest that South Africa's corporate advocates of neo‐liberal restructuring may discover over the next decade that they were too successful for their own good, failing to make the concessions to other political and economic players needed to ensure the sustainability of the programme. I open, however, with a restatement of Saul and Gelb's neo‐Gramscian ‘formative action’ framework.
Neo‐Gramscian Framework
Gramsci's writings, and theorists drawing on his work, have been particularly helpful in analysing how mass democracy was utilised to consolidate capitalism in the twentieth century. One of Gramsci's central points was that capitalism can be constituted through a ‘passive revolution’, which imposed change from above designed to maintain the economic and political system, and anticipated only the passive consent of the masses (Sassoon, 1982). But he saw this type of consent as producing a distinctly more vulnerable form of capitalism than that produced by the active, expansive consent associated with hegemony, which incorporates the base in a genuine reform programme that provides benefits and political voice (BuciGlucksmann, 1982). Under liberalism, Gramsci's concept of hegemony referred to the rule of capital consolidated through the state and society in a network of institutions and cultural practices that shape ‘common sense’ in such a way that most dissent can be incorporated within the system (as reforms that maintain its essence), while those which cannot be accommodated become marginalised as unfeasible. ‘Force’ underlies hegemony, but it is masked by active consent ‐ the more force comes to the fore, the less we can say that the state rules through relations of hegemony. Hegemony conceals the power of capital and thus provides a more durable system. However, the policy compromises required to maintain hegemony may not suit the needs of capitalists at specific historical conjunctures, when they need to restructure.
The situation in South Africa in the 1980s, when Saul and Gelb published their analysis (originally in 1981, expanded and republished in 1986), was that the economy was in deep crisis, which the existing apartheid state proved unable to address. Yet, the situation did not appear to be conducive to liberal hegemony that would permit the reconstitution of capitalism. The state ruled on a non‐hegemonic basis, increasingly resorting to force to maintain racial power, especially after 1984. The exiled ANC was fighting a ‘war of movement’, seeking to capture the state, while allies within South Africa effectively rendered the apartheid state unable to govern, thereby irrevocably undermining its legitimacy. Capitalism ‐ dominated by firms owned and managed by whites ‐ was closely associated with apartheid, and had benefited directly and indirectly from racist laws that kept wages low and restricted competition.
Yet, as Saul and Gelb argued, the situation was paradoxical for capital ‐ the costs of maintaining white power simultaneously protected and undermined their interests so that they would be better off under liberal democracy ‐ as long as the capacity of the state to redistribute assets was strictly limited. Thus, resolving the crisis, they argued, required ‘formative action’ that would set the tone for a new basis of capitalist rule. They quoted Stuart Hall, summarising Gramsci, to explain:
a new balance of forces, the emergence of new elements, the attempt to put together a new ‘historical bloc’, new political configurations and philosophies, a profound restructuring of the state and the ideological discourse that construct the crisis and represent it as it is ‘lived’ as a practical reality; new programs and policies, pointing to a new result, a new sort of ‘settlement’ ‐ ‘within certain limits’ (Hall in Saul & Gelb, 1986).
Saul and Gelb noted that capital's preferred resolution to the crisis would be based on a new ‘historical bloc’ with traditional (white) and emerging (black) capital and the black professional and middle class serving as the basis for a new, non‐racial, capitalist state, legitimised through full citizenship and elections. Yet the situation on the ground was such that the masses, led by the ANC, would not accept anything short of a fundamental redistribution of political and economic power, which meant capital could not risk majority rule for fear it would put their property too much at risk. Moreover, capital could not directly lead what Gramsci referred to as a ‘war of position’, the process of changing ‘common sense’ at the cultural level as the basis for a reconstituted state, because capitalists were too closely associated with apartheid ‐ they lacked the moral authority to put forward the terms of compromise.
But the global balance of forces shifted during the 1980s, rendering a socialist alternative less feasible. This made a political compromise between the apartheid government and the ANC more plausible, one that would permit the kind of economic restructuring favoured by capital. During the 1980s and early 1990s, those leaders of the liberation movement who were convinced that capitalism could be reformed to offer a substantial improvement over the status quo rose to prominence, opening the door to a political rapprochement with business leaders. The favourable international climate made democratisation less risky for capital, although there was much to be done domestically to limit the options available to a majority government. So the changed political context permitted capital to pursue the kind of ‘formative action’ that had seemed too risky in the early 1980s. By 1990, African National Congress leaders and liberals from the National Party came together to negotiate non‐racial terms for citizenship and democracy, with business leaders serving as trusted advisors to both (Marais, 2001). Economic policy compromises further entrenched the privileged position of business, to the detriment of the ANC's core supporters, and in a way that made it difficult for the state to consolidate hegemonic rule. The following section explains in more detail how capital went about obtaining this favourable economic dispensation.
