Political reflections on NEDLAC
8 December 2020
South Africa’s economy is crashing, with a Depression (i.e., greater than 10%negative GDP) widely anticipated for the full year of 2020. This catastrophe – partlydue to the Covid-19 lockdown and partly due to pre-existing conditions of capitalistcrisis – follows recessionary periods during most of the time since President CyrilRamaphosa took over in February 2018, as the supposed economic saviour after thenine lost years of Jacob Zuma’s rule.
Poor and working people are suffering like never before in our memory. The phaseoutof the lockdown period has given Treasury an excuse to start cutting all thesocial wage increments – no matter how ungenerous they have been – such as theR350/month grant to those who lost incomes due to lockdown as well as smallincrements to child and elder grants. And end of the (poorly-regulated) protectionsagainst eviction, foreclosures and debt defaults due to Covid-19 are also causingchaos.
Indeed, the conditions are so dire in part because Ramaphosa has no desire – orability – to change the ghastly capitalist status quo. The society desperately needsmajor changes that neither the government’s Economic Reconstruction and Recovery– from the “Economic Sectors, Investment, Employment and InfrastructureDevelopment” cluster – nor NEDLAC’s own plan, are willing to promote.
Therefore, in this leadership void, we are witnessing economic policy drift,characterised by• an austerity-minded Treasury that sabotaged Ramaphosa’s supposed R500billion fiscal stimulus, reducing it by more than 90%, therefore contributing tothe 17% collapse of GDP in the 2nd quarter;
- excessively high interest rates (e.g. a 7% prime rate for even the biggest
corporate borrowers) as the SA Reserve Bank has apparently ended its briefflirtation with monetary easing, even though inflation is well below 3%, andmassive consumer and business debt crises have begun;
- unregulated Illicit Financial Flows which even before Covid-19 were 3-7% ofGDP according to Treasury’s own Financial Intelligence Centre, not tomention many other forms of corruption and theft that left South Africa’scorporations rated second (tied with China, only behind India) in the PwC2020 Economic Crimes survey;
- a failure to address South Africa’s extreme levels of economic corruption,especially in the corporate sector;
- infrastructure spending that appears to reflect many of the worst, whiteelephant,capital-intensive tendencies in the pre-Covid-19 economy; and
- a complete void of imaginative strategies for industrial policy, labour policy,social policy and environmental policy, so urgently needed to help SouthAfrican truly ‘Build Back Better’ through a genuine ‘Just Transition.’
Economic policy is, in reality, dictated by the neoliberal power bloc in Pretoria, andis backed repeatedly by the ANC’s Economic Transformation Committee, by itsnational congresses, by its national executive, and by its parliamentarians. Toillustrate how these broad ANC structures permit the neoliberal bloc to operatefreely, the International Monetary Fund offered a loan in August 2020 – generatingrhetorical resistance from both inside the ANC and its Alliance partners. However,this resistance was simply ignored by the broader structures. Indeed, all thatTreasury needed to do satisfy the IMF that the $4.3 billion loan would be repaid – byway of self-imposed structural adjustment conditionality - was to table its June 2020special budget as a sign of its extreme hostility to the working class. The ANC,whether in the party structures or in parliament, simply let this travesty continue.
The ANC thus leaves a perception that there may be resistance to neoliberalismwithin, but this is posturing, as the neoliberal bloc enjoy such confidence from theorganisation, that they do not even mind being cited by capitalist elites as their closeallies.
Indeed, on October 6, Anglo American chief executive Mark Cutifani spoke at theJohannesburg Indaba dominated by transnational mining corporations, applauding“Finance Minister Tito Mboweni’s measures to facilitate cross-border financialtransactions to provide South African multinational companies with the flexibility tooptimally manage cash resources.” Anglo American is a London (formerlyJohannesburg) company when it comes to Cutifani’s real objective: vacuuming itscash out of South Africa.
