From racial to class apartheid: South Africa's frustrating decade of freedom

Monthly Review, March, 2004 by Patrick Bond

The end of the apartheid regime was a great human achievement. Yet the 1994 election of an African National Congress (ANC) majority--with Nelson Mandela as the new president--did not alter the enormous structural gap in wealth between the majority black and minority white populations. Indeed, it set in motion neoliberal policies that exacerbated class, race, and gender inequality. To promote a peaceful transition, the agreement negotiated between the racist white regime and the ANC allowed whites to keep the best land, the mines, manufacturing plants, and financial institutions. There were only two basic paths that the ANC could follow. One was to mobilize the people and all their enthusiasm, energy, and hard work, use a larger share of the economic surplus (through state-directed investments and higher taxes), and stop the flow of capital abroad, including the repayment of illegitimate apartheid-era debt. The other was to adopt a neoliberal capitalist path, with a small reform here or there, while posturing as if social democracy was on the horizon.

A few months prior to the democratic election on April 27, 1994, a transitional South African government was formed incorporating both the ANC and the National Party, which had been in power for 45 years thanks to whites-only voting. Even as racist laws were tumbling and the dignity of the majority black population was soaring, December 1, 1993, was the point at which the struggle for socioeconomic justice in South Africa was conclusively lost, at least temporarily. The very first act of that interim government was to accept an $850 million loan from the International Monetary Fund, ostensibly for drought relief, although the searing drought had ended 18 months earlier. The loan's secret conditions--leaked to the main business newspaper in March 1994-included the usual items from the classical structural adjustment menu: lower import tariffs, cuts in state spending, and large cuts in public sector wages. In addition, Michel Camdessus, then IMF managing director, put informal but intense pressure on incoming president Mandela to reap-point the two main stalwarts of apartheid-era neoliberalism, the finance minister and the central bank governor, both from the National Party.

Another crucial milestone was reached in June 1996, when the top echelon of ANC policymakers imposed a "nonnegotiable" wide-ranging economic strategy without bothering to consult its Alliance partners in the union movement and the South African Communist Part (SACP), much less its own constituents. The World Bank contributed two economists and its model for the exercise, known as "Growth, Employment and Redistribution" (GEAR). Introduced to promote investor confidence in the wake of a currency crash, GEAR allowed the government to distance itself psychologically from the somewhat more Keynesian "Reconstruction and Development Program," which in 1994 had served as the ANC's campaign platform. The promises generated by the World Bank's econometric model were grand indeed: by 2000, the South African economy would be growing at 6 percent and creating 400,000 new jobs each year.

The Post-Apartheid Record

The transition's flaws are excused by some ANC supporters as temporary reversals along what is a broadly progressive trajectory, unique in Africa. A recent document, "Towards a Ten-Year Review," available on the government's Web site, makes grandiloquent claims to support such an interpretation. The November 7, 2003 ANC Today newsletter on the ruling party's Web site draws on the review to promote the post-apartheid economy: "Since the ANC was elected to government in 1994, South Africa has achieved a level of macroeconomic stability not seen in the country for 40 years ... After the massive investment outflows of the 1980s and early 1990s, the country has had positive levels of foreign direct investment over the last ten years ... Between 1995 and 2002 the number of people employed grew by around 1.6 million people."

Most such claims are distortions or outright fibs. For the ANC to brag of a level of macroeconomic stability not seen in the country for 40 years is to ignore the easiest measure of such stability: exchange rate fluctuations. In reality, the three currency crashes witnessed over a period of a few weeks in February-March 1996, June-July 1998, and December 2001 ranged from 30 to 50 percent, and each led to massive interest rate increases that sapped growth and rewarded the speculators. These moments of macroeconomic instability were as dramatic as any other incidents during the previous two centuries, including the September 1985 financial panic that split big business from the apartheid regime and paved the way for ANC rule.

Domestic investment has been sickly (with a less than 2 percent increase per year during the GEAR era when it was meant to increase by 7 percent), and were it not for the partial privatization of the telephone company, foreign investment would not even register. Domestic private sector investment was negative for several years, as capital effectively went on strike, moving mobile resources offshore as rapidly as possible. Yet, of all GEAR's targets, the only ones reached successfully were those most crucial to big business: inflation (down from 9 percent to 5.5 percent, instead of GEAR's projected 7-8 percent); the current account (in surplus, not deficit as projected); and the fiscal deficit (below 2 percent of GDP, instead of the projected 3 percent).