Capital, Strategy & Post‐apartheid Politics
There are two levels at which we can ‘know’ capital. One is through interventions made by the ‘organic intellectuals’ of the business sector, in speeches, news articles, company materials like web sites and annual reports, interviews, policy position papers and comments made at meetings. These business opinion leaders may be executives of major firms who regularly contribute to policy debates, commentators in important business periodicals, or policy analysts in universities or ‘think tanks’ who closely identify with business interests and attempt to think through specific policy changes that will improve the overall business climate. Their recorded statements may be a ‘true’ reflection of the reasons for the policy preferences of capital, but they may also be designed to mask intent by casting demands that are in the interest of particular business firms or sectors as in the general interest of society. This means that it is necessary to consider the statements of representatives of capital with a critical eye, since they are political interventions and not technical ones.
The second way we can know the will of capital is through its actions, particularly investment patterns. One important contribution of neo‐Gramscian analysis is to uncover the relationship between capital's ‘real’ interests, as expressed in its investment decisions, and the way these desires are expressed in public discourse as reflecting the general interest of society. This is not intended to be a mechanical undertaking (to expose inconsistency or hypocrisy), but rather, an analytical exercise that seeks to understand how capitalist reform becomes politically possible in democratic situations. Capital's ability to convince the state of its policy preferences is only part of the story ‐ capital's ability to convince society (through the state and through the organs of society) is equally important if the state is to be able to consolidate capitalist rule in a hegemonic (as opposed to authoritarian) fashion.
South Africa's major firms had a huge stake in the end of apartheid and the nature of its successor regime. Yet they had substantial difficulties presenting their demands as in the interests of society as a whole. Until the 1990s, capital, shaped by the restrictive laws of apartheid, was predominantly white ‐ among blacks, there was a small professional class, a handful of large entrepreneurs based in the ‘homelands’, and some small competitive business people who served the black market in the townships. ‘White’ capital was highly concentrated, with six conglomerates, based in minerals, energy and finance, dominating the economy (Fine & Rustomjee, 1996). A few large firms also controlled key consumer sectors like food, beverage, automobile and retail, but smaller enterprises prevailed in competitive consumer goods sectors like clothing and agriculture. In this section, I explain how South African conglomerates in the monopoly sectors perceived the domestic economic and political crisis of the 1980s in terms of their overall accumulation strategies. The opportunities associated with global neo‐liberal economic restructuring were especially appealing to internationally‐oriented firms, which had been severely constrained by the apartheid government's efforts to keep capital investment within the country during the 1980s.
Once the apartheid state had shown it was unable to regain control over popular forces, either through limited reforms or renewed repression, major firms looked to political negotiations as the only way to resolve the economic crisis. Not, of course, political settlement at any cost, but rather, one that would permit control of the economy to remain largely unchanged, and thus open the way for economic policies conducive to renewed profitability. Three factors were vitally important to their success in achieving such a settlement. One was the opportunity to escape the seemingly intractable problems of the South African economy offered by global economic restructuring. Second, important constitutional guarantees ensured their assets would be protected. Third, business leaders became influential in economic policy debates, winning important concessions that permitted them to take further advantage of the opportunities presented by the global market. Each of these was an important element in capital's formative action.
The neo‐liberal revolution of the 1980s reconfigured economic norms around the world. The new pattern of economic regulation became widespread through several processes, notably creditor‐imposed structural adjustment programmes (Biersteker, 1990:477), and self‐imposed policy changes, often reinforced by binding trading agreements (Panitch, 1984:64). The new economic framework, inter alia, removed restrictions on the mobility of capital to invest and market its products, which included the right to withdraw investments from certain countries, buy up companies on a worldwide scale and reduced the risks of foreign investments by accessing new forms of state protection. Closely related to the rise of globalisation, the collapse of the former Soviet Union eliminated an alternative (and hostile) economic system and ended a potential source of military funding to the ANC. With the demise of the communist bloc in 1989, it appeared that Margaret Thatcher's dictum, ‘there is no alternative,’ had truly come to pass. By 1990, the rewards promised by a full ‘normalisation’ of domestic politics outweighed the risks of majority rule.
The new global marketplace offered attractive opportunities for South African firms to transcend the seemingly intractable domestic economic crisis and restructure their operations to take advantage of international (especially regional) opportunities. But political change would be a necessary first step. From the mid‐1980s, the apartheid regime favoured neo‐liberal policies, but it introduced changes only in monetary, taxation, fiscal and labour market policy. Faced with trade and investment sanctions, and the perception in global capital markets that South Africa was a high‐risk investment location, the government actually strengthened import, export, currency and investment restrictions to stem capital flight. South Africa's global integration, it was clear, would not occur under apartheid.
Moreover, if majority rule was not established, the National Party might lose power to the more racist Conservative Party. Both economic liberalisation and political negotiations would become immensely more difficult, an outcome that was simply unacceptable to major business interests. Ronnie Bethlehem, an economist with a mining conglomerate, outlined these concerns:
A CP [Conservative Party] victory would return the country to a period of deep crisis because that party remains committed to a scheme of classical apartheid. There are no credible black leaders with whom a future CP government would be able to negotiate the partition of South Africa and the perpetuation of a broader white/Afrikaner hegemony.