Cutifani is able to do so thanks to Mboweni’s predecessors Trevor Manuel and ChrisStals, who in 1999 allowed the firm – once Africa’s largest – to relocate its apartheideraloot to a notorious tax haven, the City of London. The same happened a year agowith the largest company in Africa’s history, Naspers, when it offshored its ‘Prosus’share of Chinese IT firm Tencent (worth more than $150 billion) to Amsterdam. Theresult is a balance of payments crisis due to the rerouting of profits and dividends,and hence ever worse current account deficits until, in a post-ANC post-neoliberalgovernment, exchange controls will finally be tightened to prevent this sort ofcapital flight.
Mboweni’s role at the Reserve Bank and now at Treasury included liberalizing exchange controls, as well as failing to implement existing laws, such as againstmanipulating the Rand. At least 17 commercial banks have been caught red-handedin this manipulation when their WhatsApp gossip about it was leaked. In prioryears, Citibank and Standard Chartered paid substantial fines for manipulating theRand and last week, JP Morgan was also fined $920 million for the same crime – butin each case the money went to U.S. authorities in Washington, DC. Thus, norevenue from these punishments flows to Pretoria, to relieve South Africantaxpayers.
Mboweni is not interested in taking forward the Competition Commission’sprosecution of these banks. Indeed, Treasury’s pro-corporate bias was also revealedwhen it cut the main company tax rate from 52% in 1992 to 28% today with noresulting improvement in corporate investment. So the working class simply has nofaith in the existing economic policy-making apparatus.
The Presidency offers no relief, in spite of occasional pronouncements – such as May31 when Ramaphosa spoke to the country’s leading media editors – about a neweconomy that will allegedly be more localized, appropriately industrialised,environmentally sound, socially caring, and more sensitive to the new internationaleconomic disorder.
In this context, NEDLAC provided an economic recovery strategy amenable to theANC, big business and the largest section of organised labour, which are the threetrade union federations represented in NEDLAC: COSATU, FEDUSA and NACTU.
Ramaphosa’s plan is similar, but as he said on October 7, “Such a plan can only beimplemented and have the desired outcomes if all sections of society are mobilized to play their role in its implementation and monitoring. The social compact mustinvolve social partners through the NEDLAC structure.”
But in drawing up such a plan, as well as implementing and monitoring it, whatabout those in society left out of NEDLAC, and in SAFTU’s case, specifically excluded?
We also note the absence of the C19 People’s Coalition which includes many of thesocial movements, NGOs and community organisations working hard to defeatCovid-19 – and by no means are they represented in the NEDLAC CommunityConstituency.
NEDLAC’s fail
The NEDLAC strategy that big business, big labour and the representatives of biggovernment had agreed upon in deliberations during July-September is useless.
Worse, it will create a damaging wedge between organised workers among theformally employed on the one hand, and the vast precariat on the other. The latter,the ‘precarious proletariat,’ represents the majority of South Africa’s 39 millionpeople of working age. Of these, 60% were recognised to be in the labour force inMarch, but by June, the ratio had crashed to an unprecedented low 47% (if StatsSAphone-call surveying is to be taken seriously).
To offer a genuine ‘plan’ to solve a problem, it is vital to have clear principles, aneffective diagnosis of the problems faced, a sense of the resources available to solveit, a clear strategy, effective tactics, and the kinds of allies needed to generatesufficient power to make change. SAFTU leaders have no confidence that the mainactors – the Presidency and its economic cluster ministries (especially the Treasury)and NEDLAC – are committed to change, and have a clue about how to achieve it.
In NEDLAC’s 10 000-word commitment to “Economic Recovery Action” – the 18thversion (September 2020) – there is very little of genuine substance to encourageSouth Africa’s poor and working-class masses. NEDLAC has left behind workers;democratically-minded citizens, especially those concerned with extreme corruptionin the private and public sectors; women activists demanding their needs be givenpriority; youth, especially those without a future due to mass unemployment andthe climate crisis; and environmentally-aware South Africans, especially given theecological catastrophe so visible in the Eastern Cape where the major city – NelsonMandela Bay – hit Day Zero and recently ran out of sufficient water to meet basicneeds.
