What Went Wrong in the “New” South Africa?
“Free Trade” and Water Mostly
by Andrew Nowicki
November 11, 2003
In 1994, Nelson Mandela was elected the first black leader of what was hailed as a new multiracial, multicultural and democratic South Africa. Now in 2003 in Soweto, one of the central battlegrounds in the anti-apartheid struggle, people get their electricity cut off and no longer have ready access to water Private security firms evict them from their inadequate housing. Through 1999 and 2000, protests grew against unemployment and privatization of basic services. Crackdowns by the ruling African National Congress (ANC) became increasingly repressive.
In 2002, private security guards fired live ammunition to disperse around one hundred people demonstrating over electricity cutoffs in Soweto outside the home of Johannesburg's Executive Mayor, Amos Masondo in the swank Jo'burg suburb of Kensington. The ANC, aiming to make an example, arrested the demonstrators, denied them bail and held them in Sun City, a notorious maximum security prison near Johannesburg which formerly held anti-apartheid activists. The “new” South Africa has rapidly regressed into the South Africa of old.
However, in the 'new' South Africa the repression is not to enforce a rigid racial hierarchy. Now, the ANC is suppressing opposition to its policies which have led to a marked stagnation in economic development. Annual total gross domestic product (GDP) has stagnated at about one to three percent since the early 1990s. Unemployment figures in most of the country's provinces have hovered near the 50% mark since the late 1990s. Social services have suffered massive cuts despite South Africa's national health emergency due to AIDS.
The usual suspects - enter the IMF and the World Bank
The promises of a free, democratic, prosperous and peaceful South Africa which appeared so close to fruition after the demise of apartheid have disappeared fast. Tears and pain have rapidly supplanted hope. The forces of neo-mercantilist globalization responsible for South Africa's continuing economic and social chaos were entrenched years before apartheid collapsed. Indeed, when the apartheid government was clearly doomed, faced with overwhelming international protests and a strong sanctions regime at the climax of the Cold War in 1989, the international financial institutions (IFIs) stepped in. They were determined to influence the forces of social and economic change in the interests of international finance and business. In the early 1990s, the World Bank sent advisors to South Africa to recommend neo-liberal ideology and policies promising economic growth. In 1993, the International Monetary Fund (IMF) granted South Africa a $750 million loan conditioned on the adoption of neo-liberal policies.
Although it is currently in vogue to label the policies of the IFIs as 'neo-liberal' these policies are purely neo-mercantilist. They emphasize centralized corporate control over under-developed economies through 'free' trade agreements while only allowing liberalization in areas which the developed economies and their multinational corporations already dominate, such as international capital flows. The globalization currently being imposed through the World Trade Organization (WTO), regional trade agreements and IFI Structural Adjustment Programs (SAPs) throughout the under-developed world really hark back to the age of nineteenth century imperialism. Now, as then, the resources of the imperial possessions in the periphery are directed towards the core developed economies - these days Europe, North America and Japan.
Indeed, a liberalized global economy was merely a theoretical pipe dream of nineteenth century liberal economists such as Adam Smith and David Ricardo. "Free trade" is a theoretical ideal with no basis whatsoever in reality. Unfortunately, Nelson Mandela and the new ANC establishment in South Africa adopted elements of the neo-mercantilist agenda enthusiastically in the first post-apartheid national economic program called the "Reconstruction and Development Program (RDP). The RDP did retain some redistributive elements but was rapidly abandoned in favor of a purely neo-liberal program called the Growth, Employment and Redistribution (GEAR) program in 1996 due to the growing influence of the neo-liberals in the ANC.
GEAR was drawn up almost solely by fifteen 'neo-liberal' economists picked from the World Bank, 'neo-liberal' think tanks and various African Development Banks. The GEAR program emphasized commercializing and then privatizing all of South Africa's public companies and services. It drastically cut government spending, and secondary taxes on corporate profits. It meant substantially and prematurely reducing tariffs designed to protect South Africa's key infant economic sectors including textiles and value-added manufactured agricultural goods.
GEAR also liberalized capital controls and foreign exchange rates which left the value of South Africa's national currency, the Rand and South Africa's import and export economic activity highly susceptible to the volatile and rapidly changing nature of international capital markets. Thus South Africa, a newly emerging semi-developed economy was forced to adopt economic standards of liberalization which no developed economy including the United States has been able to implement successfully.
