Analysing Chile's post-Pinochet transition, Palma identified a conundrum which equally well captures the political economy of post-apartheid South Africa:
The basic political dilemma for any oligarchy determined to hold on to such degrees of inequality (or even to increase it) is how to construct a winning strategy that is sustainable when in a democracy – given the fact that the oligarchy forms such a tiny minority, and that the distributional outcome that it seeks is so remarkably unequal … ‘Strategy 3’ consisted of trying to stabilize the distributional outcome at a level at which the elite could sustain most of the gains achieved during the dictatorship. Despite being a political minority, it succeeded in doing so … The capitalist elite succeeded during this period in building a hegemonic consensus of the supposed advantages of ‘free-market’ distributional policies. The key question is why it was that a centre-left coalition, with clear majority support, could do so little in distributional terms. In other words, why was ‘Strategy 3’ so successful for an oligarchy operating within a democracy, even though it was a political minority? (Palma 2011, 133 and 136)
Yet, as political economist Vishnu Padayachee noted in 2006, South Africa's rich critical scholarship of the 1980s and 1990s lost a great deal of its capacity to remain critical of power in democracy (2006, 16). Engaged in a variety of advisory and contractual relationships with the state, progressive scholars have sought to inform policy rather than analyse how it is produced. A frequent implication is that frustrating policy directions – signalling the success of ‘Strategy 3’ – are met with disbelief and attempts to argue from within, either the state or the Tripartite Alliance, which comprises the African National Congress (ANC), the South African Communist Party (SACP) and the Congress of South African Trade Unions (COSATU). Yet, on the eve of the twentieth anniversary of the historic electoral victory of the ANC, and in the aftermath of the massacre of 34 mineworkers in Marikana in August 2012, followed by a spate of strikes across mining (Alexander in this issue), it seems essential to offer an assessment from without.
When applying a political economy analysis to the post-apartheid period, it becomes apparent that, as most ‘revolutions’, the South African one has involved more continuities than is usually thought, across a range of areas. Perhaps the single most striking one is the persistently high level of inequality, mirrored in the rising share of income appropriated by the rich (Figure 1) and in labour's declining share of GDP (Figure 2). This has led to growing recognition that South Africa's development is far from having met the expectations that the end of apartheid generated (Freund 2010). In order to explain this, we build on Fine and Rustomjee (1996), who have characterised the minerals–energy complex (MEC) as the engine of capitalist development in South Africa, emphasising the structural imbalance of the economy. Recently, Ashman, Fine, and Newman (2011) have shown that the meteoric rise of finance since the 1980s has been both crucial to the success of the neoliberal project, and closely associated with the continued dominance of the MEC. They argue that patterns of capital accumulation in South Africa have espoused the global trend of financialisation (Epstein 2005), leading to massive capital flight following the democratic transition, courtesy of the new government's relaxation of exchange controls.1 Financialisation has further reinforced the system of accumulation centred around the MEC, making it even less prone than it was to invest in labour-absorbing manufacturing or agriculture. Hence, neoliberal reforms have resulted in the opposite of the promised virtuous circle of increased investment and employment. South African investment levels, both foreign and domestic, have been low since the 1970s, and when they somewhat increased in the 2000s, it was as a result of a credit-driven consumption boom (Mohamed 2011). The upshot is that the country has record-high levels of unemployment, hovering around 35%, which, combined with rampant labour casualisation, is making the reproduction of the working class increasingly difficult (Chinguno, and Di Paola and Pons-Vignon in this issue). Progressive change will hinge on radical changes in macro-economic policy and the role of finance; in this issue, we seek to explore why such change has been elusive thus far.
Share of total income earned by the top 1% in selected countries, 1986–2009. Source: UNCTAD 2012.
