Introduction: development failure or neoliberal success?
If the ‘strange non-death of neo-liberalism’ (Crouch 2011) in Europe is infuriating many observers, its resilience in South Africa is even more astonishing. This is a country whose liberating forces drew on a mix of popular mobilisation, referred to as social movement unionism (Von Holdt 2002), and low-intensity guerrilla struggles orchestrated by the underground and exiled African National Congress (ANC). This movement's ideological orientation was firmly on the side of socio-economic, if not socialist, transformation from the call for the nationalisation of mineral wealth and banks in the 1955 Freedom Charter to Nelson Mandela's declaration after he was released from prison in 1990 in which he ‘stressed the necessity of nationalisation and redistribution’ (Habib and Padayachee 2000). South Africa has been ruled by the ANC since 1994 and since 1996 by a tripartite alliance with the South African Communist Party (SACP) and the Congress of South African Trade Unions (COSATU).
Yet, the Alliance has opted to continue with the conservative macro-economic orientation of the late apartheid period, with the adoption of the Growth, Employment and Redistribution (GEAR) in 1996 over alternative frameworks (see Freund in this issue). While progress in certain areas (constitutional democracy, housing, electrification) cannot be ignored, very little has changed since Habib's assessment of the first 10 years of ANC rule:
When these programmatic collective aspirations of the liberation movement [such as the Freedom Charter] or the comparative experiences of other Sub-Saharan African countries are used as a political compass, then what is noteworthy is the conservative character of government's macro-economic programme, which is located at the heart of its policy ensemble. This program, known as [GEAR], has … not only had negative consequences for poor and marginalised people in South Africa, but it has also compromised the outcomes of the raft of other progressive legislation. (Habib, 2004, 91–92)
Habib was writing when the macro-economic stabilisation of the South African economy – the stated rationale behind GEAR – was considered achieved although on a narrow fiscal basis (Mohamed 2010) and when an abundance of ‘progressive noises’ were being made by the ANC and government about the future direction of policy. Yet, 10 years later, his assessment remains valid in spite of increases in social spending (see Khan in this issue). Of course, there have been further discursive adaptations in the meantime: the two-stage theory of revolution (first democracy with compromise, then socio-economic transformation) has since provided a convenient way of postponing the redistributive stage indefinitely. What stands out as the central paradox of the outcome of post-apartheid economic policy is therefore the boasted ‘success’ in achieving a budget surplus by 2006, combined with the failure to reduce inequality to any significant degree (Marais 2011).
This article explores the commitment to macro-economic orthodoxy: not only was this orientation maintained beyond its ‘use by’ date, but it seems to have durably transformed the South African state into a cost-controlling rather than developmental engine. Our key argument is that South Africa offers an exemplary case of neoliberal deepening which has entailed three interconnected processes: ideological conversion, a stated focus on poverty and development (discussed in this issue's introduction) covering a deep commitment to orthodox macro policies, entailing institutions and a set of practices, and a far-reaching state restructuring involving of the emergence and consolidation of a hegemonic treasury.
We draw on an analysis of economic, political science and public administration scholarly literature, a systematic review of policy documents, departmental reports and organogrammes. We also explore the grey literature produced by think tanks and academic and international institutions. The article is also informed by a series of interviews conducted in 2012 and 2013 with past and current policy stakeholders located in business, the state and organised labour. While it is an attempt to weave political economy with political science to go beyond both the former's tendency towards determinism and the latter's preference for ‘technical’ analysis devoid of engagement with superstructures, it is at odds with the self-styled political economy and political science of the neoclassical ‘policy reform’ literature which emerged in the 1990s (Geddes 1994; IDB 2006). The latter's main objective was to provide operational advice to force-feed neoliberal reforms to reluctant (usually Latin American or formerly communist) countries, without questioning the content of such reforms (Grabel 2000). Its class character, and that of neoliberalism by extension, is easily recognisable from the identification of the key adversaries; as Geddes points out, ‘democratic governments have been able to carry out successful adjustments [because] the urban working class, though hurt …, has usually not proved capable of impeding adjustment, protecting itself from having to shoulder significant costs, or punishing the initiators of adjustment at the polls’ (1994, 117).1
Neoliberalism as a political ideology has been conceptualised, then implemented through one main channel: macro-economic policies (Grabel 2000). We provide an empirically grounded account of neoliberalism in South Africa, while heeding Burawoy's critique of organisational sociology (1979) regarding the need to look beyond an endogenous understanding of institutional resilience to relate it to the reproduction of capitalism as a whole and of specific interests within it. Furthermore, we aim to contribute to the political economy of neoliberalism by examining its South African form, thus responding to the call by Ashman, Fine, and Newman:
To understand the specific form that state–market relations take over time and place, it is critical to identify the underlying economic, political, and ideological interests and social relations which shape both state and market and their interaction. Connected to this, it is necessary to specify the form class relations take as they evolve in particular settings. (Ashman, Fine, and Newman 2010, 30)
We focus on interests and relations in order to pave the way for future enquiry into the specific class dynamics underpinning South African capitalism. While an in-depth exploration of the relationship between the political reorientation of the ANC and its shifting class interests and inner dynamics is beyond our immediate scope, we offer some premises for such an analysis.
