The significance of myopia

In a recent article, "Road to SA's radical economic transformation is far and elusive", Business Report, 25 February 2015, Xolani Qubeka, Secretary-General of the Black Business Council wrote that:

"While (the economy) appeared to be strong and effective under apartheid, it is because it was an illusion. It was a phantom that was based not only on a lie, but one that thrived on dishonesty and perpetually stealing from the majority and the poor to heap and pile the rewards and benefits for a minority. That is why every white South African is privileged, even those who have today slid into the abyss of poverty...White industry captains are not alone in their unwarranted need to protect their gains. They are in the good company of some of the earlier BEE beneficiaries, who continue to deny that they are beneficiaries of BEE or even affirmative action....this is an unambiguous appeal and clarion call to white business to bring their lot to the table in a very genuine fashion."

The first sentence above is remarkable enough. However, what distinguishes Mr  Qubeka's contribution is not just his complete lack of factual knowledge - in effect, he makes it up as he goes along - but an entire absence of economic understanding which is quite striking in someone who claims to be involved in business. It is clear that he is race-obsessed and he bends everything he says to his own particular racial illusions. Yet the one thing every entrepreneur needs is a rigorous respect for fact. The consumers are what they are, the market is what it is. Anyone who tries to manipulate those realities to suit any ideology will inevitably go bust.

How to understand Mr Qubeka's extended bleat? Perhaps the key is his repeated attacks on established BEE beneficiaries. In effect what Mr Qubeka is saying is "To hell with these guys who have already benefited from BEE. What about guys like me still on the way up? We want to be rich too." Once one has grasped that, one has grasped everything. His is the attitude of someone who still wants to be bought off with some massive BEE deal. All the anger and passion derives from that.

The great anxiety of such folk is that the era of such giant BEE takeaways may be over. No one now thinks that BEE achieved much. White business is fed up with it and even the government seems to have lost much of its enthusiasm. Where does that leave people like Mr Qubeka who sincerely want to be rich? He clearly dreams of what is often referred to as "an economic Codesa" in which white fat cats will "come to the table" ready to give it all away in the same way that De Klerk gave power away. Dream on.

Given his deficiencies, why bother with people like Mr Qubeka at all? The reason is twofold.  First, it is important to lay out the more factual history of it all. Which is that in 1994 the ANC benefited from its inheritance of a relatively well managed patrimony. The infrastructure was world-class, the civil service was reasonably competent and not often corrupt, the economy was highly developed with productive farms and better than food self-sufficiency, mines run on a best-practice model and a powerful financial sector led by wholly South African banks and insurance companies.

Beyond that, the country possessed considerable human capital - many fine academics, medical scientists, geologists, engineers, architects and others. This was true even at municipal level where even many smaller municipalities possessed an imposing array of skills. For its first years in power the ANC was able to coast on this inheritance. This is one reason why the Mandela years seem rosy in retrospect.

But the worm was in the apple. The most destructive piece of legislation was the Equity Employment Act which soon destroyed the civil service and every municipal administration. This occurred under Mandela. Mbeki - effectively his prime minister - was warned: this could break the country because your supply line is broken. Black education is in such a dire state that there is no clear supply of competent black professionals to fill these posts. His key advisers warned him that his best bet was to keep all the expertise he had inherited in position for as long as possible. To which Mbeki essentially replied "But there are so many people who want those jobs and we have to satisfy them. As for education, we know we have to fix it."

This is what people say who don't understand that fixing education is a labour of Hercules, requiring immense political will over a period of years. It was so much easier in exile where you could just say, OK comrades, those in favour of fixing education...? And then move on to the next subject.

The increasing disillusionment of voters - both white and black - with the ANC stems more than anything else from the wearing down and out of this inheritance. Zuma is now bearing the brunt for idiotic steps taken under Mandela and Mbeki as well as by his own administration. And whatever Mr Qubeka says, voters know perfectly well that the roads and railways were better maintained under apartheid, as was the electricity system, and as was law and order. And unemployment was then only a fraction of what it is now. The ANC wants desperately to say that it has "a good story to tell" but actually it doesn't at all. It has been like a spendthrift younger son, squandering his patrimony and, after twenty-one years, with almost nothing to show for it.

Just think, when the ANC came to power Eskom had 25-40% excess capacity. The only two power plants built in the last 21 years were those commissioned by the Nats. We hear a lot of grumbling that the government now faces a situation in which many power stations are thirty years old or more. But that means they were only nine years old when the ANC came to power. The roads have been allowed to deteriorate, the traffic lights frequently don't work and in Jo'burg there are open manholes without lids in many of the roads.