This analysis leads to confronting an uneasy question: rather than a case of disappointing development (trying but failing), isn't South Africa an example of neoliberal deepening? The two main features of its economy are indeed consistent with the neoliberal ‘model’: high and rising inequality, reflected in a very large and profitable financial sector. In South Africa, both inequality and financialisation are at, or close to, the highest levels recorded in the world. Neoliberalism is understood in this issue in line with the heterodox, and in particular Marxist, analyses of Fine (2012), Harvey (2005), Palma (2011) and Saad-Filho (2011). It consists of policies, ideology and practice which are not always coherent, but tend to reinforce the power of capital at the expense of labour, and the power of finance capital at the expense of other fractions of capital. Thus, arguing that South Africa represents a case of deepening neoliberalism does not imply that all of its characteristics must be deduced from an initial blueprint; on the contrary, what is interesting is to analyse the particular form, contradictions and adaptations of neoliberalism in South Africa, in the hope of yielding new insights on social, economic and political prospects facing the country.
Central to the Marxist analysis of neoliberalism is the role of the state: far from signalling its retreat, neoliberalism requires active state involvement to promote the interests of capital. Burawoy (1981, 284) argues that the capitalist state is an organisation serving the reproduction of the capitalist system without necessarily being a mere ‘instrument’ in the hands of the dominant class. He sees the capitalist state as being mainly concerned with keeping the whole (society) together. It is precisely its autonomy which, at times, allows it to maintain competing classes and sectors together. But it is important to underline the fact that the centrality of the state in the deepening of neoliberalism is denied in neoliberal discourses; for instance, the myth of the ‘lean’ state conceals the strengthening of state enclaves more critical to capitalist reproduction than others. In post-apartheid South Africa, macro policies and state restructuring have advanced the interests of big conglomerates and finance, thus entrenching neoliberalism (Segatti and Pons-Vignon, in this issue; Makhaya and Roberts, in this issue). This has been accompanied by the selective incorporation of influential figures drawn from the liberation movement, such as ex-NUM General Secretary Cyril Ramaphosa, into the accumulation circuits of the dominant (MEC and finance) fractions of capital. Such accommodation has been analysed through cases such as platinum (Capps 2012, 2012a) and coal (Rustomjee 2012), which suggest that the white incumbents have done remarkably well in securing their accumulation prospects. This has been facilitated by active state intervention, even when its objectives appeared to be progressive – or ‘transformational’, to use South African jargon. Capps thus points out that ‘the [Mineral Development Bill]’s core proposal to nationalise mineral rights … was an essentially bourgeois measure designed to accelerate accumulation in the national mining industry by eliminating the barriers to investment posed by private minerals ownership’ (2012a, 330). It is also worth noting that incorporation has been very limited, with the roads to accumulation remaining effectively blocked to new entrants in most areas (Makhaya and Roberts, this issue). This has an important bearing on the increasingly violent contestation – and enforcement – of the social order, with a concentration on the state as the main path to accumulation (von Holdt, in this issue).
In spite of increasing political violence, one cannot help but be surprised by the tolerance for continuously high, or rising, levels of inequality and unemployment in a country whose liberation was achieved largely by the struggles of workers and communities. In order to shed light on this, we turn to a crucial dimension of state support for neoliberalism in South Africa, namely the loudly advertised pursuit of poverty reduction policies. These policies have been essential to the successful implementation of orthodox macro policies in a context marked by widespread deprivation, and where the elusive prospect of ‘trickling-down’ benefits is less and less palatable. In order to capture the idiosyncratic form of South African neoliberalism, it is useful to recall Palma's characterisation of the Latin American ‘art of neoliberalism’, namely the ability to sustain remarkably high levels of inequality, and of concentration of wealth in the hands of the rich, in a democracy. To understand the political sustainability of macro policies serving the interests of capital, there is a need to unpack the political communication around social and developmental goals. Far from being an example of ‘shock therapy’ to ensure policy credibility, as advocated for ex-Communist countries in the early 1990s (Grabel 2000), the post-apartheid transition has indeed entailed a professed commitment to addressing poverty from the outset, but within the parameters of an orthodox (hence restrictive) macro-economic framework.2 This has been ideologically supported by neoclassical analyses which have lauded macro-economic policy for its successful stabilisation of the economy, arguing that ‘micro-economic’ problems (in particular the cost of unskilled labour) were the root of all evil. In the words of Ajam and Aron (2007, 771), ‘the bottom line is that while South Africa has done exceptionally well in stabilising the macroeconomy, the microeconomic objectives still require concerted focus.’
