WAITING FOR THE ANCIEN REGIME TO DIE (PART I)

A lesson from Gramsci

We are at a strange juncture in South Africa's history. As Antonio Gramsci wrote in the early 1920s, “The crisis consists precisely in the fact that the old is dying and the new cannot be born; in this interregnum a great variety of morbid symptoms appear”. Gramsci had seen the old Italy collapse in the First World War and believed passionately that a new, socialist Italy must be born. But for cultural reasons – the hegemonic hold of the Catholic church over the workers and the peasantry – this was impossible.

What Italy actually got was Mussolini, who threw Gramsci in prison where he died at the age of 46. He had a keen sense of the tragic. “History teaches”, he wrote, “but it has no pupils”. Indeed. Gramsci had been a member of the Turati (Left) wing of the Italian Socialist Party before it became the PCI. Some of his Turati comrades ended up joining Mussolini and, like Il Duce, were butchered by the Partisans.

In the South African case the old regime that is struggling to die is that of the ANC and SACP, all of whose formative ideas date from the 1950s and 1960s. The ANC that came to power in 1994 was largely the work of three men – Oliver Tambo (b.1917), Walter Sisulu (b.1912) and Nelson Mandela (b.1918) – who would not have been out of place in the era of African independence in the early 1960s but had no real grasp of post-1973, let alone post-Soviet realities. Mandela happily confessed to a complete ignorance of economics, clearly not understanding that this is an admission that no modern leader can make.

Unsurprisingly, the ANC opted for an etatiste model of the “developmental state” which creaked with age even when it was introduced.

That is “the old (which) is dying”. For it has failed quite spectacularly. In part this was because the ANC runs a patronage state and its clients eagerly exploited the possibilities of personal gain which governmental and parastatal structures afforded. But the party also had an old-fashioned devotion to state ownership, to industrialisation (actually, re-industrialisation), to the beneficiation of minerals and just to old technologies in general.

By the end of the Zuma period this mixture had produced runaway corruption, huge unemployment, growing inequality, de-industrialisation, almost no growth and steadily falling per capita incomes. By any reckoning this was completely disastrous and, by definition, unsustainable.

What “the new” is which wants to be born is less certain. At the moment the air is thick with plans to reform South Africa's economy in such a way as to make recourse to the IMF unnecessary. But its seems unlikely that the government will (a) agree on exactly what needs to be done (b) move with anything like the urgency required or (c) actually manage to get anything done.

On top of which, of course, any money handed to government to achieve any particular project has a high risk of leaking away due to theft, maladministration and BEE special deals. So it would be safer to assume that none of these plans will be effective in the now very limited time we have, although they will doubtless give birth to any number of new presidential task teams, committees, war rooms, commissions, summits and what have you. The main thing is, don't hold your breath.

The more likely debt crisis

So it seems far more likely – as the ratings agencies have already unanimously decided – that the ANC will instead guide South Africa into a sovereign debt crisis. What happens then depends on who wins the ensuing and inevitable battle within the ANC as to whether or not to apply to the IMF for a bailout. It may seem as if the forces against a bailout must win: Mboweni and the Reserve Bank would clearly – however reluctantly – see a bailout as inevitable and necessary, but the forces against a bailout are surely stronger and more numerous.

But that may be simplistic. For quite apart from the pros and cons of particular reforms, the argument would also be about whether South Africa was going to remain part of the international political economy – part of the modern world, if you like – or whether it would instead opt to stumble into a parochial, dark and immiserated little world of its own, like Zimbabwe or Venezuela. This latter prospect is so alarming that one would expect some rather unlikely figures to swing round in favour of an IMF application. In addition, of course, the government would come under strong international pressure not to throw away Mandela's legacy in favour of the Mugabe/Maduro option. Even the Chinese would doubtless choose that: they would prefer a viable partner to deal with.

If South Africa does take the bailout the end result is likely to be a slimmed down state with far fewer functions and a much smaller public service, together with the privatization of most of the SOEs and a much freer labour market.

After nearly thirty years of edging steadily leftwards, South Africa would then rebound sharply in a more market-oriented direction. Our politics would do the same, not only because the old policies would be discredited but because the SACP and Cosatu would emerge from such a process as mere shadows of their former selves. Provided – it's a big if – the government was keen to take advantage of the now much more competitive economy, the country might then enjoy a period of stronger economic growth.

Refusing the IMF

However, as we know, many within the ANC, as also Cosatu, the SACP and EFF are resolutely determined not to go near the IMF, no matter what – and there will be no difficulty in rounding up plenty of “progressive” economists to support them in this. For South Africa's sadly fallen universities have been in the vanguard of that long leftward swing and have been pumping out a highly politicized product for a whole generation now.