After a discussion of neoliberalism in South Africa, we focus on the ‘conversion’ of key ANC leaders to neoclassical economic orthodoxy. Building on Palma's idea of the ‘art’ of neoliberalism (2011, 136) presented in the introduction to this special issue, we accept his claim that ‘what is particularly remarkable about neoliberalism … is its capacity to achieve this [“remarkable asymmetric distributional outcomes within democracies”] … mostly by ideological conviction’. We then turn to the central, yet under-researched, instrument of neoliberal deepening: the build-up of a dominant national treasury (NT) with the ability to shape policy-making across all areas of state intervention. In the conclusion, we emphasise the importance of looking concurrently at state dynamics and ideological hegemony to understand neoliberalism, together with a critical assessment of neoliberal resilience in South Africa in the face of numerous challenges.
Neoliberalism as state intervention under ideological hegemony
Does neoliberalism entail rolling back the state in order to promote the market as a superiorly efficient allocative mechanism? This is what neoliberals argue, through requiring a retreat as well as a transformation of the state. To qualify the restructuring of the state under neoliberalism, the term new public management (NPM) has become widely used.2 It was born out of the critique of inefficient and corrupt bureaucracies (‘old public management’) formulated by the public choice school (Buchanan and Tullock 1962), and the first large-scale civil implementation of NPM concerned the British National Health Service under Thatcher. Hoggett thus summarises its key tenets:
Government has not only been the agent of neo-liberal reforms, it has also been its object. Market discipline has been applied to public bureaucracies through reforms which have attempted to increase competition within government itself, the idea being that via such reforms it would be possible to ‘get more for less’. (Hoggett 2010, 205)
There is plenty of evidence suggesting that the post-apartheid South African state has been restructured in a neoliberal manner: the outcome, whether in the Department of Trade and Industry (DTI) (Chipkin and Lipietz 2012), in public hospitals (Von Holdt 2010) or in core state functions such as civil registration, immigration and policing (Segatti, Hoag, and Vigneswaran 2012), has certainly not been the corruption-free, efficient state promised by NPM. This echoes the poor results of ‘good governance’ which became a central feature of donor-driven state reform in developing countries from the 1990s; the idea that pro-market institutions will ensure efficiency and development entails a deep misunderstanding of how polities operate (Khan 2005).
The post-communist left (or ‘Third Way’) has been instrumental in continuing the work of the neoliberal right and consolidating the restructuring of the (British in particular) state following NPM precepts. A similar process has taken place in South Africa, probably in part because of the exchanges between epistemic and policy making communities via specific linkages with British universities. NPM thus appealed particularly to the ANC as a non-bureaucratic, managerial – i.e., ‘modern’ – model (Chipkin 2013). Chipkin and Lipietz (2012) discuss the anti-bureaucracy bias that has inspired the post 1994 restructuring of the state, showing it amounted to ‘throwing out the baby with the bathwater’. The key reason for ‘de-bureaucratising’ the state – that problems with the apartheid state were linked to its bureaucratic operation – was never investigated. Yet, as they argue,
Deeply suspicious of the capitalist sector (for its complicity in producing and reproducing racial domination) and yet worried about the effects of state-driven development after the collapse of the Soviet Union and the fortunes of other African states, the critique of bureaucracy associated with the NPA [sic – NPM] movement was received as a ‘third-way’ [within ANC circles]. It suggested a way of retaining a leading role for the state while avoiding waste, inefficiency and corruption. (Chipkin and Lipietz 2012, 12)
Our starting point is the idea that the state is ‘weakened’ under neoliberalism is misleading. Fine (2008) has highlighted there are a number of examples where the South African state has shown high levels of capacity, notably in the National Treasury, and in relation to selected political priorities. While many developing country states have experienced ‘capacity de-building’ processes under Structural Adjustment Programmes (SAPs) (Oya and Pons-Vignon 2010), it is important to analyse the resulting transformations, and to acknowledge that they have often been able to meet the key macro-economic objectives of stabilisation. This suggests that some capacity remains in order to implement neoliberal reforms; as Ashman et al. put it in relation to South Africa: ‘The problem is not so much lack of capacity, but more its creation, distribution and deployment as a reflection of political priorities’ (2010, np). In contrast to authors such as Gumede (2008) who have deemed the South African state to be weak, we argue that its areas of policy success warrant an exploration of the corresponding capacity developed.
The commonly accepted focus on Thatcher and Reagan as heralds of neoliberalism ‘can easily leave unexplained the seemingly contradictory yet indispensable transformation of the role of the state in economic management’ (Scharfenaker 2011, 36). Scharfenaker discusses the close ties between neoliberalism and new classical macro-economic theory; indeed, the latter has sought to prove that markets can always go back to equilibrium without state intervention, dismissing the relevance of the distinction between micro and macro levels of analysis (and policy). While the internal flaws of this argument have been discussed by Ackerman and Nadal (2004), we focus on the role of the state in entrenching and reproducing neoliberalism through ring-fencing macro-economic policies of a certain type. The theoretical framework of Lucas' new classical macro-economics (1973, 1976) has come to be adopted as gospel truth by a variety of institutions, such as the International Monetary Fund (IMF), and by a growing number of governments. The framework has been translated into more or less uniform sets of policies and regulation implemented by institutions which have been made autonomous from political interference, in order to dictate the direction of macro-economic policy. New-classical macro policy has come to be referred to as ‘good’, especially in the policy reform literature, which has shifted the focus away from identifying the most suitable policy to ‘how to implement it’. In Lora and Olivera's words:
The leitmotif of this literature is the recognition that what is efficient in economic terms may not be politically viable, and that less than optimal policies may be maintained or adopted not as a result of shortsightedness or ignorance, but due to some form of political constraint. (Lora and Olivera 2004, 100)
This article adopts an explicit focus on macro-economic policy as both an objective in itself and as an organising instrument of the state's techno-structure under neoliberalism. We uncover the deepening of neoliberalism in post-apartheid South Africa and the dynamics which have driven it, ensuring the ascendency of capitalist interests associated with mining, energy and, primarily, finance (Ashman, Fine, and Newman 2011a). This will help understand how this evolution is likely to influence the future of ‘development’ in South Africa.