There appear, in NEDLAC’s long list of economic aspirations and actions, a greatmany well-crafted phrases that reflect South Africa’s massive developmental gaps.
Yet weasel words abound, so each one of the demands needs to be unpacked.
For example, in discussing “Macro-economic stability, particularly fiscalsustainability,” there is an agreement to “ensure fiscal prudence including themanagement of wage bill.” Yet by following this very philosophy, Treasuryembarked upon what SAFTU and other labour federations consider to be an illegalabrogation of a three-year salary increment deal with civil servants, and must nowdefend this in the courts, as well as in the streets – such as the October 7 strike.
For more examples of the weasel words among the platitudes, consider NEDLAC’sthree focus areas:
“1. Aggressive infrastructure investment”
This phrase could very well mean a recommitment to the mega-projects already inprocess, especially the ones that will worsen capital-intensity, corruption, carbonemissions and export vulnerability to the world economy, given that so much of themain parastatals’ recent infrastructure projects have resulted in appallingwastefulness and ecological devastation.
These include Medupi and Kusile coal-fired power plants; the South China Raillocomotive purchase for the massive coal-export rail line expansion; the Durbanport-petrochemical expansion including the highly vulnerable pipeline toJohannesburg, and many now proposed. There are hundreds of billions of randsalready committed to disastrous white-elephant infrastructure that will make the tenempty money-losing 2010 soccer stadiums look like good investments incomparison.
A clear example is the privatised renewable electricity that ended up beingmassively expensive per kilowatt hour and that leads to most profit repatriationgoing to Europe, with no efforts visible to provide publicly-financed, sociallyowned,decentralised solar and wind energy with connections back to the nationalgrid.
Because NEDLAC does not specify the problems with the existing infrastructure, thenext round of mega-projects is anticipated to include a massive coal-firedpowerplant and subsidised bulk systems for Musina Makhado Special EconomicZone to be run entirely by Chinese capital; a massive national gas pipeline – with allthe attendant methane leakage risks – that will depend upon fracking anddangerous offshore drilling; a new highway through hotly-contested sites on theWild Coast that will mainly help an Australian mining house; unnecessary highwaywideningaround Durban; and Rosatom nuclear energy reactors, whose deals date tothe Zupta-era pressures put on the president when in 2014 he was recovering frompoisoning in Moscow.
Other megaprojects such as new cities are either fanciful or placed even further fromcentral city areas than existing townships – such as Mooilkoof in Gauteng, on thefar-eastern periphery – or instead fall victim to downward raiding of the housing byhigher income groups – such as already experienced in Century City in Cape Townor Durban’s Tongaat.
In short, SAFTU is desperate to see very different strategies, based on basic-needsinfrastructure that the poor and working masses complain about more and more:well-located housing with clean water and water-borne sanitation, dependablesupplies of electricity and internet access, reliable commuter rail and safe kombitransport, good local roads with stormwater drainage, street lights to allow forgreater safety, quality schools and creches, more clinics and community centres, awell-functioning state policing and judicial infrastructure, recreational sites, anexpansion of the Post Office (including financial services), easily accessible shoppingand community amenities.
Moreover, these all need regular maintenance and municipal cleaning, plusretrofitting of our communities to deal with climate change. That in turn wouldrequire innovations such as worker self-managed, community-controlled renewableenergy systems, and the production of much more resilient infrastructure – such aswater supply and storm-water drainage systems – so that droughts and floods donot continue to leave us in crisis. These much-needed components are simply notforegrounded in the NEDLAC or government plans.
“2. Employment orientated strategic localisation, re-industrialisation and exportpromotion”
These ideas are incoherent. Either an economy embraces a ‘delinking’ philosophythat protects local industry from international competition or engages in exports atall costs when politicians sign free-trade agreements. Because the latter strategycancels out the former, it is practically impossible to do both.
