Are South African elites paying attention to these underlying economic dynamics? | Patrick Bond

by Nov 20, 2011All Articles

trevor_zumaNot judging by this year’s long-range response from the National Planning Commission’s talented technical, political, civil society and business thinkers. Its fascinating diagnostic analysis of why South Africa is beginning to slide off the rails is negated by the screaming silences on economic management. To be sure, the NPC’s main revelation was striking: ‘State agencies tasked with fighting corruption are of the view that corruption is at a very high level. Weak accountability and damaged societal ethics make corruption at lower levels in government almost pervasive. Corruption in infrastructure procurement has led to rising prices and poorer quality.’

Just to take one example, Durban’s senior municipal management gives us much to chew on: the hundreds of millions of rands in fraud associated with the Mpisane family’s township housing; the destruction of the municipal bus system by anther privatizing crony firm, Remant Alton; ex-mayor Obed Mlaba’s so-called waste-energy incineration project in which an apparent tender hijack rewarded his daughter; and unending, unplanned subsidies for the Point redevelopment and uShaka amusement park, Luthuli International Convention Centre and Moses Mabhida Stadium. There, vast construction cost escalation and post-2010 utilisation planning by outgoing city manager Mike Sutcliffe raise questions of competence and corruption, questions that Danny Jordaan implicitly asked in his apology for baiting SA with an uneconomic World Cup.

But this is an easy critique. The NPC diplomatically deferred from analyzing the deeper corruption of the economy, the wasting of productive capacity in favour of what is now regularly termed ‘financialisation.’ Perhaps such a diagnostic would have implicated the minister in charge of the NPC, Trevor Manuel, who was finance minister from 1996-2009. Thus in the NPC diagnostic, capital is incorrectly said to be ‘scarce’ when in reality we have the opposite problem of excess liquidity in ultra-speculative markets. SA real estate was the world’s biggest bubble by far before the price crash began in 2008. The NPC diagnostic actually applauds some of the most misguided features of economic management. To claim that ‘South Africa today has much to celebrate on the economy and infrastructure’ would mean pretending that debilitating bubbles – such as the JSE and middle-class consumption excessively based on consumer debt – are actually strengths:

▪ ‘The JSE is the 14th largest in the world, with a total market capitalization of some R2.3 trillion
▪ More than 12 000 ‘Black Diamond’ families (South Africa’s new black middle class) are moving from the townships into the suburbs of South Africa’s metro areas every month’

But the JSE is attracting speculative financial funding that simply is not being turned into brick-and-mortar investments and machinery. SA’s corporate fixed investment rates remain very low by historical standards, especially in manufacturing. And levels of consumer debt are at an untenable level. With SA house prices still falling (after a brief uptick in 2010), the inability to liquidate those assets has turned consumer credit opportunities into debt slavery for millions more South Africans. And amazingly, the NPC didn’t notice the ongoing job massacre, with its claim, ‘Unemployment levels are decreasing since 2002.’

Upon launching the NPC in June, Manuel remarked, ‘When you can’t locate where you are, your ability to reach your destination will be constrained. Last week the centenary of the Titanic was marked. If there are going to be icebergs on the route then you’d better know.’ NPC members didn’t want to see the world financial iceberg looming immediately ahead. Had they, there was an old navigator they could have turned to. At the end of the Wall Street Journal interview, Roubini reminded us, ‘Karl Marx had it right. At some point, capitalism can destroy itself. You cannot keep on shifting income from labor to capital without having an excess capacity and a lack of aggregate demand. That’s what has happened. We thought that markets worked. They’re not working.’

Instead, democratic planning will be needed, and the seeds of this are found outside the NPC’s November report, in the struggles of ordinary people for a better life.

Planning the status quo?
The NPC’s inability to diagnose economic problems is matched by its schizophrenic approach to broader socio-environmental decay. On the one hand, the NPC lists atop its infrastructure priority plan two objectives: ‘The upgrading of informal settlements’ and ‘Public transport infrastructure and systems’, but on the other hand inveighs, ‘users must pay the bulk of the costs, with due protection for poor households.’ But how can that contradiction be reconciled, when the vast bulk of state investments in transport are being made in luxury Johannesburg-Pretoria train lines which a tiny fraction of the public can afford, and when the e-tolling system is so onerous for ordinary people that the Congress of SA Trade Unions and its allies have forced a recthink?

Likewise in supplying electricity, the source of so many service delivery protests, Eskom’s huge price increases – 127 percent from 2008-11 already with many more years of 25 percent annual rises still to come – apply to poor households but not to BHP Billiton and Anglo American Corporation. These two were receipients of Special Pricing Agreements made with apartheid’s officials two decades ago (two such officials, Finance Minister Derek Keys and Eskom Treasurer Mick Davis, promptly joined BHP Billiton after apartheid). They run another two decades, supplying power to smelters – zapping imported bauxite into aluminium that is priced too high for local consumption – at R0.12 per kilowatt hour, around a tenth of what poor households pay via self-disconnecting pre-payment meters. Not a word about such contradictions can be found in the NPC’s 444-page report.

The NPC’s third and fourth infrastructure priorities are also contradiction-ridden: ‘The development the Durban-Gauteng freight corridor, including the development a new dug-out port on the site of the old Durban airport’ (part of a R250 billion ‘back of ports’ strategy to expand the notorious petrochemical industry) and ‘The construction of a new coal line to unlock coal deposits in the Waterberg, extension of existing coal lines in the central basin…’ in spite of the vast damage – not acknowledged – done by coal to local and global ecologies.

Ironically, though, the very next paragraph begins, ‘South Africa needs to move away from the unsustainable use of natural resources,’ but optimistically asserts, ‘South Africa can manage the transition to a low-carbon economy at a pace consistent with government’s public pledges, without harming jobs and competitiveness.’ What the NPC report demonstrates, in reality, is that we are locked so deeply into Minerals-Energy Complex tyranny that no change to status quo climate destroying politics is on the cards. The new Climate White Paper also fails to grapple with the fact that South Africa is twenty times worse than even the United States when our energy-related CO2 is corrected for per capita GDP growth: our economy is diabolically coal-addicted with no real prospect of changing. For as the NPC also argues, as its top priority for economic growth, we must ‘Raise exports, focusing on those areas where South Africa has the endowments and comparative advantage, such as mining…’ even though this status quo strategy has been utterly destructive to economy, society, polity and ecology.

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