The ANC and orthodox economics: marriage of convenience or elective affinities?
Historical affinities and Mbeki's Blairite moment
The myth of a sudden conversion of the liberation movement from old-fashioned socialism to orthodox economics at the turn of the 1990s has long been dispelled (Adelzadeh 1996 and 2012; Aron and Kingdon 2007; Ashman, Fine, and Newman 2010, 2011a; Baker, Boraine, and Krafchik 1993; Bond 2000; Fine and Rustomjee 1996; Freund 2010, and in this issue, Gelb 2010; Gevisser 2007; Hirsch 2005; Morris and Padayachee 1989; Nattrass 1994; Turok 2008; Sparks 2003). Instead, most authors point to the historical affinities between the ANC and orthodox economics and to the development of an original position combining adherence to the core principles of macro-economic orthodoxy with the local imperatives of rent-redistribution on the one hand, and the ambition to nurture an indigenous model of growth on the other.
The ANC's social democratic current was consolidated in the transition and post-apartheid period. A Blairite understanding of social democracy was adopted, in what Alan Hirsch, deputy director in the presidency, called a ‘consistent economic philosophy’ with ‘a social democratic approach to social reform’ at its centre based on state intervention but with ‘a firmly entrenched fear of the risks of personal dependency on the state and of the emergence of entitlement attitudes’ (2005, 3). Delving further Hirsch explains that ‘the ANC approach is sometimes summarised as elements of a northern European approach to social development combined with Asian approaches to economic growth, within conservative macroeconomic parameters. This remains the intellectual paradigm within which the ANC operates’ (2005, 4).
Even though the official adoption of economic orthodoxy by the ANC in 1996 may have constituted a ‘momentous shift’ for a party with a huge working class constituency allied to the SACP and COSATU (Marais 1998, 147), most analysts agree on situating the ascendency of orthodox economic thinking within the ANC in the mid to late 1980s. Freund (in this issue), following Sparks (2003), Gevisser (2007), Gumede (2008) and Marais (1998), points to the decisive role played by Thabo Mbeki in shaping the specific type of neoliberal deepening in South Africa. There are at least three specific dimensions which characterise Mbeki's influence on the direction taken by post-apartheid macro-economic policy. First, Mbeki ensured that the ANC's internal agenda on macro-economic policy moved firmly away from a socialist, or even left-of-centre, agenda throughout the late 1980s and early to mid 1990s. His participation in several encounters with South African big business, in particular with Anglo-American, familiarised him with the demands and expectations of that constituency. This shift was then consolidated during Mbeki's work within the ANC's Division of International Affairs (DIA) which led him to penetrate international circles within the international financial institutions (IFIs) and global finance (Goldman Sachs for instance) that his colleagues from the ANC's Department of Economic Policy (DEP) were not related to. This helps understand how, in spite of the fact that he was not involved in economic policy-making before 1994, Mbeki's voice became so authoritative on such issues thereafter (Gevisser 2007, 667).
Second, Mbeki contributed to grooming new ‘recruits’ to key positions, whether within the ANC DEP, or in key government departments (Finance, DTI), to espouse the conservative agenda advocated by the IFIs and South African big business. This was done in a strategic way by appointing promising or recognised cadres or trade unionists whose credentials within the struggle were unquestionable. Emblematic of these careful choices were Alec Erwin, former COSATU unionist appointed to the DTI, Trevor Manuel, former activist and unionist from the United Democratic Front (UDF), appointed to both the DEP and the Department of Finance, or Tito Mboweni, ANC organiser who, after becoming deputy head of the DEP, and leading the Department of Labour from 1994 to 1996, became the first black governor of the South African Reserve Bank (SARB). While seasoned political leaders or trade unionists used to negotiations and power struggle, none of these were sophisticated ideologues or economists. Historically left-leaning due to their political activities, their sensitisation to specific economic schools of thought was only limited in the early 1990s. At the individual level, this explains the somehow swift and radical change of hearts pointed to by commentators. A number of interviewees (Coleman 2012; Sharratt 2012; Turok 2012) confirmed the ‘conversions’ of a few key individuals and their acceptance of a ‘broadly shared Washington consensus’ (Abedian 2012). Even when exposed to Marxist economic analysis in Western academic circles, adherence to macro-economic orthodoxy was not shaken (Kganyago 2013).