Taking the analysis one step further, one can hypothesise that, in South Africa, the most important political condition for the deepening of neoliberalism has been the transition to democracy itself, because it has allowed the neoliberal project, suitably dressed up, to benefit from the historical legitimacy of the ANC and its alliance with the working class. This is even in line with what Geddes (1994), one of the foremost proponents of the neoclassical literature on policy reform, identified as key factors ensuring the sustainability of liberalisation in the very same year when the ANC won South Africa's first free elections.3
In a country already characterised by very high inequality such as South Africa, one could have anticipated much resistance to neoliberal policies from organised labour, progressive social forces, intellectuals and many others.4 It is striking that the neoliberal orientation of policy has not been openly discussed within the ruling Alliance, to the open frustration of COSATU (2002, 10), which lamented that ‘it is impossible to have an intelligent debate with someone, if they refuse to disclose the basis of their argument.’ A few years later, the assumptions which informed government policy from 1996 onwards were discussed by Hirsch (2005), a key policymaker and intellectual in the presidency, who highlighted the three dimensions of what he calls the ANC's ‘intellectual paradigm’:
A northern European ‘social democratic’ approach to social policy associated with ‘a firmly entrenched fear of the risks of personal dependency on the state and of the emergence of entitlement attitudes’; combined with
East Asian approaches to economic growth; within
conservative macroeconomic parameters. (Hirsch 2005, 3–4)
The form taken by social policy in South Africa is an important feature of the art of neoliberalism (see Khan, in this issue). In a context marked by high poverty and inequality levels, with growing popular mobilisation, social policy represents a political necessity to ensure the sustainability of neoliberalism. Relatively large spending on social programmes has been achieved, but in a fiscally constrained manner. The performance of social spending has been uneven, with, according to Gelb (2010), success in direct transfers (conditional cash transfers [CCTs] and housing), and relative failure in indirect transfers, such as health and education. However, even regarding CCTs, which have greatly increased since 1999 (Interview, Sachs 2012), there are fierce debates regarding their overall impact (Meth 2007). As noted by Ghosh (2011), direct transfers can alleviate poverty, but they do little to address inequality; furthermore, they act to entrench neoliberalism if they are associated, as has been the case in South Africa, with encouraging private provision of services to the poor.
Central in these programmes has been a residual conception of poverty, which Oya (2009) opposes to relational approaches. The former entails a notion that the poor are poor because they ‘lack’ something, whether education and skills, or capital. Relational approaches, on the other hand, focus on inequality and relations of exploitation as the cause of poverty. In particular, conditions of employment and wage levels are central to understanding poverty from a relational point of view (see Sender 2003); higher wages for poor workers were indeed a central component of the discarded Macro-Economic Research Group (MERG) proposals (Freund, in this issue). In a context like South Africa, policies based on a relational understanding of poverty would perhaps have addressed the unequal dynamics associated with pre-existing property rights, rather than entrenched them. The dominance of a residual approach to poverty and poverty reduction was famously articulated by Thabo Mbeki's ‘two economies’ (2003), one modern and one backward, a formulation which conveniently emphasised their co-existence as opposed to their articulation (Bond 2007). Combined with the ANC's reluctance to nurture a culture of ‘dependency’ in the second economy, the stage was set for social policies that would not tamper with the perceived driver of growth, the dynamism of the first economy, which must of course be supported by orthodox macro-economic policies.
The result of South Africa's combination of ‘residual’ social policies and orthodox macro-economic policy has led to the deracialisation of part of the first economy, while leaving the second ‘exactly where it currently is: marginalised, poor and overwhelmingly black’ (Habib 2004, 92). This conception of social policy appears to be far removed from its proclaimed north European model. Indeed, despite a few institutional similarities,5 very little connects South Africa to the social-democratic model, save in a Blairite way. Crucially, the residual approach which informs South Africa's social policy fails to address the causes of poverty, in particular how macro-economic processes can affect the prospects of poor people to access infrastructure or jobs, a critique not specific to South Africa (Ghosh 2011, 854).