… [A]ny CP electoral victory ‐ the consequence of a failure of the NP to negotiate a new constitution ‐ could not go unchallenged by the ANC and the other now unbanned, black‐led political organizations that the CP still rejects. The armed struggle would have to be resumed with greater intensity and international backing, and would almost certainly be accompanied by a reimposition of isolation and sanctions by the outside world. In a post‐Gulf War scenario, the possibility then of direct United Nations military intervention could not be excluded. It would be, in the words of a former South African prime minister, B. J. Vorster, an outcome ‘too ghastly to contemplate’ (1992:525–526).
Majority rule seemed a far lesser threat, especially after domestic and international capitalists began to engage ANC leaders like Thabo Mbeki and discovered he was sympathetic to their concerns (Saul, 2002:14).
It was important for business to promote a political settlement that would restrict the latitude of the incoming government to intervene in the economy, especially in the areas of nationalisation, re‐regulation or asset redistribution. Business leaders worked with National Party and Democratic Party representatives to the constitutional negotiations to ensure their interests were protected. The mining conglomerates were particularly concerned about the possibility of asset redistribution or extensive reparations, since the ANC Freedom Charter had declared that
the national wealth of our country, the heritage of all South Africans, shall be restored to the people; the mineral wealth beneath the soil … shall be transferred to the ownership of the people as a whole. … Restrictions of land ownership on a racial basis shall be ended, and all the land redivided amongst those who work it (ANC, 1955).
For capital, private ownership rights needed to be protected in the constitution.
Early efforts to maintain the rights of whites framed explicitly in racial terms were a non‐starter ‐ such attempts simply deadlocked the negotiations (Saul, 1993:104106). Property guarantees based on citizenship better served the needs of private capital than did an explicit white veto since they maintained the impression that such protections were in the interests of everyone (and indeed, resonated with blacks who had been dispossessed during the apartheid era). Under both the interim and final constitutions, every person had an absolute right to property (including any property they possessed at the time the constitution came into force) and could not be deprived of it except under strictly limited terms with market‐value compensation (South Africa, 1993). With such provisions in place, future asset redistribution would be strictly limited.
Constitutional provisions also protected the independence of the central bank governor, subject only to regular (non‐binding) consultations with the Finance Minister (South Africa, 1996a; South Africa, 1993). Guaranteeing central bank autonomy while tying it to ‘protecting the internal and external value of the Rand’ effectively safeguarded monetary policy from political intervention (Pillay, 1997).
To be sure, the black majority gained many new rights, most importantly, ‘one person, one vote’. Nonetheless, the business sector was also a substantial beneficiary of the constitutional negotiations. Property rights, like the new political and civil rights but unlike social and economic rights, were absolute and legally enforceable. Moreover, the central bank and property provisions were among the 34 principles that could not be altered without a two‐thirds Parliamentary majority. These constitutional gains were critical in putting a framework in place that would limit the kinds of policies that a future government would be legally permitted to introduce, and thus a key element in capital's post‐1990 formative action.
Policy Influence of Business
The decision by some business leaders, especially from the mining and finance sectors, to abandon apartheid gave them some credibility in trying to mould the ANC's economic policies. Key business spokespersons consistently put forward the case for adopting a liberalising framework, saying it would spearhead investment, especially foreign investment, which would lead to growth, the only ‘sustainable’ way to create jobs. Growth would increase tax revenues, allowing the government to improve basic services. Their influence soon became apparent: the ANC's restructuring framework, growth through redistribution, became growth and redistribution … growth then redistribution … and finally simply growth.
Business leaders recognised they might be shut out of the process of economic policy‐making unless they insisted their policy changes were the best way to meet ANC goals. Bethlehem (1992:533) explained the importance of re‐framing the debates in technical terms:
Standing on the brink of a major political transformation, there is nowhere where [the] deideologizing of the market is more important than in South Africa. The economy, and the matter of what must be done to restore its growth, needs to be removed from political controversy as much as possible … If the gap separating the main power protagonists can be narrowed and the economy made to perform, it will generate its own beneficial consequences into the social dynamic.
Foreign investment is extremely important to create the jobs we need, to create the extra wealth, to get the economy going. In order to attract that investment, and indeed to encourage more investment by South African companies, you need an environment that is totally conducive to investment. … [T]he one thing that has to be established is that we are going forward on the basis of a free market economy. We have to have low inflation. We need a climate of low taxation. For the foreign investor, the principle interest is company tax. Company tax in this country is still not low enough ‐ it is not competitive with other countries that are looking for foreign investment. At 35% we have made a lot of progress, but it has to come down to below 30%.
Personal tax also needs to be kept low. In South Africa we have the financial rand [Endnote 1] and we have exchange control. There will be no major investment in this country ‐ I think I can say that with complete confidence ‐ until we remove exchange control, certainly for foreigners. There are enormous opportunities to privatise in this country. Privatisation gives the message to the world that you are serious about a free market economy, so it is an absolute must. The proceeds from privatisation can be the basis for the RDP [the ANC's electoral platform] funding (SALB, 1994:22–24).