Lastly, Mbeki held strong views with regards to the degree of ‘indigeneity’ of the models to be followed and the necessity to maintain South Africa's sovereignty. This did not only mean that policies had to take into account South African historical and socio-economic specificities, but also that local expertise and locally engineered ‘solutions’ would systematically be favoured over foreign inputs and models, whether orthodox or heterodox. The trajectory of the Macro-Economic Research Group (MERG), documented in great detail by several authors (Marais 1998; Padayachee and Sherbut 2007; Freund in this issue), but also the rebuttal of the positions of IFI experts in the GEAR process are confirmations of this ‘local’ preference and sovereign trope.3 Asked to comment on the GEAR process and its lineage with the RDP, Kganyago (2013), former Director General of the NT and current deputy governor of SARB, noted: ‘GEAR was not something conceived in Washington by high-flying graduates from Ivy League universities. It was something that was driven from South Africa to deal with the macro-economic challenges we were facing.’
Mbeki's 2008 resignation may have marked the decline of his personal influence but not the dismantling of the network of key policy-makers and institutions that were strategically positioned under his leadership, confirmed by the recent endorsement of the National Development Plan (NDP) spearheaded by Manuel, at the ANC 2012 Policy Conference.
The elective affinities between business and the ANC
Beyond Mbeki's decisive influence, the ANC's elective affinities with neo-classical economic thinking were also the outcome of a long-standing relationship with South African big business, which took a new turn in the early 1990s. Handley (2005, 217), citing SACP stalwart Jeremy Cronin, discusses the socialisation of ANC elites by South African big business, particularly mining and finance, an aspect also noted by another key political actor of the time, Ben Turok, ANC Member of Parliament and chair of the Parliamentary Portfolio Commission for Finance (Turok 2012).
Freund, in this issue, provides further insight into the specific relationship that developed between old cadres and rising stars of the ANC, and the business sector. Marais (1998, 147) and Freund concur that whereas IFIs only played an intermittent role in socialising the newly appointed ANC cadres to conservative macro-economic models, Harry Oppenheimer, the then doyen of South African business, acquired considerable influence over the new macro-economic policy by becoming a regular consultant and availing the logistics of the Brenthurst Foundation for policy discussions.
Recent interviews indicate such proximity of views between IFIs, foreign investors and the South African business community continue to inform their relationship with members of the ANC leadership. Matthew Sharratt, vice-president of Merrill-Lynch Bank of America (ML-BoA) in South Africa, speaks of a ‘convergence of views’: in particular ‘with Trevor Manuel and Tito Mboweni, there were multiple channels of discussion. There still are’ (Sharratt 2012).
These accounts, however, beg the question of the specific ways in which market-driven models were internalised by the new policy actors and the mechanisms of their reproduction over time. Kentridge (1993) and Marais (1998, 2011) show convincingly that by 1993, following the ANC May 1992 Policy Conference, the party's policy documents had been stripped of any reference to interventionist policies and opened the door for privatisation. In addition, the ANC clearly committed to an export-oriented growth strategy, something which was not simply influenced by the World Trade Organization (WTO) but which also derived directly from the COSATU-initiated Industrial Strategy Project (ISP) (Marais 1998, 155; Freund in this issue), albeit a very distinct one from what South African business favoured, particularly in terms of deriving competitiveness from product quality and value chains for the former, and mostly from low wages for the latter. In 1995, Adelzadeh and Padayachee had already identified the signs of ‘an essentially neoliberal, free-market ideology’ in the RDP Green Paper and warned that given South Africa's historical development, the recipes of ‘privatisation, liberalisation and convertibility [would spell] disaster’ (1994, 11).
The ANC's long-term direct linkages with South African big business were decisive in ensuring that business's key expectations were met on issues of private property, continuation and deepening of market liberalisation, particularly financial markets, and privatisation of public assets. The widely accepted narrative among South African policy-makers is that markets did the rest. In particular, the currency crisis which accompanied South Africa's reinsertion into the global economy provided a timely excuse for neoliberal stabilisation. Yet, a number of commentators (Hirsch 2005; Marais 1998; Sparks 2003) argue that the choices made in the mid 1990s were not entirely justified by the crisis situation and that they certainly cannot account for over two decades of consistent conservative macro-economic policy choices.
Questioning the centrality of the crisis scenario
From early 1996 the South African currency suffered a speculative attack. This happened in the specific context of the cessation of trade and financial sanctions, improved creditworthiness and a liberalised capital account for foreigners which in turn triggered counter-inflationist policies with high interest rates. A credit boom ensued. By the end of April 1996, the rand had depreciated by 20% compared to its mid February level (Aron and Elbadawi 1999, 2, 6). Massive intervention by the Reserve Bank was necessary in the form of sales of dollars to resist depreciation, resulting in huge losses in net reserves of US$5.3 billion by April. The dominant view among key players at the time is that the 1996 currency crisis left no other option for government but to adopt a set of ‘prudent’ macro-economic policies in order to restore market confidence (Gevisser citing Mboweni interviewed in 1997, 2007, 670; Abedian 2012; Kganyago 2013).
Other accounts are more nuanced on the centrality of the crisis situating it in a broader policy process. That is characterised by the continuing trend towards conservative macro-economic approaches preceding the ANC's access to power precipitating its unconditional adoption of ‘prudent’ policies (Kganyago 2013). Critiques of the macro-economic policy choices point to the instrumentalisation of the crisis as well as to other factors. Marais (1998) for instance considers that the 1996 rand crisis was a convenient way to justify discarding MERG, and fast-tracking the adoption of GEAR. Habib and Padayachee show that, throughout the period of the Government of National Unity (GNU) (1994–1996), the balance of power between the ANC and three other key interest groups (the international financial community, private foreign investors and the domestic business community) was significantly against the Congress. Pressures exerted by Washington institutions throughout the 1990s, the rating of South Africa, the (real or fantasised) dependency on foreign direct investment for technology transfers and growth, or the need to restore domestic investment levels were key factors leading the new leaders to opt for an orthodox macro-framework, more than the rand crisis alone (Habib and Padayachee 2000, 254). In addition, the serious public debt situation that emerged in 1994, related to actuarial pension fund deficits and government debt of the apartheid homelands, heavily constrained the newly appointed government.