The proclaimed affiliation with a ‘progressive’ model, emptied of its content by the constraints of the macro framework, or by biased interpretation, is also visible in micro-economic policies. The idea that South Africa could be considered to be an East Asian style ‘developmental state’ was dismissed by Fine (2010), who pointed out that, if anything, the electricity crisis which affected the entire South African economy in 2008 was enough to prove the gross insufficiency of government coordination. If cash transfers were the (a posteriori) ANC shorthand for ‘welfare state’, the reference to the Asian model has been justified by the proclaimed ‘export-oriented’ micro-economic strategy. This has entailed a neoclassical focus on trade liberalisation as a substitute for industrial policy, with the former expected to act as a disciplining mechanism on overprotected, slack industries. One key inspiration (or possibly justification) for this strategy was the post-Fordist ‘high road’ promised to South African industry by the Industrial Strategy Project (ISP 1995). The idea was that workplace modernisation would pave the way for productivity gains and allow companies and workers to benefit from trade liberalisation. Hunter (2000) has shown the numerous limitations of this approach, with in particular a marked deterioration in pay and working conditions.
Debates on trade liberalisation in South Africa suffer from common biases, with neoclassical proponents blaming disappointing results on internal ‘blockages’ (typically labour costs) or insufficient liberalisation (Edwards 2005). As a matter of fact, the rate of liberalisation has been impressive, with South Africa exceeding the tariff liberalisation requirements of the WTO when she joined (Baloyi and Pons-Vignon 2008). It further appears that the only sector outside the MEC core to have experienced investment in the post-apartheid era was automotives – incidentally the only sector to have been supported by an industrial policy, at least until the late 2000s. If anything, it appears that the South African economy has suffered from premature deindustrialisation, rather than increased manufactured exports (Tregenna 2011).
Rather than demonstrating the difficult transferability of the East Asian model, South Africa is a typical example of its distortion. First, as pointed out by Amsden (2001), export promotion in East Asia followed and was articulated with import substitution. Even when some industries were deemed mature enough to be submitted to the difficult export test, numerous strategic protection measures were retained. Thus, the East Asian model is anything but an example of blanket liberalisation, as it was done in South Africa. Perhaps even more crucially, East Asian developmental states have been associated with central planning agencies focused on national development objectives – where, in other words, spending departments commanded over treasuries. While the Reconstruction and Development Programme (RDP) office could have been such an agency, it was suddenly closed a few months before GEAR – South Africa's five-year ‘Growth employment and redistribution’ plan – was announced, in 1996. This placed the coordination of policy firmly in the hands of ‘technocrats’, in particular of the National Treasury (NT), as bitterly regretted by COSATU (2002).
This policy capture by the NT appeared to change with the National Industrial Policy Framework (DTI 2007) and subsequent action plans, as well as the creation of the Economic Development Department (EDD) in 2008. However, the difficulties experienced by the Department of Trade and Industry (DTI) and EDD in influencing economic policy suggest that these are inconsequential concessions to the more progressive wing of the Alliance. Crucially, the focus by government and many economists on micro-economic issues has downplayed the role of the macro-economic framework in preventing the kind of structural transformation associated, for instance, with the very East Asian developmental states that South Africa claimed to emulate. By placing macro policy outside of the realm of debate, its available development options have been technicised and depoliticised. The neoclassical focus on micro-economic bottlenecks is further misleading because it conceals the fundamental role played by the technocratic capture and creation of key state institutions in constraining all other sectors of state intervention.
The third dimension of ANC policy highlighted by Hirsch, orthodox macro-economic policies, is certainly the one closest to its proclaimed model. Its rigorous implementation has led to a ‘creative’ interpretation of the other two (poverty reduction and micro-policies) while ultimately shaping the economy's restructuring. If anything, the pursuit of orthodox macro-economic policies is coherent with the orientation of the late apartheid regime (see below); however, the support of the ANC for this orientation has allowed a decisive deepening of neoliberalism, which is visible in the remarkable growth of the financial sector and persistent inequality. Our contention is that the orthodox orientation of macro-economic policies has been the most important feature of the post-apartheid era, as it has informed the way in which all other policies have been framed, and constrained. It is the main reason for the dismal post-apartheid performance in opening up economic opportunities for black people, as discussed by Makhaya and Roberts in this issue.