Corporate leaders also forged links with black entrepreneurs over their shared interest in property rights, deregulation, and low taxes, and cultivated a relationship with the ANC‐aligned National African Federated Chamber of Commerce (NAFCOC). Black faces began to be seen in corporate boardrooms, and Sanlam, Anglo American and other major conglomerates sold a portion of their operations to black entrepreneurs. In addition to their public relations role, prominent black business leaders like Don Ncube, Nthatho Motlana and Cyril Ramaphosa provided a political conduit to the ANC and helped symbolically reconfigure ‘black empowerment’ from a class‐based process to an individual aspiration.
These efforts to shape the policy debate were assisted by influential international actors, notably the IMF and the World Bank. The IMF started lobbying soon after it became apparent the ANC would form the first post‐apartheid government (Bond, 1991:19). The World Bank became a major advisor, producing discussion papers, sponsoring workshops, seminars, and ‘intensive training programmes,’ and in other ways making its expertise indispensable (Padayachee, 1997). They worked closely with the Development Bank of South Africa, which in turn became an important advisor to the ANC (Kentridge, 1993:8). Economists from the two international institutions, with counterparts from the Finance Ministry, the South African Reserve Bank and the Stellenbosch University Bureau of Economic Research, devised the neo‐liberal economic strategy the government adopted in 1996 (Bond, 1996b).
These concerted efforts on the part of business leaders and their allies (including the outgoing government) to shape the ANC's views on economic policy while limiting the policy latitude of the new government soon paid dividends. In mid‐1993, the ANC agreed to a GATT trade liberalisation deal. The trade agreement had not been a priority for the ANC, but other actors, including business and the outgoing government, recognised its power to tie the hands of the future government (Bell, 1997:78). The ANC also agreed to an $850 million loan from the IMF in 1993, with a Letter of Intent that committed the incoming government to reduce the budget deficit, maintain tight monetary policies, refrain from any new currency exchange control mechanism, swiftly terminate restrictions on the export of capital, cut tariffs and eliminate non‐tariff barriers (Padayachee, 1994:588–589). These were all policies business leaders like Boyd had advocated. It should be underscored that there was no debt crisis ‐ the only real urgency was to secure the ANC's commitment to neoliberal restructuring before the election.
The influence of business leaders continued after 1994. The new government agreed to privatise some state corporations and ‘commercialize’ the rest, even those that delivered basic services. They cut corporate taxes while maintaining a regressive sales tax. Proposals for anti‐trust legislation and affirmative action programmes were watered down. Providing free basic services took a back seat to fiscal probity; job creation was placed ever more firmly in the hands of the private sector. The biggest corporations continued to receive subsidies ‐ but failed to create new jobs – while there was little direct support for industrial sectors hard‐hit by high interest rates and tariff reductions. Currency and investment regulations were liberalised, and tariffs cut faster than agreed in 1993.
In this new political context, strategies adopted by business leaders began to change. During the negotiation period, they emphasised points of commonality with the moderate factions of the ANC and accepted the claims for some redistribution and redress as legitimate. But after the election, they abandoned their ‘partnership’ discourse and took a more oppositional stance, as seen in Growth for All (South Africa Foundation, 1996), which was a plea for more extensive and intensive neoliberal ‘reforms’. Parallel to their increasingly aggressive public opposition to government policy, key business leaders eventually dominated Mbeki's behind‐thescenes circle of trusted advisors (Gumede, 2002:202–203). Coupling public hostility to government policy with private cooperation meant business leaders could not play a role in efforts to legitimate neo‐liberal restructuring programmes to the general public and instead decided to rely exclusively on the ANC to play this role.
Over the short term, the reliance on the ANC was successful. Their influence was most evident in the introduction of Growth, Employment and Redistribution (GEAR) in June 1996 (South Africa, 1996b). GEAR declared that the key to growth was private direct investment, which required a ‘supportive environment’:
government consumption expenditure should be cut back, private and public sector wage increases kept in check, tariff reform accelerated to compensate for the depreciation and domestic savings performance improved. These measures will counteract the inflationary impact of the exchange rate adjustment, permit fiscal deficit targets to be reached, establish a climate for continued investor confidence and facilitate the financing of both private sector investment and accelerated development expenditure.
With the announcement of GEAR, the ANC government indicated it would decide the parameters of economic policy without the participation of traditional political partners (Johnson, 2002). This approach mirrored the advice of Western leaders and international financial institutions, to employ ‘shock treatment’ rather than gradual reforms (Przeworski et al. 1995:113, fn 2). ANC‐associated trade unionists, NGOs and even senior party members (including most of the Cabinet) were not informed in advance of GEAR. On its announcement, Finance Minister Trevor Manual said: ‘there is no alternative.’