South Africa's next President, Thabo Mbeki, elected in 1999, was an even more enthusiastic advocate of neo-liberal policies than Nelson Mandela and was one of the main political forces behind the adoption of GEAR. The GEAR program has accomplished the exact opposite of their stated aims. While the International Monetary Fund (IMF) praises the fact that the GEAR programs have resulted in an economic growth rate of around three percent for 2003, the Congress of South Africa Trade Unions (COSATU) and the ANC itself estimates that South Africa will need an economic growth rate of at least six to eight percent to achieve even minimal reductions in unemployment.
Although GEAR promised 120,000 new formal sector jobs in its first year of implementation South Africa lost more than 100,000 formal sector jobs by the end of GEAR's first year. For the remaining eleven million employed people in South Africa in 2003 at least four million are employed in the volatile, low wage informal sector and engage in temporary, subcontracted economic activity ranging in everything from prostitution to street hawking. There has been an enormous wealth polarization under the ANC. South Africa has the dubious distinction in 2003 of having a larger income gap between the rich and poor than any other country in the world except Guatemala.
The most surprising aspect of South Africa's post-apartheid economic programs was that the programs were embraced so wholeheartedly by the ANC. South Africa, with its comparatively low foreign debt of only around five percent of its total budget deficit in the 1990s, was under no pressure from the IFIs. While highly indebted states throughout Africa were having neo-liberal programs imposed on them through SAPs, South Africa adopted them willingly.
Patrick Bond, a professor at Witwatersrand University in Johannesburg termed these ANC policies 'homegrown structural adjustment'. This is the most saddening and sickening aspect of all, the fact that the effects of these programs could have been almost entirely avoided. South Africans are now forced to deal with self-imposed corporate-controlled globalization in increasingly desperate ways which meet with increasing repression. Even though all South African citizens are constitutionally guaranteed "sufficient food and water" in South Africa's Bill of Rights, the ANC, encouraged by World Bank advisors, embarked on a nation-wide campaign to privatize South Africa's public-owned and operated water systems. They contracted out the management of water systems to large multinational bidders such as the French water-multinational Suez whose sole raison de'etre, needless to say, is profit.
The ANC completely ignored more realistic, viable and legal methods of ensuring water access to South African citizens. They might easily have funded small-scale local service providers and maintained overall regulation of the national water system to ensure water access to the low-income groups that would not be able to afford the new privatized water rates. Nor did the ANC contractually obligate the water-MNCs to provide water to the poor. The results of this rapid privatization without corporate accountability in a country in which the majority of the workforce is unemployed was disastrous.
By 2001 there was a massive cholera outbreak that had spread from rural areas in Kwa-Zulu Natal Province to the outskirts of Johannesburg. It sickened hundreds of thousands of people and killed at least three hundred people who had to turn to polluted, cholera infected water systems after they could no longer afford the water charges of the new privately owned water companies. The cholera epidemic cost the South African government millions of dollars as it sought to contain the outbreak and treat infected people and contaminated river systems.
In the Eastern Cape Province water prices increased by 300 percent in the town of Fort-Beaufort and to similar heights in other urban areas throughout South Africa. Now, in 2003, village, town and city councils
throughout South Africa are trying to cancel the contracts with the water multinationals (MNCs). The urban councils are contractually obligated to pay the debts to the MNCs which the poor and unemployed can't obviously afford. Nevertheless, the ANC continues to illegally restrict access to water despite the constitutional right of all South Africans to water.
Protest and resistance suppressed
The government continues to arrest individual citizens and members of community organizations. Prominent among these are the Anti-Privatization Forum (APF) and the Soweto Electricity Crisis Committee (SECC). In addition anti-housing eviction campaigns risk arrest and detention as they try to restore electricity to residences, prevent housing evictions from taking place and destroy prepaid water meters, installed so water can only be accessed by those who can pay.
The chairperson for the APF, Trevor Ngwane, is a former ANC member who was expelled from the party for opposing its privatization policies. He was arrested and held without bail in 2002 for protesting outside Jo'burg Mayor Masondo's property. Ngwane has said, 'Corporations seeking profit from a natural resource will never create a product or system that will benefit the disadvantaged'.