Yet, Habib and Padayachee demonstrate that risk factors faced by South Africa differed in many ways from those encountered by Eastern European countries in their transition period in terms of market institutions; ownership structure of the economy; positive economic indicators; and mild pressure from the IFIs (Habib and Padayachee 2000, 260). In other words, while risks were real and many, they were not necessarily as high as elsewhere. Alternative policy development projects (Erosa [Economic Research on South Africa], then MERG and the ISP), were also available. In spite of this, the ANC resolutely shifted to orthodox macroeconomics.
For Gevisser, the 1996 crisis was used as ‘a form of exogenous shock, perhaps even exaggerating the dangers of the crisis so as to force the fiscal austerity and macro-economic balance that they [Manuel's team] believed was essential for maintaining South Africa's sovereignty’ (2007, 670–671). Also dubbed an additional ‘nail to the coffin’ (Marais 1998, 160), GEAR, announced by Manuel, then newly appointed Finance Minister, in June 1996, officialised the continuation of late-apartheid South Africa's leaning towards a neoliberal approach to national and regional development in the post-apartheid era. It thus becomes clear that both historically, and as a result of the strategic positioning of key role players, conditions were gathered for the strengthening and deepening of neoliberal policy frames.
From NEM to GEAR and beyond: towards the autonomisation of macro-economic policy processes
Since 1990, nine different initiatives aimed at producing an economic policy framework for South Africa have been developed. These were the Normative Economic Model (NEM) (1993), the Economic Trends Research Programme (ET) (1992–1994), the Industrial Strategy Project (ISP) (1993–1996), the Macro-Economic Research Group (MERG) (1991–1994), the Reconstruction and Development Programme (RDP) (1993), the Growth, Employment And Redistribution strategy (GEAR) (1996), the Accelerated Skills Growth Initiative for South Africa (ASGISA) (2006), the New Growth Path (NGP) (2011) and the National Development Plan (2011) (see Fine 2012a), currently considered by the ANC to become the party manifesto in the 2014 elections.
Two types of macro-economic policy development processes ought to be distinguished: on the one hand, policy processes emanating from within government aimed at justifying a posteriori specific choices corresponding to internal party agendas; on the other, broader consultative processes, research heavy and driven by academic deliberation. While debates have not remained confined strictly to one process or the other, if only because the personnel involved may have been ubiquitous,4 establishing this basic dichotomy is fundamental to understand the outcomes and destiny of each of these processes. It also makes more visible the otherwise more elusive continuities between NEM, the RDP, GEAR, ASGISA and NGP. These five processes share some similarities:
to have been commissioned from within government (or to have been the ruling party manifesto turned into official policy in the case of the RDP);
not to have been debated publicly or incorporated external inputs in a deliberative manner;
and to have become official policy (although a short-lived experience in the case of NEM).
These processes also have in common that they have not disclosed entirely the modelling on which they were based, and have consisted more in broad directions than in an evidence-based body of work.5 Heavily criticised for its secrecy, GEAR was also loathed for its unrealistic objectives in light of the proposed policies. This was already the case in its gestation period (Nattrass 1994), as well as two years after its start, when GDP growth and employment were already way below their target (Padayachee 1998; Weeks 1999). As opposed to this, ET and ISP, elaborated and conducted over broader time periods from initial commissioning by COSATU, developed over collective, iterative rounds of consultation, and along sub-thematic work teams. Neither of the two fed directly into ongoing policy-making processes.
MERG, for its part, is emblematic of a policy process turned sour. The tense relationship that dominated its deliberations and the team's relationship with the ANC DEP, as well as its final abandonment by the ANC, all point to an aborted policy process. It is therefore ironic that the most consultative and empirically grounded policy development process was discarded after facing critiques from business, the ANC and part of the South African left.
These differences in trajectories and methodologies do not alone account for the destiny of these processes but they do highlight two important points. First, a trend towards the autonomisation of policy processes away from democratic oversight towards the inner circles of the party/state, particularly those of the ANC DEP and the NT/National Planning Commission/Department of Economic Development.6 Second, a dynamic of continuity or emerging path dependency, visible in the way in which intermediary consultative processes and critiques have been unable to affect the final policy frames.