Instead the refuseniks will advocate more state control, more debt and more printing of money. No one should be surprised by the fact that some of those advocating this more socialist path will be notorious villains and crooks. Imagine, if you will, the nationalisation of more industries and the imposition as directors or CEOs on the resulting SOEs of the cronies of Ace Magashule, Floyd Shivambu or Julius Malema. The result will be more bankrupt SOEs and more very rich cronies.

It should be realised that if the ANC refuses to go to the IMF the alternative of a Chinese take-over recently floated by David Bullard does not really exist. China has been drawing in its horns, concentrating far more on its own development and it appears to have little appetite for pouring money away into hopeless Third World regimes. So if we refuse an IMF bailout the result is more likely to be a South African version of what we see in Zimbabwe (which is trying desperately to get an IMF bailout but can't).

This involves a small but highly privileged party elite retaining power by brute force in the midst of near-universal unemployment, hyper-inflation and ever-falling living standards for the population at large. For per capita incomes in Zimbabwe are now far lower than they were in 1960 and all the welfare gains not only of the early Mugabe period but of the colonial period too (good schooling, hospitals etc) have been wiped out.

Note that Zimbabwe did not reach this nightmare situation because anybody planned or wanted it: nobody ever said “wouldn't it be nice to have a ruined country with 90% unemployment”. It is, rather, the negative resultant of following other imperatives which had the effect of backing the country into a corner. Mugabe wanted to spend heavily on health and education but his talk of Marxist socialism frightened investors away. So there wasn't the economic growth to pay for those reforms. The result was economic stagnation, a ballooning debt and an IMF bail-out. But Mugabe hated having to follow IMF prescriptions and so kicked them out.

The resulting economic malaise saw Mugabe lose a popular referendum and it was clear that in a free election he would lose power. So he seized the commercial farms, tortured and beat the farmworkers who had dared to vote against him and rigged the elections. The resulting economic collapse and the complete lack of investment saw the Zimbabwe dollar founder, so Mugabe printed more and more money and tried to boss the economy with price controls.

He only got away with this because Mbeki supported him and because millions of Zimbabweans fled the country. And in the end even he didn't get away with it. Mnangagwa has meant more of the same. At each stage of this Calvary the key imperatives have merely been to preserve the privileges of the party elite and to ensure that they remain in power.

A lesson from Zimbabwe

To get the flavour of the result read Brezh Malaba in the Zimbabwean Independent (11 July 2020) writing about Vice President Kembo Mohadi, the MP for Beit Bridge, around whom the normal number of business scandals revolve:

“This week (Mohadi) stunned people in Matabeleland South when he said the economy is in bad shape because at independence white people did not train us on how to run it. I was astounded. 40 years of blaming white people. How did we get here?

Four decades after the end of racist settler rule, Zanu PF leaders continue blaming white people for this tattered economy while conveniently absolving themselves. It is a tragic failure of leadership. A former liberation movement has been reduced to a kleptocratic dictatorship with nothing to offer an increasingly young and restless population.

Mohadi's incredible statement is not the only example of Zanu PF's out-dated analogue politics in a dynamic digital world. Victor Matemadanda, the party's national commissar, elicited guffaws of ridicule on Wednesday when he claimed that Zimbabwe's imaginary Western enemies are co-ordinating an anti-government protest scheduled for July 31.

Can anyone tell me the “big idea” or the philosophical paradigm at the heart of today's version of Zanu PF? The tired outfit has no capacity to build a globally competitive developmental state in the 21st century.”

Mohadi's story is not actually true. At independence Ian Smith volunteered his services to Mugabe who gratefully accepted them. For many months Smith sat next to Mugabe every day as they went through government business with Smith drawing on his his experience from many years in government. For whatever his other demerits, Smith was a patriot who wanted his country to succeed. The two men got on extremely well until one morning Mugabe informed Smith that he was nationalising a whole slew of companies. Smith made his opposition clear whereupon Mugabe lost his temper, ending the relationship for good.

It is already possible to discern trends in South Africa which lead the same way. Not a few African nationalists would like to expropriate the white-owned farms here too. The National Command Council has seen the ANC elite enjoying power without responsibility, including the brutal use of the security forces against its own population. Per capita incomes have been falling ever since 2013 and Mboweni has publicly warned that all the gains of the democratic era (he means social grants, education and health spending) could be wiped out by rising debt. And, of course, our government is similarly lacking in capacity and competence.

A further point of comparison emerges from the recent report by SA Statistics which reveals that the median age of South Africans is 27. So our average citizen was born in 1993, has no memory of apartheid, and is very likely unemployed. Our population too is “increasingly young and restless”.