Instead of taking South Africa's status as a low-income country and the needs of its impoverished majority into account, the ANC governments embarked on a system of complete privatization of its essential services. This centralized corporate-mercantilist control of South Africa's resources will become even more entrenched under 'free' trade agreements wither already completed or on the table with the United States and the European Union (EU). The World Trade Organization (WTO) recognizes that semi-developed economies like South Africa need "special" and "differential" terms permitting trade tariffs and other trade protections to shield their developing economies. But the current bilateral negotiations have undermined those WTO prescriptions as well as South Africa's industry, agriculture and labor force.
For example, the 'free' trade agreement with the EU forces South Africa to open 90 percent of its trade to
the EU. The EU in return only allows the South African economy access to 50 percent of its market. The EU has also enacted further non-tariff barriers (NTBs) to trade with South Africa such as strictly enforcing health and safety regulations which block many South African goods from entering the huge market of Europe.
The EU trade agreement also only encourages South Africa to export cheap raw materials instead of more value added goods, such as manufactured goods which reinforces South Africa's position as a dependent, periphery economy. South Africa has also entered into 'free' trade negotiations with the United States along with the other semi-developed southern African states that belong to the Southern African Customs Union (SACU) such as Namibia and Swaziland. These negotiations are due to conclude at the end of 2004.
This trade agreement with the US will also increase corporate control of southern Africa's economies, resources and labor. Indeed, in order for southern Africa to qualify for 'free' trade with the United States, all southern African states must liberalize all sectors of their economies, including social services. Corporate taxes have to be reduced or eliminated. Corporations must be allowed to purchase social services, land and resources wholesale from African governments. At the same time duties and tariffs on manufactured goods from the US must be substantially reduced.
Concentrated wealth distorting national development
The US, the EU and the large multinationals aim to gain as many concessions as possible from South Africa through these trade agreements while simultaneously seeking to avoid even limited concessions and access to markets in return. South Africa cannot even begin to compete with the developed economies. So economic development within South Africa has collapsed. While there is economic growth in assets such as stocks and property, these assets are concentrated among the wealthy minority.
Unfortunately, the ANC government remains unenthusiastic about national development strategies designed to lift the poor black majority out of wrenching poverty. According to the Landless People's Movement (LPM) of South Africa, the government, although constitutionally obligated to do so, has not initiated even small-scale land redistribution to impoverished black South Africans. In 2003, eighty six percent of land in South Africa remains under the ownership of around 120,000 white farmers and the central government.
Government economic policy has favored rigid, narrow growth strategies designed only to increase corporate profit and roll back the state. South Africa's economy depends overwhelmingly on the economies of the developed countries. This means South Africa's infant industry remains stunted and its impoverished black majority marginalized. The extreme concentration of wealth, the collapse of social services, the explosion in social problems like prostitution, crime, urban terrorism and gang warfare and the rapid spread of AIDS mean the end of hopes for a better future. The dreams of millions of South Africans which rose to such heights after the collapse of apartheid have turned into a national nightmare with no end in sight.
Andrew Nowicki is a social justice advocate based in Washington D.C. He can be reached at: firstname.lastname@example.org.
*US-South Africa Business Council Business Report, July 2003, www.nftc.org
*Southern African Regional Poverty Network (SARPN), www.sarpn.org.za
* Landless People’s Movement (LPM), www.nlc.co.za
* The Third World Network, Malaysia, www.twnside.org.sg
* The Anti-Privatisation Forum (APF), www.apf.org.za
APF can be contacted at: email@example.com
* South Africa Bill of Rights (Chapter 2), www.polity.org.za
* Action for Southern Africa (ACTSA), www.actsa.org/Trade/growing_hop.htm
* Global Issues, www.globalissues.org
* 'The Great Jobs Gap', The Sunday Times, Aug. 10, 2002, www.suntimes.co.za
* Trevor Ngwane & George Dor. 'IMF Can Only Bring Misery to SA,' The Sowetan, July 12, 2000.
* Paul Kingsnorth. 'Globalization Made Them Do It,' www.paulkingsnorth.net/madethem.htm
* The Shop Steward, www.cosatu.org.za
* The Environmental News Network (ENN), www.enn.com
*Independent Media Centre-South Africa, www.southafrica.indymedia.org
* The Center for Pubic Integrity, www.icij.org/water/
* Desai, Ashwin. We are the Poors (Monthly Review Press, 2002).