During the 1930s, South Africa’s localisation strategy was borne of necessity thanksto the Great Depression and then World War II, and this was the period of thecountry’s fastest and deepest industrialisation. But the globalisation plusdeindustrialisation policy adopted by the National Party and African NationalCongress governments during the 1990s wrecked South Africa’s clothing, footwear,textiles, appliances, electronics and other major labour-intensive sectors that couldnot withstand ultra-cheap East Asian goods.
That is why countries must usually choose one or the other route, because if welocalise to reindustrialise, we risk breaking major international trade agreements andwill perhaps suffer potential expulsion from the WTO. To reindustrialise may,however, require exactly that level of delinking: breaking from the already-decliningglobal value chains that impose excessive specialisation and, as we learned in 2020,terrible vulnerability to a world economy in recession.
There is, of course, a potential resolution of the contradiction, in the event theAfrican Continental Free Trade Agreement allows South African revitalized manufacturing to suddenly emerge and conquer the continent’s billion-strongconsumer market. But in turn, that would assume that South Africa would not haveto compete with East Asian, Indian, European and U.S. manufacturers across thecontinent, but nearly all African governments have agreed to Free Trade deals withthese states, and there is no reason these governments will end the preferential dealsthey have with the larger players.
Recall that in 2015 when South African poultry farmers tried to restrict U.S. imports,President Obama forced Jacob Zuma to back down and allow the subsidised, overchlorinatedbird parts into the country, thus lowering jobs. And whether Trump orBiden prevail in the U.S. election, that same pressure – under the African Growthand Opportunity Act – will continue to be imposed on African importers. And SouthAfrica has nothing like the power that the U.S. wields on behalf of its majorcorporations.
“3. Enabling conditions and a supportive policy environment”
What this usually means, when one delves deeper than the platitudes on offer, isprovision of generous subsidies – such as the R200 billion made available to banks asa guarantee on lending – and deregulation for big business.
This is why the NEDLAC framework for economic recovery as it currently stands isa bad deal and needs replacement.
And SAFTU’s criticism of it is a reflection of why NEDLAC changed its rules in 2017when SAFTU was on the verge of joining – shutting out critical voices with moregenuine concern for the welfare of workers, society and the environment.
NEDLAC as a site of comrade co-optation in the energy sector
We have reviewed the context for the economic recovery strategies and also reasonswhy NEDLAC has fallen into disrepair as a site of negotiations. NEDLAC’suselessness is especially evident when, away from the elite hallways of Rosebank, itssignatories are now attempting to intervene in the daily life of townships and shacksettlement residents. Perhaps most dangerously on this terrain, the NEDLACdocument claims, “Labour and community have committed to mobilising theirconstituencies in support of government infrastructure programmes.”
What does this mean? In the separate agreement dealing with Eskom, the NEDLACsocial partners agree:
“Social partners will support dedicated unit/s to remove illegal connections andprosecute offenders. The Community constituency must commit to working with lawenforcement agencies to combat and remove illegal connections, and support theinstallation of pre-paid meters in all dwellings. The installation of pre-paid metersmust be implemented for all consumers across the country and the Masakhanecampaign must be broadened to facilitate this. Pre-paid meter equipment should bedesignated and manufactured locally. Social partners agree to expedite the building ofa local pre-paid meter equipment manufacturing industry.”
What NEDLAC is describing is an extremely controversial strategy associated withEskom’s neoliberalism and commodification: to promote pre-paid electricity metersand disconnections of those in townships and impoverished municipalities whocannot pay the ridiculously expensive and often wildly inaccurate bills.
The only relief they offer the poor, whose electricity bills have skyrocketed 400%since 2007 largely because of African National Congress corruption associated withcoal-fired electricity plants Medupi and Kusile, is a vague commitment to relook atthe 50 kWh per month free electricity supply.