What sets South Africa apart from other countries where historically progressive parties have entrenched neoliberalism is the recurrent insistence, in Tripartite Alliance discourse, that the stabilisation of the 1990s was but a first step making true socio-economic transformation possible. This is captured in the much (ab)used characterisation of the liberation of South Africa from apartheid as a ‘national democratic revolution’, which locates it in a left-wing, revolutionary tradition. At regular intervals, the promise of the imminent shift to a ‘second stage’ has been floated, including during the run-up to the 2012 ANC policy conference. This was presumably an attempt by President Zuma to live up to COSATU's calls for a ‘Lula moment’, in recognition of the former Brazilian president's rather unique ability to shift policy in a decisively progressive direction in his second term, thereby transforming a neoliberal state into a ‘social democratic welfare state’ (Morais and Saad-Filho 2011). Yet, as COSATU General Secretary Zwelinzima Vavi had anticipated in his political input to the COSATU–SACP Bilateral on 26 July 2001:
The [National Democratic Revolution] … envisaged a radical change in property relations in favour of the formerly oppressed. It is in this vein that the state has to play an active and developmental role. To rely on the markets … would perpetuate such inequality but with a change of complexion … Attempts to (merely) ‘deracialise’ apartheid capitalism would fail to alter the balance of class forces in favour of the working class; they are more likely to alter the balance of class forces in favour of capital.
While the adoption of neoliberal macro-economic policies by the ANC in 1996 represented a significant shift away from its own orientations since the 1955 Freedom Charter (Turok 2008; COSATU 2002), it was coherent with those of the apartheid regime since the late 1970s. At that time, growing tensions within the National Party and between the state and the private sector over the management of the deepening economic crisis and dwindling investment led to the adoption of a first set of liberalisation policies (in particular of exchange controls), followed in 1982 by a programme of privatisation and deregulation (Marais 2011). These reforms had three important effects: they ‘allowed for the easy transmission of the worsening international economic conditions into the South African economy’ (Morris and Padayachee 1989, 76, quoted in Marais 2011, 44) while greatly increasing the power and concentration of large conglomerates (four of them controlled 80% of the Johannesburg Stock Exchange from the mid 1980s; Chabane, Goldstein, and Roberts 2006). This acted as a springboard for their financialisation, facilitating the emergence of a powerful financial sector which has since grown from strength to strength (Ashman and Fine 2013). The continuity with the post-apartheid period is striking: when the South African economy was liberalised by the ANC government in the 1990s, the restructuring which ensued further benefited the historically strong capitalists, who were able to shift many of their assets out of the country, resulting in (continuously) high rates of capital flight (Ashman, Fine, and Newman 2011).
This issue attempts to unpack the concurrent political, economic and social dynamics of neoliberal deepening under a democratic regime, thereby shedding light on the complex unfolding and idiosyncrasies of neoliberalism in post-apartheid South Africa. The issue thus opens on an enquiry into the making and unmaking of the most decisive yet under-researched policy choices of the post-apartheid period: the MERG, which represented the unique – if short-lived – exploration of an alternative macro-economic agenda for South Africa. Based on a series of interviews and the study of unpublished archives and personal records, Bill Freund's enquiry into the politics of MERG documents the state of economic policy thinking at the time the ANC decided to enter negotiations. He shows the institutional and political constraints under which MERG operated and establishes a fine sociology of the ANC's shift to neoliberalism. He provides a detailed analysis and assessment of MERG's proposals, in the context of the options available to the ANC in the transition period. Not only does Freund help us to understand the specific choices made and their proponents and opponents, he also helps appraise MERG's emphasis on social expenditures, infrastructure, and employment-driven growth, at a time when GEAR's unimpressive outcomes are now so broadly recognised domestically and internationally.