The striking commonalities between the NEM and GEAR have already been noted by several commentators (Marais 1998; Nattrass 1994; Padayachee 1998). Continuities between GEAR and the NGP are more subtle but nonetheless real. As noted by Fine (2012b), the NGP does not strike as breaking away particularly neatly with the ‘old’ growth path. The location in the presidency of the National Planning Commission (NPC) – headed by the longest finance minister in the history of South Africa, and the one who propelled GEAR in 1996 – was already a signal as to the limited autonomy of the other new department, the Economic Development Department (EDD). Headed by former trade union official Ebrahim Patel, EDD's policies, like those of all other departments, fell under the scrutiny of the NT, and in its initial footsteps very much depended on its host, the DTI, in the framework of the National Macro-Organisation of the State process launched after the 2009 election (EDD 2010). The NGP's overreliance on trade-offs points to a classical Keynesian approach ill-suited to a situation of massive structural unemployment and slow growth. According to Fine (2012b), the document falls short of acknowledging one of the key aspects of post-apartheid macro-economic governance: its connivance with the massive financialisation7 of the South African economy and its main outcome – unprecedented capital flight (Fine 2012b, 7). Opposition to MERG had partly focused on the same dimension: the interventionist nature of the policy model, which included the need to curtail the independence of SARB (MERG 1993, 281) and position the Bank much more firmly under the authority of the state (Marais 1998, 160). Sixteen years later, the silence of the NGP on the need for the state to exert more control over financial capital to be directed towards domestic productive investment is indicative at best of an analytical flaw, at worst of a consistent political stance to ensure the status quo. A similar critique can be addressed to the NDP (Fine 2012a), whose future as the ANC's manifesto for 2014 remained uncertain in late 2013.
This section has argued that while the international and domestic business environments exerted pressure on the rising ANC leadership in a time of multi-layered crisis, alternative and credible models to neoliberalism were available but rapidly sidelined during the period 1993–1996. The cognitive instruments available to the party in relation with economic policy were historically limited and systematically weakened under the GNU and subsequently. While most policy actors of the time contend that the global financial crises of the 1990s and the 1996 speculative attack on the rand were decisive in legitimising stabilisation policies, this does not stand up to careful scrutiny. Rather, macro-economic policy development initiatives in the post-apartheid era have been emblematic of a trend towards the consolidation and deepening of neoliberal thinking on the one hand, and of a move away from democratic oversight on the other. The autonomisation of decision-making circles required the concurrent building of a powerful techno-structure with an ability to implement the macro-economic framework, ensure its longevity and exert considerable oversight over the rest of government activity.
Commitment to macro-orthodoxy and technocratic capture
Macro-economic policy reform as a process in technocratic capture and innovation
While economic policy formation during the transition period has been accounted for in an impressive body of works (Adelzadeh 1996; Aron and Kingdon 2007; Gelb 2006; Habib and Padayachee 2000; Handley 2005; Hirsch 2005; Nattrass 1994; Padayachee and Sherbut 2007; Padayachee 2006), these have tended to neglect processes of technocratic capture and innovation. On the other hand, studies of public sector reform in South Africa have rarely focused on institutions in charge of economic policy-making but rather on social and micro-economic policies (Marais 1994; McLennan 2008; Picard 2005; Schwella 1999; Wenzel 2007). The influence of the NPM paradigm has been documented by many (Cloete 1986; Cloete and Mokgoro 1995; Fitzgerald and McLennan 1992; Marais 1994; McLennan 2008; Picard 2005; Wenzel 2007), but little attention has been paid to NPM within the NT, as a strategy applied to itself as well as its new vision for the rest of government, and the consolidation and stability of orthodox macro-economic policy models.
In South Africa, public sector reform was a central component of the RDP (Chapter 5 and in particular sections 5.9 and 5.10), but one in which the state was largely taken for granted as an agent of implementation (Wolpe 1995). The aggravating effects of NPM on two critical public sector weaknesses – the flight of technical expertise and limited, and even at times deficient, governmental coordination – were in general overlooked at the time of reform (Chipkin and Lipietz 2012; Wenzel 1996, 2007). Its effect on learning capacity within the state was equally neglected, in spite of its central role in the analysis of state development, whether from a state-centric or a state-structural perspective (Hall 1993, 277).
Relatively sophisticated and successful by African standards, the Department of Finance still remained archaic and isolated from the rest of government activity pre-1994. Its comprehensive restructuring, the build-up of a powerful national treasury administration, the creation of the South African Revenue Service (SARS), the setting up of the presidency, and the continued independence of the reserve bank (RB) constituted the backbone of macro-economic policy reform (Abedian 2012; Aboobaker 2012). These bureaucratic processes did not only determine the nature and longevity of the new macro-economic policy framework but they also conditioned all other forms of state intervention. Initially meant to stabilise the country's ailing economy in a context of exceptional volatility in the mid 1990s, these institutions became central in shaping and regulating policy reform across sectors through compliance with the overall macro-economic model. The nature of this techno-structure and its conditions of emergence are crucial to understanding the continued dominance of orthodox macro-economic policy, including in times of growing contestation since the early 2000s. Combined with a broad public sector reform that soon moved from a developmental agenda to a more narrowly managerial one, this techno-structure and its increasing adherence to orthodox economics ensured a panoptical control over governmental activities at the service of fiscal restraint.
The guardians of the temple: the emergence of an oligopolistic bureaucratic process
As a post-apartheid creation, the National Treasury stands apart from South African public administration: not only are its powers in terms of financial control immense and comprehensive, but its staff and organisational capacity exhibit levels of professionalisation which are exceptionally high by national standards. Largely decided and designed by a small group of politically connected ‘experts’ closely associated with the making of GEAR during a conference organised by Iraj Abedian, Jay Naidoo and Alec Erwin at the University of Cape Town in 1995,8 the reform process of the Department of Finance had to be implemented swiftly and concurrently with the adoption of macro-economic fundamentals.