Given the fiscal crises in Eskom and municipalities, and given the willingness of thenew Eskom CEO to disconnect black people’s electricity lifeline, it would be foolishto think the NEDLAC Labour and Community constituencies can change thebalance of forces and improve the 50 kWh, now that they have endorsed the policingof disconnections.
The free lifeline electricity supply of 50 kWh/month is definitely not being providedto most poor and working people since it requires a means test that, for informalworkers with erratic incomes and no pay slips or bank accounts, is administrativelyabsurd. Worse, Eskom is engaged in ‘load reduction’ that cuts off the electricitysupply to entire district and local municipalities, township sections and shacksettlements, including those who are paying, in the same spirit the apartheid regimeengaged in ‘collective punishment’ of freedom fighters and their broader hostcommunities.
NEDLAC/Eskom/DME energy fumbles
To make matters worse, the NEDLAC social partners – including misguided labourrepresentatives – have made pro-privatisation commitments that will hurt workers,including “Separating and unbundling Eskom to eliminate cross subsidisation.”
But the potential to cross-subsidise (i.e., charge some customers more than others,especially if they are consuming too much) so as to assure a lifeline supply to allSouth Africans is vital to making electricity a true human right. The wealthy whouse many hundreds of kiloWatt hours each month should pay more per unit, so theylearn to reduce consumption (which is still nearly entirely fuelled by burning coal),and so that every month, everyone in South Africa has at least 100 kWh/capita (notthe current 50 kWh/household). If you use more than a reasonable basic amount,you should pay much more for each additional unit: cross-subsidisation.
NEDLAC also commits to “The implementation of the Integrated Resource Plan toensure the diversification of South Africa’s energy sources.” That apparently means:
- supporting the IRP’s commitment to the corruption-riddled $100 billion IngaHydropower project on the Congo River near the Atlantic Ocean, even
though electricity transmission lines will be highly vulnerable to disruption asthey cross the Democratic Republic of the Congo;
- supporting nuclear energy, even though this proved a disastrous distractionwhen Rosatom worked closely with the Guptas and Jacob Zuma to do a $100billion deal for eight generators in 2014-18, starting when Zuma wasrecovering from poisoning in Moscow;
- supporting yet more fossil fuel expansion – including dangerous fracking andoffshore gas supplies, and also new coal-fired power plants;
- supporting a model for renewable energy based upon privatised electricitygeneration, a model that is unacceptable given that clean energy is a publicgood with many implications for public health, gender equity and equitablecommunity development – none of which the European suppliers of solar andwind power have an intrinsic interest in promoting.
And in spite of all the evidence of climate chaos that has mounted across the world,NEDLAC promotes new “liquid natural gas terminals at Coega followed byRichards Bay and Saldanha.” The risk of methane leakage and combustion of gastogether make this strategy incompatible with South Africa’s international
obligations to halt and reverse greenhouse gas emissions in coming years.
As if to prove the ongoing relevance of the phrase “Minerals-Energy Complex,”NEDLAC’s strategy also exhibits an extreme fetish for mining and exporting rawminerals:
“The social partners recognise the significance of the mining sector for stimulatinghigher inclusive growth by, inter alia, improving investor sentiment and developingnew investible projects for the medium and long term. They thus commit to:
(a) Jointly develop a new competitive exploration strategy within three months totarget three percent of global exploration expenditure; and
(b) Reduce, by fifty per cent, the current timeframes for mining, prospecting andenvironmental licenses.”
This will result in many more community and environmental conflicts and delay agenuinely Just Transition to a post-carbon economy. SAFTU recognises “the Right toSay No!” to the destruction of local lands, livelihoods and cultures by themultinational corporate cowboys which dominate the mining sector. So forNEDLAC to bend over backwards to transnational corporate interests, in order togain (a highly unrealistic) three percent of all global mining investment, and to do soby deregulating mining licenses – in a context of extreme abuse and a failure toensure rudimentary environmental stewardship – will be a travesty.