However, as I have argued elsewhere, no exact replication of Zimbabwe seems possible. Our government has little foresight but even it can see that the expropriation of white farmers would lead immediately to famine and huge social discontent. And there is nowhere south of us for desperate people to flee to.

In addition, the ANC's power rests centrally on its ability to keep paying social grants. It relies absolutely on the tax revenue from white South Africans and the private sector. If a large number of whites left, the government would collapse. (Zimbabwe, after all, has never recovered from the flight of just 4,000 white commercial farmers.) But one should remember that, as in Zimbabwe our current situation did not arise because anyone willed it but because other imperatives altogether have been followed.

Singing the old songs

Morbid signs there are a-plenty. Chief of them is the new economic statement by the ANC, full of the same old formulae: the developmental state, a state bank, a state pharmaceutical company, more manufacturing, beneficiation of minerals and so on. All the old favourites, including, of course, the nationalisation of the Reserve Bank.

In addition, the ANC has asked its social and economic transformation committees to examine the possibility of a Basic Income Grant – R500 a month payable to everyone aged 19-59. Currently social grants cost R188 billion a year but this would add a further R198 billion. In addition, the ANC wants NHI to be expedited – costing perhaps another 4%-5% of GDP. There will, doubtless, be no shortage of “progressive” economists saying these are all wonderful ideas.

The new ANC economic statement is a bizarre document. It repeatedly says that the pandemic has created new opportunities. With three million jobs lost and 47% of households going hungry it is clear that these “opportunities” do not apply to the people at large. Instead they are opportunities for the ANC elite to consolidate their power. Under the heading “The balance of forces” the document tells us that as a result of the pandemic:

“… the contested relationship between the public and private sectors has shifted. The pandemic has reinforced the legitimacy of public investment in health care. It has legitimized a greater and more active role of the state in guiding the economy. It has forced a rethink on public services that are now seen as a necessary investment rather than a liability. Central banks are increasingly being called upon to assume a more active and direct role in supporting the real economy.”

Note that this is all politics, not economics. There has been no real shift between the private and public sectors. No one ever doubted the legitimacy of public health spending: the problem was that so much of it got wasted and stolen. Nothing has increased the state's ability to “guide” the economy and indeed its incompetence has been shown up in many ways by the pandemic.

The fact that the document's authors are now willing to re-name consumption as investment does not change the economic facts. And, of course, the arguments for and against central banks just printing extra money haven't changed. All that's really meant is that in the confusion and disorganization of the pandemic, the ANC sees ways in which it can push its old agenda that much further.

Suffice it to say that as an essay in political economy this document would fail badly in any undergraduate course. It is an embarrassment. But it reminds one of the old Italian saying that “the situation is desperate but not serious” for the fact is, of course, that it doesn't really matter for there is not the slightest prospect that any of the document's recommendations will be carried out.

It will quickly be overtaken by events and be swamped by the usual winning combination of ministerial incompetence and low-energy management. One can imagine an IMF economist sent to South Africa in a few years time to drive through a structural adjustment programme, turning up this antique document and getting a few laughs out of it. That's all it's good for.

Naturally, the document inveighs about the need to fight poverty and inequality which are (of course) the fault of apartheid. When you read this you should remember that in the current year the wages of the 1.3 million public servants (2.2% of the population) will consume 60% of all tax revenue – and of course, they are currently fighting for another inflation-plus increase.

No one who is remotely interested in alleviating poverty and inequality would agree to such a situation for a moment. And this situation has nothing to do with apartheid: it is entirely an ANC construct. In practice South Africa is now being run for the benefit of a smaller minority than was the case under apartheid.

Finally, of course, we have the demand for another R10.4 billion from government to start up SAA again. This is largely the work of Pravin Gordhan who has conducted a peculiar kamikaze mission over the corpse of the failed airline. Everything about the deal is surreal, including the fact that white pilots are now to be replaced by black ones. Is there anyone in the world keen to fly with an airline which chooses its pilots on the basis of skin colour?

But, as we have seen, this is simply one more demand for the Treasury to somehow “find” enormous sums for all manner of pet projects. Such demands mainly reflect the fact that the ANC has almost no understanding of the country's economic situation and that the pressure groups within it remain just as hungry as ever. The long-term collective effect of such demands is, of course, to push South Africa headlong into a sovereign debt crisis.

Short term they are probably intended as a battering ram to bounce Mboweni into concessions or to force him out. No one would have dared play such brazen factional games when Trevor Manuel was the finance minister under Mandela and Mbeki, but everyone knows the President is a weakling now so factional fun and games are the order of the day.

Part II of this article to follow.