The ANC had little patience with criticism of GEAR. President Mbeki commented: ‘Anyone who is rational can’t come to any conclusion other than our (economic) policies’ (Marais, 1997:7). Two months after its trade union ally helped the ANC win the 1999 election, Chairperson Terror Lekota chastised COSATU at their own congress for criticising GEAR:
The recent trend on the part of some highly‐placed comrades, of ascending platforms or by other ways criticising or agitating against policies and actions of the movement, inside and outside Government, smacks of a lack of revolutionary discipline (1999).
Because GEAR closely mirrored the vision for economic reform outlined by Leslie Boyd and the South Africa Foundation, its announcement suggested that the ‘formative action’ of capital had been successful, permitting capitalism to be renewed under the political leadership of the ANC. But the intolerance of criticism implied the ANC leadership was not confident it could hold sway over broader public opinion, especially its traditional constituency. This suggested that ‘domination’ (albeit without physical force), rather than ‘hegemony,’ maintained the economic programme. As the following section suggests, the failure of the ANC and business to successfully defend the programme to the broader public as in the general interests of all South Africans, and providing widely distributed benefits, meant that it was on shakier political ground than one might expect, given the electoral dominance of the ANC.
Corporate Restructuring
It has been widely suggested that the ANC government had no alternative but to liberalise because South Africa was a small country, peripheral to global economic concerns. While the impression was given that the pressures for such liberalisation were foreign, it was in reality the largest domestic mining, banking and retail operations, which had the most at stake, that pushed hardest and put the most resources into the policy debates. The rationale put forward for liberalisation was to entice new investment to South Africa. But their real motivation was not to spark economic renewal, encourage investment, create jobs, broaden the tax base or any of the other laudable outcomes they said would result from their proposals. Their real objective was the freedom to restructure their enterprises to take advantage of the new international trade and investment regime. In other words, they wanted the freedom to move their capital out.
In 1994, the economy was dominated by six powerful (see below) interlocked conglomerates, Anglo‐American, Rand Mines/SA, Mutual, Gencor/Sanlam, AngloVaal, Standard/Liberty Life and Rembrandt/Gold Fields, which controlled more than 70 per cent of formal sector economic activities. Fine and Rustomjee (1996) called them the ‘minerals‐energy complex’ (MEC), since their core activities were the productive and distributive activities associated with the mining and energy sectors and related manufacturing sub‐sectors like smelting and mineral processing, as well as banks and insurance companies. These companies exerted structural power in the economy, with their interests well represented throughout the state.
Liberalisation and deregulation, coupled with opportunities created by global neoliberalism, made it possible for these corporations to restructure (Makgetla, 2004:275). They began snapping up mining, natural resource and other companies around the globe and further expanding their banking and commercial operations (Kunnie, 2000:94). Soon, South Africans were the biggest foreign investors in Southern Africa (Daniel et al. 2004:379). Little of this was ‘greenfield’ investment in new businesses ‐ most involved mergers, acquisitions and strategic partnerships. Local competitors were squeezed out, especially in retail and tourism.
A second trend in this process of internationalising South African capital was the ‘de‐nationalisation’ of several prominent South African firms in the late 1990s, including Anglo American, South African Breweries, Liberty Life and Old Mutual, which moved their head offices and primary stock market listings to London (Bond, 2000:26). By 2006, according to Fortune magazine, BHP Billiton was the 195th largest company in the world and the largest mining firm ‐ as well as the largest Australian company. Anglo American was the 196th largest company and the fifteenth largest British firm, followed closely by Old Mutual (all rankings from the 2006 Fortune International 500). SABMiller, the product of South African Breweries’ purchase of the giant US brewer Miller and numerous beer firms, was also a British rather than South African firm. Each of these had been a major protagonist in the early‐1990s economic policy debates.
In addition to internationalising their operations, the conglomerates began to unbundle their complex, multi‐industry enterprises (characterised by horizontal integration) to create more focused corporations that were ‘rebundled’ through intra‐sectoral consolidation (vertical integration) (Chubane et al. 2006:554–555). Anglo American sold most of its cross‐holdings in other firms, as well as its financial and industrial businesses, while acquiring new natural resource assets. Barlow Rand unloaded its mining concerns to concentrate on developing, manufacturing, supporting and licensing industrial products. Investment holding company Rembrandt split into two. By 2000 the Johannesburg Stock Exchange (JSE) was no longer dominated by six firms ‐ now, institutional fund managers were the main share‐holders.
By the early 2000s, many of the former MEC firms were more profitable than ever, with the share of profits in national income rising from 29 per cent in 1999 to 34 per cent in 2003. However, they had not spearheaded a new cycle of investment, which, at 15 per cent of 2001 GDP, fell well short of the 20–25 per cent estimated to be necessary to spark economic growth (Makgetla, 2004:265–266). Between 1994 and 1999, the outflow of capital exceeded the inflow by $1.6 billion (Economist, 2001:11). Capital's organic intellectuals had convinced the ANC to adopt new policies, but it was largely irrelevant to these firms whether liberalisation induced the promised growth or not. Claims that liberalisation would induce new investment into the country and spark growth had been, at best, designed to sell the approach.