Our once-efficient ports and airports now have some of the highest charges in the world, deterring partners and investors. AgriSA has more than once said how lucky the ANC has been that it has not had to manage a major drought. Well, now its chance has arrived and the government has failed completely. All the desperate warnings by farmers over the past year about the need for drought relief were disregarded. It remains to be seen if we can get through the consequent maize shortage without major xenophobic riots.

Even if South Africa manages to buy white maize on world markets, "does SA still have the infrastructure to import maize from the coast by rail?" asks the economist, Fanie Brink, concluding that probably the broken-down state of the railways would compel the government to ship maize, much more expensively, by road. Yet the railways were in a perfectly functional state in 1994. One could go on. The police, the army, navy and air force, the civil service, the teachers, municipalities, the universities - which of them were not stronger in 1994 than they are today?

The point is that South Africa, on so many fronts, is now nearing a crunch. The running down of the patrimony has now largely exhausted the possibilities for quick gains by the new elite. At the same time the state is beginning to go bust. Already PetroSA has had to give up its plans to buy Engen or to build a new refinery. Soon the government will have to accept that the NHI is a pipe-dream.

At the moment it is still in denial, saying (for example) that it won't sell off Telkom to pay Eskom's debts. But before long it will have to meet those debts and then it will suddenly realise that it just hopes someone will buy Telkom. Faced with this looming crunch, Finance Minister Nene has opted to increase taxes because he knows that he can't make his fellow-ministers reduce their spending.

And this is the second reason for Mr Qubeka's significance. For he is quite symptomatic of the black elite, government ministers included. They all still live in never-never land and will be the very last ones to realise that the party is over. This is important because one might have thought that as the crunch nears the elite might become a little scared and more cautious. Not a bit of it.

The civil service and municipal workers' unions are being offered 4.8% and the municipal workers 4.4% (by SALGA), which was last year's inflation rate. They are demanding 15% and are livid that the government has in both cases reduced their offer. This is a clear sign of the shoe is pinching for the government. The unions say, rightly, that there is almost no precedent for an employer actually reducing its offer as negotiations proceed.

Similarly, Mr Qubeka clearly wants large companies which sold huge chunks of their equity at a discount in order to comply with BEE rules to repeat the exercise all over again now that their BEE partners have cashed out their share. The fact that no company can keep giving away its equity without going bust does not concern Mr Quebeka. He just wants them to "come to the table" and do it all again.

Similarly, if the public sector workers were to get their 15% the result would be an immediate credit downgrade to junk bond level, forcing huge cuts in government spending elsewhere and, almost certainly, a major financial crisis resulting in higher unemployment. The public sector workers are at one with Mr Qubeka about this: their response, in effect, is just "show me the money".

The black elite's selfish myopia is in itself a major force in the unfolding drama. Nobody at that level seems to have taken on board the fact that South Africa is heading for a crunch.  We could be only months away from the credit downgrade to junk bond status which would unleash a financial crisis which ends in an IMF bail-out.

Take that together with the government's move against the largest and most productive commercial farmers together with the impending maize shortage and much higher maize prices and you have a recipe for a melt-down of central government authority amidst xenophobic and food riots, with neither the police nor the army in any position to do much to stop them. The question then is really what happens next. One cannot even guarantee national unity. Some provinces might decide that the breakdown of central government authority means that they can - and must - go it alone.

And make no mistake, it is the central government whose neck is on the chopping block. A downgrade to junk bond status, let alone an IMF bail-out, would, like the electricity crisis, be unmistakeable signs that the experiment in ANC government begun under Mandela has comprehensively failed. Everyone knows that such failures did not happen before 1994. If, in addition to that, the government proves incapable of preventing food prices shooting up and possibly even absolute food shortages, there will be more and more angry people demanding to know where is the electricity, where is the water, where are the jobs, and where is affordable food?

The combination of such shortages with high-level and quite evident corruption will be the clearest possible sign that the ANC promise of "a better life for all" was a false prospectus. In such a climate opposition parties thrive, government authority collapses and, if past experience is anything to go by, there will be growing public disorder which, inevitably, will turn to xenophobic rioting.

If the central government loses authority, where does it go? In some countries it would go towards the election of an Opposition government but it seems certain that in South African conditions this will occur with an ANC majority still in power. So where does it go? Probably not to the provinces which are usually in a state little better than the central government. It is far more likely that authority and initiative will flow down to the metropoles and major cities.

At the same time individuals of all races will attempt to take back some of the power previously delegated to government. This has already been happening for some time with the increasing privatization of security, health, education and even water-supply. More and more people will generate their own electricity and they will also try hard to pay less tax, by fair means and foul. Already, as we know, many large black townships don't pay much or at all for their rates and electricity, a habit which could spread.