Following this historical analysis, Segatti and Pons-Vignon interrogate the resilience of macro-economic orthodoxy post-GEAR and post-Mbeki, focusing on the role played by state reform in enforcing this. Examining macro-economic policy-making from the double perspective of political economy and technocratic capture, they draw on interviews with policy actors and content analysis. The article points to some of the key contradictions in macro-economic policy narratives. In the context of a conversion to neoclassical economics by key ANC leaders, and of remarkable personnel continuity in economic policy circles, the post-apartheid macro-economic policy framework emerges as an intangible superstructure, disconnected from micro policies. The concomitant administrative reform reveals the emergence of an increasingly powerful and hegemonic National Treasury which, far from marking the ‘leaning’ of the state, entrenches the power of vested interests over strategic economic choices.
Drawing on case studies from the Competition Commission, Gertrude Makhaya and Simon Roberts tackle the post-apartheid state's attempts to regulate access to economic opportunities and to limit concentration in core and emerging sectors: milling, telecommunications, and chemicals and fertilisers. The paper shows how liberalisation found its initial justification among the ANC leadership as a way to dismantle apartheid monopolies. However, the authors show the limitations of competition law: entrenched business interests have managed to protect their positions and even use competition law to their advantage. In total, while the competition regime has been relatively effective in uncovering and blocking the most overtly monopolistic behaviours, it has not been able to alter capital concentration in the economy or open and diversify access to markets for new entrants.
Firoz Khan turns to the politics and government of poverty through an examination of dominant narratives justifying policy positions on social transfers. Khan shows how South Africa's expanding system of social security payments is constitutive of neoliberal deepening. The article analyses the recasting of the ‘social’ and ‘citizenship’ with the aim to transform the poor into ‘morally responsible’, ‘community-oriented’ and ‘market-friendly’ citizens. Via textual analysis, interviews with policy designers in the public and civil society spheres, and the wider research and development practitioner community, Khan explores how the South African elite intend managing and containing the contradictions and tensions inherent to the social agenda of neoliberal deepening.
Karl von Holdt's article explores the significance of violence in reproducing and disrupting social order in South Africa. Drawing on ethnographic case study material, as well as interviews and press reports, von Holdt envisages three different kinds of violence: intra-elite violence; vigilantism and xenophobia; and state repression. He situates the question of violence within the continuities of economic policy, inequality and poverty pre- and post the transition to democracy, and argues that the emerging social order is profoundly unstable and marked by a proliferation of struggles over the distribution of power and wealth. Such contestations are not simply material struggles, but are simultaneously struggles over meaning and symbolic order; this, however, does not necessarily imply that an alternative and more inclusive order is likely to emerge. On the contrary, contestation is generating processes of fragmentation and antagonistic local solidarities, simultaneously undermining the coherence of the state and the meaning of ‘law’.
Finally, Peter Alexander's piece hones in on the Marikana tragedy and argues that it constitutes a turning point in South Africa's history. By weaving sociology and history into his analysis, he demonstrates that Marikana should be envisaged as a rupture in mobilisation patterns and motives. The sequence of events which followed the tragedy, notably a massive wave of strikes, is seen as evidence of profound structural changes within and beyond the mining sector with repercussions reshaping the condition of the working class in South Africa, particularly in relation with capital and the ruling party.
Three briefing papers bring more depth and breadth to the understanding of post-apartheid South Africa. Raphaël Botiveau offers a critical insight on the ANC's experience in power since 1994, with a focus on the evolution of the Tripartite Alliance and, in particular, the relation between the party and trade unions. In the light of 2012 and 2013 mobilisations in the mining and agricultural sectors, Botiveau examines the reasons for COSATU's continued allegiance to the ANC at a time when the Federation is constantly being marginalised politically and struggles to make its demands heard. Miriam Di Paola and Nicolas Pons-Vignon analyse the restructuring of the labour market, showing that it has reproduced the broader dominance of capital over labour. The emphasis on collective bargaining has not allowed unions to obtain better conditions for workers, as their workplace strength has been undermined by widespread casualisation. Crispen Chinguno raises the question of the rupture of the post-apartheid workplace order through an enquiry into the 2012 strike violence in the mining sector. Drawing on an ethnographic study of the workers' response to violence, he argues that the ongoing reconstruction of a new workplace order is very precarious, and characterised by poverty, inequality and fragmentation.