Though many firms reduced their exposure in the South African economy, their reliance on the state did not end. South Africa's post–2001 sponsorship of the New Partnership for Africa's Development (NEPAD) answered the need for an inter‐state framework to facilitate and protect investments in the region (Lesufi, 2004:821). South African firms soon responded: banks and financial institutions took the lead in modernising banking systems throughout the continent, with investments in more than two dozen countries. State‐owned corporations won contracts to create infrastructure, including ESKOM's ambitious continent‐wide electrical grid. The state provided financing though its Industrial Development Corporation to firms investing in southern Africa and even shared the risk by taking equity stakes in large projects (Daniel et al. 2004:378–381). NEPAD extended the dominance of South African firms in the region by offering a new level of protection for substantial investments.
Judged by the restructuring that became possible over the past two decades, capital's ‘formative action’ appeared to be a rousing success. Under the protection of the new ANC government and post‐apartheid state, firms were able to restructure their operations largely on their terms, re‐establishing profitability while reducing exposure to the volatile South African economy. Thanks to their new investment horizons, many companies had less need to be concerned with the ‘developmental’ success of economic restructuring as measured in per capita incomes, literacy, infant mortality and morbidity in South Africa. But the weaknesses of the domestic economy mattered to the population in general, and the government's economic programme faced growing discontent from its own voting constituency by the late1990s.
Legitimising the New Economic Framework
The adoption of the business sector's favoured economic programme created a political conundrum ‐ if the framework was to reach hegemonic status, it would have to be relevant to a substantial portion of the population. If it was not, the highly politicised society, which had already demonstrated its capacity to paralyse the government and the economy, might insist on a fundamentally new approach. The government's ‐ and business sector's ‐ best hope was to demonstrate the advantages of the economic framework by fostering a black, especially African, middle class. White business leaders had a particularly strong stake in the stabilising influence of a black business and professional class.
This grouping would play both a political role (counterbalancing radicals in the ANC coalition) and a symbolic role (showing that capitalism was benefiting blacks). As Iheduru explained,
This black capitalist class would become not only custodians of black capital but also allies of the government against white power and mass black poverty, both of which threaten political stability (2004:25).
Yet the black middle class was small before 1994, especially in the private sector. Government‐sponsored Black Economic Empowerment (BEE) programmes became critical to expand this new constituency. BEE programmes were designed to help black entrepreneurs access investment capital, and to improve the employment mobility of black professionals (Southall, 2007). BEE programmes that emphasised the purchase of equity stakes were the most helpful to business leaders, because they cemented common entrepreneurial interests and strengthened communication with the new government, with minimal disruption to ongoing business operations.
Recent research has shown the black middle class has grown (Iheduru, 2004; Southall, 2004), but it has remained fairly small and insecure. The black ownership share is less than fifteen per cent of the economy (blacks account for ninety per cent of the population and black Africans about 85 per cent). The small size and tenuous nature of the emerging black middle class limited its role. Moreover, although Iheduru suggests the new black elite has taken substantial steps to incorporate other societal groups like trade unions and poor communities into a broader capitalist programme, he also notes black business people have not created jobs (2004:18–20). Makgetla concluded that by emphasising equity participation in corporations, ‘black economic empowerment has increasingly come to mean making the existing, concentrated structures of ownership more representative, rather than broadening the structure of capital overall’ (2004:279). With little job growth or wealth redistribution, it has remained difficult to legitimise capitalist rule.
Indeed, the process of establishing a black middle class coincided with a widening income, wage and wealth gap among blacks, which itself threatened to be nearly as politically destabilizing as the previous class/race divide. Southall argued that
the most worrying aspect for black capitalism was the perception that black empowerment had worked mainly for the enrichment of a tiny black elite … when the ordinary mass of blacks continued to live in dire poverty, pride in the achievements of the few easily translated into outrage, especially given various highly publicised instances of greed … (2004:320).
Thus, although the government's economic framework ‘delivered the goods’ to business, few in the ANC's political constituency benefited ‐ a surprising number were worse off a decade after the end of apartheid. The impact was felt most acutely among the poor. Unemployment remained stubbornly high: 26 per cent in 2004 according to the narrow definition (actively searching for work) and 41 per cent by the broad definition (wanting work) (Kingdon & Knight, 2005). These numbers were slightly higher than in 1996, the year GEAR was introduced. Many who had jobs were impoverished: in 2004, more than forty per cent of the employed and half of the black population who were employed had incomes below R1,000 (just over $140), and nearly twenty per cent had incomes below R500 (about $70) (Valodia et al. 2006:91–92, 95). On average, employed blacks were responsible for five to six economic dependents.