The administrative shift was subsequently consolidated by the institutionalisation of departmental mechanisms as well as a growing body of legislation coordinated through the Department of the Auditor General. Critical to the close association between the NT and such policies were a pool of senior and middle managers united by an esprit de corps shaped by an uncritical adherence to the core principles of new classical (or ‘good’) macro-economics and NPM. Following the ascendency and supremacy of NT over macro-economic policy-making (1995–2009), whether actual or symbolic, a period of tensions, contestation and resilience then ensued with the creation of the Economic Development Department (EDD) and the National Planning Commission (NPC).
From stabilisation management to technocratic capture
One fundamental aspect of the South African post-apartheid techno-structure is the degree to which the central panoptical role of NT is embedded in Chapter 13 of the Constitution (Sections 213 to 230 on Finance). Constantly reasserted in annual reports, public speeches and interviews of key actors within the Ministry of Finance and specifically the NT, the constitutional lineage is seen as the ministry's foundational element of legitimacy (NT 2012).
Modelled on Commonwealth experiences, most notably the Australian and New Zealand Departments of Finance, (Abedian 2012; Sachs 2012), this institutional transformation was then endorsed and implemented over a relatively short period of time first by Erwin, then deputy minister, then by Manuel and a team of carefully chosen political figures, young and middle-aged white technocrats from the previous staff, and some emerging experts with political credentials, such as Maria Ramos. Of particular note is also the remarkable stability of top and middle management in spite of the initial restructuring within the ministry and then throughout political changes. Over the past 18 years, the department turned ministry has only had three ministers, four deputies and four director generals.
The Ministry of Finance has developed internal promotion mechanisms which have allowed staff to progress and stabilise from low-level entry to senior managerial positions such as chief directors and heads of division. Three of the current 10 heads of division have been with the department for the past 18 years and all for more than five years. The current director general joined in 1997. Finally, the initial top management structure of the Department of Finance between 1995 and the mid 2000s has outgrown the department and been redeployed to key public and private top management positions in sectors in which they continue to have a considerable influence on South African macro-economic policy-making: Manuel to head the NPC, Gill Marcus to the governorship of SARB, Ramos first as CEO of Transnet and then ABSA, Lesetja Kganyago as the deputy governor of SARB. Turnover among key managers has generally been considered as an indicator of departmental efficiency in the post-apartheid era (Chipkin forthcoming; Kganyago 2013).
Second in explaining the ascendancy of the Ministry of Finance is the restructuring of its internal operations and human resources. From the initial four main directorates, the current ministry now comprises 10 specialised directorates. While the ministry faces a vacancy rate of 13% at senior management level (NT 2011, 268), this remains low by South African standards: the average vacancy rate across national departments in heads of department positions stands at 43% (Public Service Commission 2010, 3). The initial skills base at recruitment is high: over 95% of staff have highly-skilled occupational profiles, at senior management, highly skilled supervision and highly skilled production levels (NT 2011, 273). In 2010–2011, 54% of appointments had been done internally against a target of 45% (NT 2011, 273) and the turnover rate over the period 2009–2011 was only 10.4% (NT 2011, 271), against for instance 26% for the DTI (DTI 2011, 212) or 32.9% for the Department of Home Affairs (DHA 2011, 102). The NT thus relies on one of the most highly skilled and stable corps of civil servants across national departments, but also one characterised by its distance from ANC politics (Kganyago 2013).
Third, the rapid ascendancy and power of the NT over other areas of government is also explained by the development of its oversight apparatus in the initial context of the 1995 crisis. The prudent position of the NT has since constantly been utilised to justify the sophistication of the legal and administrative set of mechanisms which ensure the NT's oversight of government activity. The Public Finance Management Act (PFMA) of 1999 was reinforced by the Municipal Finance Management Act (MFMA) of 2003 and very much symbolises the concrete realisation of this oversight capacity. While the nominal authority of the NT over other departments should be distinguished from its actual ability to implement compliance, the reform has resulted in an impressive concentration of analytical capacity within the NT, much needed in fact in other departments.
The creation of SARS is a case in point. Heralded as an example of successful autonomous revenue authority (ARA) (Di John 2006, 6), and lauded for its sustained performance, its role beyond fiscal collection needs to be envisaged from a learning perspective in contrast with capacity stagnation in implementation departments. In comparison with the rest of Africa, South Africa has a longer tradition of taxation because of the greater development of wage labour in its economy. As Di John (2006) shows, fiscal capacity has historically served as the foundation of state capacity not only in terms of increasing the redistributive powers of the state, but especially in terms of the economic knowledge that fiscal activity generates for the state. The challenge, however, for middle income countries, and in the South African case in particular, is to diversify the fiscal base and increase penetration towards direct taxation, particularly of corporate (including to prevent capital flight) and land interests (Di John 2006). The way in which the fiscal authority was reformed in South Africa raises questions as to the capacity of the South African state to move beyond the apartheid-era elite consensus on income tax (Lieberman 2001) towards the latter goals. The current incapacity of SARS to counter capital flight on one hand, but also the fact that in much simpler areas of intervention, requiring far less bargaining between interest groups such as industrial policy, the ‘SARS model’ has not diffused (Di John 2006, 6), both point to serious limitations in the adoption of an ARA model at the core of the reform.
Contestation and resilience of the techno-structure since 2009
With internal contestation within the ANC, in the build-up to the 2007 policy conference and the election of Jacob Zuma in 2009, there was a sense among the Alliance critics of macro-economic policy that the grip of the NT would eventually be loosened. There was thus hope that the creation of EDD and the NPC located in the presidency would render the Ministry of Finance at the service of reformed macro-economic policies more inclusive of the views of the left, and particularly of COSATU (Coleman 2012; McKinley 2003, 44).