NEDLAC as a site of corporate criminality
NEDLAC does make progress on a few fronts where SAFTU has complained aboutneoliberal economic policy: “Social partners recognise that localisation and importreplacement have significant potential for job retention and creation, thedevelopment of new SMMEs and start ups and the initiation of new technologyplatforms that can strengthen South Africa’s human resource endowment. Further,import replacement lowers South Africa’s vulnerability to global value-chaindisruptions in strategic sectors.” That vulnerability is acute, given the year-on-yearcatastrophic decline in the economies of our main trading partners, includingEurope, the U.S., China and India.
In addition, NEDLAC’s document does at least recognise how severe thedegeneration of state and corporate elites has been:
“Corruption and criminality across all spheres of society pose the biggest threat torecovering and rebuilding our economy and society. The social partners recognise thatevery citizen has a role to play in ensuring an ethical private sector and civil society,clean government and combatting corruption wherever it occurs… Businessorganisations taking firm and decisive action, together with law enforcementagencies, against private companies and professional services firms in the businesscommunity that facilitate collusion and corruption, including state capture…Implementation of the joint National Anti-Corruption Strategy which will includeimproved transparency, monitoring, accountability, speedy and decisive consequencemanagement, protection of whistle blowers, lifestyle audits in the public and privatesector, ethics, meritocracy and professionalism in all sectors of society as well asdealing with systemic issues that can minimise corrupt practices.”
SAFTU recalls that at one point, in late 2017, there was indeed a concerted action bybig business to rid itself of one of the highest-profile transnational companiesworking in South Africa at that point: Bell Pottinger. The London public relationsfirm was forced into bankruptcy, entirely due to its role in the Zupta nexus(especially because of the category “White Monopoly Capital” that it popularized alongside Duduzane Zuma, which alienated another South African client, JohannRupert).
However, since then, and especially since Zuma fell in early 2018, there has beenonly a smattering of progress in tackling the epidemic of corporate corruption, theworld’s second worst case according to PwC’s 2020 Economic Crime survey.
Progress was made against a Limpopo-based bank, VBS, and several arrests havebeen made of its executives. However, it is revealing that white capitalists inSteinhoff and Tongaat Hulett, as well as their enablers in the major transnationalcorporate accounting firms, have not been prosecuted though the funds involvedwere far greater than at VBS and the cases are older.
This epidemic of corporate crime is something NEDLAC seems hesitant to name andshame, even though, as PwC explained, company leaders are increasinglyresponsible for corrupting the state:
“Given the spate of recent scandals in South Africa, both in the public and privatesectors, it is no surprise that organisations consider bribery and corruption to be themost serious economic crime to affect businesses. This, combined with increasedinvolvement of senior management in perpetrating such acts, has resulted in a sharpincrease in the value of losses incurred as a result. The level of involvement of seniormanagement as the main perpetrator escalated from 20% in 2018 to 34% in 2020.”
The NEDLAC critique of government and civil society corruption is just as weak,although the problems there are arguably nowhere near as severe as in corporateSouth Africa. While no civil society corruption index exists, the TransparencyInternational ranking of South Africa in 2020 was 128th most corrupt civil service andpolitical elite. Compared to #2 ranked corporate South Africa, the clear and presentdanger of criminality lies in Sandton, Stellenbosch, Cape Town and Umhlanga.
NEDLAC is nowhere near ready to acknowledge this obvious fact, by virtue of itsfailure to openly confront the corporate criminals that may now be penetrating itsoperations. Given the prevalence of criminality at the top rungs of corporate SouthAfrica, the very legitimacy of NEDLAC itself is in question, until it proves otherwise.
Discussion Point: The NEC has repeatedly said that while it is important that weform part of this institution but we must at the same never make a mistake ofbelieving that NEDLAC is designed to solve working class problems. What shouldbe SAFTU strategy and tactics in engaging with corporatist structure that hold a
danger to lull us into believing that it is a panacea for our challenges?
Issued by SAFTU, 8 December 2020