Progress in service delivery was equally bleak. By 1999, the percentage with access to safe water near their homes increased from 70 to 80 per cent, but thousands of water connections were cut off every month because people could not pay their bills. By March 1999, housing subsidies helped build 630,000 homes, but these numbers included both built homes and the transfer of title deeds for tiny serviced plots of land (with a pit latrine and a yard tap) on which people were expected to build their own shacks. The housing minister declared many of the built houses to be substandard because they were poorly constructed or too small. Meanwhile, the housing backlog continued to grow (Marais, 2001:190–191). The impoverished were expected to pay full market costs for housing and basic services they could ill afford. Those who fell behind on rent or service payments faced armed evictions (Desai, 2002). New neighbourhood movements protested the evictions and electricity and water cut‐offs, with some prominent leaders facing harsh state repression, arrest, and bail conditions that replicated the ‘banning’ of individuals from political activity during the apartheid era (Desai & Pithouse, 2004). The government joined business leaders in demonizing such communities as steeped in a culture of entitlement. This attitude did little to popularise neo‐liberal measures.
South African capital should have anticipated that their remarkable success in shaping the post‐apartheid economic programme might be short‐lived, because the programme offered little to the ANC's main constituency. When private business – whether foreign or domestic, large or small ‐ failed to invest, restructuring became associated with poverty and job loss. This was not just a problem for the ANC, but also for capital, since most major firms would be vulnerable if the economic programme changed direction drastically. Firms like Anglo American retained substantial investments in South Africa, and even BHP‐Billiton, which moved most of its assets outside the country, remained heavily dependent on the state's sponsorship in the region. Yet capital's organic intellectuals seemed unable to recognise the paradox, and to moderate their demands to allow the government to broaden the benefits of economic reform. Thus, neo‐liberal restructuring continued to be perceived as benefiting a minority, including a small number of wealthy blacks, but offering little or nothing to the majority. Little wonder, then, that the government was unwilling to tolerate much criticism of the programme, for fear it would open a floodgate that would destabilise the government.
‘Post’‐GEAR Politics
The government has continued to explore ways to legitimise neo‐liberal restructuring. During the 1990s, the government explained GEAR as a necessary short‐term measure that would soon pay off, linking it with the participatory and basic‐needs oriented Reconstruction and Development Programme (RDP). Trade unionists, township activists, community–, NGO– and church– leaders and sympathetic intellectuals had participated in formulating the RDP, which envisioned directly meeting basic needs for services such as housing, transportation, electricity, clean water, sanitation, education and health care while promoting growth and employment creation (ANC, 1994:4–7). The ANC called GEAR ‘the initiative to give effect to the realisation of the RDP by the maintenance of macro balances’ (ANC, 1997), although many ANC allies called for GEAR to be rejected and for a return to the RDP, indicating that the government's efforts to link the two programmes were unsuccessful.
Since 2000, the government has been exploring ways to embed the neo‐liberal economic restructuring programme in a hegemonic politics through reforms that would preserve the essence of the programme but broaden the number of beneficiaries. The government made two major changes: in BEE and the fiscal programme. BEE charters were introduced in the mining, financial services, hospitality and other economic sectors. The mining charter, initiated in 2002, required all firms to be 15 per cent black‐owned by 2007, rising to 26 per cent by 2012; as well as to make concerted efforts to increase black management to 40 per cent and to improve employment conditions for blacks (Southall, 2004:323–324). Although mining executives and business press commentators objected vociferously to the scale of the proposals, prominent firms like Harmony Gold, Gold Fields and Randgold quickly transferred assets. Six major energy sector firms signed a charter with government and empowerment groups agreeing to transfer 25 per cent ownership to blacks by 2014. Most already had strategic partnerships or joint venture ‘empowerment businesses’ with black business people (Iheduru, 2004:11). Other sectors soon followed suit, including financial services, the hospitality sector and advertising (Southall, 2007). The growth of a patriotic black bourgeoisie has continued to be seen by the government as central to legitimating its economic restructuring programme.
At the time, the government also began to boost public spending, focusing on economic infrastructure and direct transfers to the poor (PBC, 2006). Government programmes improved services to poor communities after 1994, but they were offered at a low level and high price, and service provision was not linked to employment creation or income generating opportunities (Makgetla, 2004:271–272). Government spending on pro‐poor programmes became more generous after 2001, which was critical to broaden support for economic liberalisation. The People's Budget Campaign (PBC) noted a moderately expansionary budget in 2002 with increased deficit spending, reduced tax cuts, some free basic services including a commitment to free anti‐retrovirals, and improved income support for the poor through the Child Support Grant (PBC, 2002). The PBC identified additional improvements in the government's 2006 budget, such as real expenditure increases in infrastructure, social development grants and basic services (PBC, 2006).