The key question is what happens in the five metropoles (Pretoria, Johannesburg, Ekhuruleni, Durban and Cape Town) and, to a much lesser extent, in the smaller cities of Bloemfontein, Pietermaritzburg, East London and Port Elizabeth. The major cities have much larger budgets and local civil services than the provinces, making devolution to them almost inevitable. Take water and electricity, for example. Every metropole knows that it cannot survive without adequate supplies of both so, despite the existence of Eskom and the Department of Water Affairs, they will be increasingly driven to secure their own supply.

After all, many private companies now generate much or all of their own electricity, so why shouldn't a metropole set up such a company of its own? Already we find a number of towns building their own desalination plants to aid their own water supply and such ventures could grow. Already there are moves by some metropoles to provide city-wide internet connectivity. Similarly, a city might hire a private security firm to give it, in effect, its own para-police force. When Hennie Bester ran the DA in Cape Town his motto was "in the end power and authority will flow to where there is capacity and initiative". This remains true.

If, however, the cities are to take over what were previously central government duties, the corollary would have to be that citizens paid an increasing share of their taxes to the city, not the central state. This would, doubtless, be resisted - in effect it would mean that the federalism which the ANC rejected at Codesa was returning through the back door due to central government incapacity. But it is not clear that this resistance could endure if enough citizens backed such a transfer, particularly if the government remained or became more incapable. This is, after all, what has happened in much of Africa where the central state does very little and ends up simply controlling the road from the presidential palace to the airport.

This also means that more than ever will depend on the quality of city leadership. Until recently the tendency was to look to Cape Town but under Patricia de Lille's mayoralty this has ceased to be true. There has been a tendency for cronyism to creep back in. There is the alarming fact that the first thing that greets one at Cape Town airport is a large picture of the mayor and that such self-advertisements have begun to proliferate elsewhere - something that did not happen even during the reign of Nomaindia Mfeketo. And de Lille has already broken the rule of single-term mayors.

What is certain is that Cape Town, like all the other metropoles, is going to need far better leadership if it is to face up to the challenges it will increasingly face.

Of course, if the metropoles are poorly led, they will fail to face the challenge. What happens next may be seen in Nairobi in Kenya where power has often been devolved to local suburbs. But this only works in affluent suburbs like Karen (named, sadly somehow, after Karen Blixen) and it means that poor areas like Kibera - the biggest slum in Africa and possibly the world, housing a million people - go to the wall. This is what would happen in Cape Town or any other metropole that persists with bad leadership.

If one wants to retain any sense of community or inter-racial cohesion, one has to prevent this sort of breakdown into suburban self-government.

The final stage of such devolution may be seen in countries like the DRC or Zimbabwe where the central state provides nothing at all and all other organs of government have collapsed or nearly so. At that stage the individual rich buy themselves what they want and poorer people flee to other countries. This would hardly work as a model for South Africa. Where would the poor flee? Botswana? Namibia? Antarctica?

As can be seen, despite the desperate and often indignant critiques of government now, there is still a considerable way to go on the descensus ad infernum, though there is no need to accept this as inevitable. Meanwhile it is fascinating to see how individuals like Mr Qubeka may think they are arguing for one thing are actually plumping for something quite different. It is a bit like the decision against nuclear power in Germany.

 Those who voted for this thought they were just getting rid of radiation risks. In fact they were voting for dependence on Russian gas and a corresponding inability to stand up against Mr Putin. If you think of it, it is Germany's vote against nuclear which has doomed Ukraine.

One is reminded of Marx's strictures against the French bourgeoisie who, he said, could not see their overall class interest, only their selfish individual interest - so French railways were built higgledy-piggledy, to gratify individual landowners, while British railways were built in much straighter lines to satisfy the interests of the bourgeois class as a whole.

Marx's strictures are entirely applicable to the ANC. In effect they have been trying to build a new ruling class based upon the black bourgeoisie but this effort has been shot through with contradictions, with individual interests almost invariably trumping community or class interest, with many of its members misguidedly still campaigning for the socialist rhetoric which was the necessary path to power, and now even with increasing concessions to feudal African chieftains and kings.

The real winners have been the various individuals who have made a fortune in the midst of this confusion. Not the least interesting feature of the present situation is the fact that one of this tiny group of "winners" - Cyril Ramaphosa - seems increasingly geared up to be the next President. Should this happen, the real question will be whether he succeeds in completing the African bourgeois revolution, abandoning socialism and the triple alliance in favour of an unmistakeably middle-class led society - or whether he temporizes and watches power and authority dribble away.

RW Johnson

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