Part of the contestation of the NT came from within government circles themselves around the questioning of double standards in policy-making (Zalk 2012). While micro-economic policies have extensively been subject to the scrutiny of the NT through a range of compliance mechanisms, macro-economic policy itself has developed in isolation from intergovernmental scrutiny. The dominant view among past and current NT officials is that macro-economic policy should abide by a set of ‘fundamentals’ constituting non-negotiable parameters within which other (micro or social, for instance) policies must be defined, and which should not be affected by changes in economic policy orientation. Little attention is typically paid to the degree to which macro-economic policy affects sectoral dynamics, with some officials arguing that the macro framework does not influence the prospects of the micro economy (Kganyago 2013). In addition, there is a sense among supporters of orthodox macro-economics that the ‘fundamentals’ are consensual across South African government, a view which ignores long-standing contestations within the ANC and the Alliance. Kganyago, for instance, maintains that macro-economic stability benefited the poor and low-income earners because it paved the way for increased social and education expenditures, highlighting the fact that these were the visible signs of the efficiency of macro-economic stability, in spite of a growing body of research pointing to the abysmal failure of ANC policies regarding asset redistribution and the reduction of inequalities (Makhaya and Roberts, in this issue; Bernstein 2013; Ashman et al. 2011b; Marais 2011).
This view of macro-policy as consensual legitimises the double standards applied by the NT to itself and other government departments. First, the support by the NT of drastic cuts in state expenditure on the one hand, while the restructuring of the Ministry of Finance, and in particular of SARS was undertaken thanks to massive budget allocations on the other (Coleman 2012); second, the double standards in review processes and monitoring and evaluation between micro-economic policies, subject to extensive scrutiny up to Cabinet level, and core macro-economic policies such as inflation-targeting and capital account liberalisation which are neither discussed nor reviewed (Zalk 2012; Coleman 2012).
Finally, while on paper the strategic location of economic policy making has shifted to EDD, real control over it remains more than ever at the hands of supporters of conservative approaches. Two processes should be considered concurrently. One is the post-2007 fragmentation of analytical capacity and decision-making structures across one directorate within the NT, EDD and the NPC headed by Manuel. The other is the limited consolidation of analytical capacity within the ANC Economic Transformation Committee (ETC) which rather than developing internal capacity has come to rely extensively on government, and particularly NT, expertise (Zalk 2012; Sachs 2012). Presentations to the ETC are thus mostly requested from NT, SARS and at times other departments' technical staff. However, the adoption of the NDP by the ANC at the 2012 Policy Conference in spite of criticism from COSATU in particular, who officially condemned the NDP in March because of its reliance on neoliberal trickle-down, indicates that not only macro-economic policy, but even more broadly government policy, remains strongly under the influence of the technocrats who shaped post-apartheid economic policy.
Waiting for Godot: contestation and neoliberal resilience
This article has shown that the resilience of orthodox macro-policies in South Africa has hinged on the continuation of reform processes initiated during the late apartheid period. The expertise for economic thinking in the transition has largely drawn on ‘indigenous’ conservative forces, while the politically calculated ideological conversion to neoliberalism among the top leadership of the ANC was accompanied by a strategy of technocratic capture through the rise of the NT and its role across government. It should therefore not be a surprise that macro-economic policy has been dominant, and the interests of finance and mining capital have continued to be well served in the post-1994 era. It would be important to analyse post-apartheid class formation mechanisms in order to understand this resilience more thoroughly.
In documenting these processes we debunk some of the myths legitimising neoliberal resilience: the crisis narrative in the mid 1990s; the assumed general lack of capacity of the state (and associated progressive potential of the market); and, finally, the emphasis on the social and developmental character of reforms in order to conceal their neoliberal character. The need to lay bare the mechanism and discourses of neoliberal deepening is particularly strong in a context where this perspective has never been explicitly articulated within the ruling tripartite Alliance (Coleman 2012). As advocated by the policy reform literature, and fundamental to its longevity, the South African macro-economic policy framework has also been insulated from democratic controls and debate. This insulation and opaqueness has been crucial in partially concealing the class character of macro-policies and the restructuring of the NT as serving the interests of capital.
However, the abyss in which the South African working class has sunk 19 years after the end of apartheid has triggered growing contestation. While the domestic dissatisfaction voiced within the Alliance over policy orientation or the growing violence around rent capture across local government in the country signal a profound and potentially fragmenting fault line, the Alliance leadership has, in spite of minor concessions, maintained the same macro-economic orientation. Thus, in spite of the continuation of the ‘progressive noises’ which had led Habib to wonder about the possibility of a shift in 2004, South African government policy is still firmly tilted in favour of big business. This was clearly exposed at the 2012 ANC policy conference through two key decisions. First, the NDP rather than the NGP was endorsed as the national strategy, thus reasserting support for big business interests as necessary for growth. Second, Cyril Ramaphosa was elected deputy president of the ANC, paving the way for him to become deputy president after the next elections in 2014. A major shareholder in Lonmin, he had written in an email to an executive at Lonmin mine that:
The terrible events that have unfolded cannot be described as a labour dispute. They are plainly dastardly criminal and must be characterised as such … there needs to be concomitant action to address this situation. (Cited in Vermaak 2013)
This was the day preceding the Marikana massacre of August 2012.