The emphasis on pro‐poor spending was reinforced by the announcement of a new economic policy framework, Accelerated and Shared Growth South Africa (ASGISA), which sought to halve poverty and unemployment by 2014 through growth and higher public expenditure (South Africa, 2006). Unlike GEAR, ASGISA incorporated some of the demands of various ‘popular’ elements including the trade unions. Nonetheless, it was met with a good deal of ambivalence, due to the circumstances surrounding the programme's development as well as its content. The government claimed to have consulted extensively, but COSATU General Secretary Zwelinzima Vavi countered that discussions with organised labour had been superficial and apparently aimed at securing support for the government's proposal (Brown et al. 2006). Critics insisted ASGISA incorporated the basic assumptions and aims of GEAR and promised merely to ‘consolidate recent gains’ with higher levels of infrastructure spending. In its draft response to Deputy President Phumzile Mlambo‐Ngcuka, COSATU complained that the new strategy merely paid ‘lipservice to the issues of redistribution and inequality’ (Robinson, 2006:4). From the government's perspective, that was precisely the point: to reform policy enough to gain public support for liberalisation. Although the ANC was forced to incorporate some of the demands of labour and popular actors, the changes were intended to increase support for the existing neo‐liberal framework rather than fundamentally reconsidering the basic economic policy direction.
Indeed, the government's post–2000 reforms may have been too little and too late, as evidenced by the political crisis that rocked the ANC after 2005, and which had its roots in widespread dissatisfaction over the economic programme. The drama began with the arrest of Jacob Zuma, Deputy President of the ANC and the government, on charges of corruption following his financial advisor's conviction for bribery. Zuma had been strongly favoured as Mbeki's successor by ANC ‘left’ elements because he appeared to support a pro‐poor economic programme. These actors had not challenged Mbeki directly, but intended to ensure the next ANC leader would be more sympathetic to their interests. So their plans were dashed when Zuma was charged with corruption (and later charged with rape as well), and they had no obvious replacement for the 2007 leadership race. Zuma's acquittal on rape charges and the dismissal of the bribery case opened the way for him to resume his leadership quest, and his selection as the new ANC leader, despite looming new corruption charges that indeed were laid against him just weeks later, was a direct result of the inability of the government to legitimate the economic restructuring programme.
Zuma's selection, and the installation of his loyalists in key party positions, has sparked a histrionic reaction among some opinion‐leaders in the business community. In an editorial titled ‘The Enemy Within’, Financial Mail editor Barney Mtombothi (2008) highlighted the growing influence of members of the SACP:
the real victors are the communists. They’ve succeeded beyond their wildest dreams in embedding themselves in the innards of the ANC. Gwede Mantashe, the SACP chairman, now runs the day‐to‐day affairs of the ANC as secretary‐general. Blade Nzimande, SACP secretary‐general, sits on the ANC's highest decision‐making body and may be destined for even bigger things if Jacob Zuma becomes the country's president. And last week Mantashe was in parliament to install Ncumisa Nkondlo, a fellow communist, as chairman of the ANC caucus. The SACP is in the ascendancy. … Those who think it's going to be business as usual are deluding themselves.
Among the ANC's traditional constituency, the Zuma affair had come to represent more than the man: his prosecution opened a political space to publicly ask critical questions of Mbeki, who was accused of engaging in dirty, secretive politics to keep his political and ideological opponents at bay. Indeed, Zuma's trials became a conduit for criticisms of the nature of democracy under Mbeki, specifically the exclusion of those on the political left from any real policy influence. In May 2006, COSATU General Secretary Zwelinzima Vavi openly told reporters he feared South Africa was drifting towards a dictatorship, run by cabinet ministers and business people (Mde, 26 May 2006). This comment neatly summarised the weakness of business’ formative action ‐ capital did not seem to have recognised the importance of embedding their favoured economic reforms within a hegemonic programme.
Conclusion
This article has revisited Saul and Gelb's 1981 analysis of capital's formative action, using their neo‐Gramscian framework to consider the period since the 1990s. I have argued that capital, as represented in the white‐owned mining and financial conglomerates, was able to pursue a path in the 1990s that had been too risky in the 1980s ‐ to advocate for non‐racial democracy as a way to renew economic growth and restore profitability. I have shown that although structural conditions in the global economy were more favourable to capital in the 1990s, individual business leaders, sympathetic policy analysts and state officials played an active role, domestically, in advocating neo‐liberal economic restructuring policies, while locking some aspects of the framework into place through international agreements and constitutional provisions. As a result, they were able to restructure their operations largely on their own terms, which meant internationalising, denationalising and unbundling their firms to compete better in the global marketplace. However, as the 1990s and the 2000s proceeded, it became clear that capital had almost been too successful, winning so many concessions and giving up so little in terms of supporting reforms that would benefit the majority ‐ who, after all, were the ANC's primary constituency ‐ that the economic restructuring programme was inherently unstable. The legacy of anti‐apartheid struggle made it difficult to demobilise society and instead sparked a political crisis in the ANC, opening the way for the selection of a populist leader who drew on left‐wing and grassroots support. Whether Zuma (or his successor, if he is unable to run due to criminal proceedings) ultimately changes policy direction as much as his supporters would like to see, or is able to legitimate the existing framework more effectively, there is little doubt that corporate executives have reason to be nervous. One must conclude that to an extent, they were the authors of their own misfortune.