End austerity & privatisation: Build a healthy, productive, accountable public service sector – Amandla #79/80 Editorial

by Dec 10, 2021All Articles

SO, WE FACE A FOURTH WAVE OF Covid-19 infections driven by the new variant now known as Omicron. Although prediction is dangerous when it comes to Covid-19, much like the third wave we can expect many thousands more lives destroyed.

As with every new wave of infections, the realisation dawns that Covid-19 is not some passing disaster. It is going to be with us for years, probably decades, and increasingly we will have to rely on the health system in different ways – vaccines, other medications and treatments, doctors, nurses, clinics, hospitals, etc. And of course, we will rely not just on health and medical interventions, but also on a whole range of social and other services to prevent infection and ensure a full and speedy recovery.

Bear in mind, Covid-19 is not the only disaster we face. The age of the climate emergency is now. Climate change-fuelled extreme weather events are no longer and dispersed. They are, as Jayati Ghosh put it, “no longer ‘impending’ but playing out in real-time.” South and Southern Africa have already had to endure extreme droughts, floods and ferocious bush and forest fires and these are occurring more rapidly and severely.

Unlike the rich, industrialised world, our region lacks the resources to protect against future climate disasters and provide for the very pressing immediate needs of a large proportion of the population. The state and public services are absolutely crucial in disaster relief, in adaptation strategies to build the resilience of communities to climate change and especially in mitigating the climate crisis.

A failed economic strategy
And as if that’s not enough, we face social and economic disasters associated with having one of the highest rates of unemployment in the world. The recently released StatsSA Quarterly Labour Force Survey for the 3rd quarter details just how severe this crisis is. Unemployment has risen yet again to 46.6%, with 12.48 million now unemployed. No country or state can sustain a society where almost 50% of the workforce is unemployed. Unemployment and the associated social crises of gender-based violence, substance abuse, racism and xenophobia are a national emergency. It requires urgent intervention from the state, with all its power and resources.

No doubt there are many factors that contribute to SA’s unemployment crisis, not least the impact of Covid-19 and the climate emergency. However, as we have pointed out repeatedly in the pages of Amandla!, there have been two predominant contributors: failure by the South African state to drive the redistribution of wealth, which could act to crowd in investment (public sector investment pulling in private sector investment); and failure to implement appropriate economic policies which would bring investment in the productive sectors of the economy.

Trade and financial liberalisation have encouraged South African capital to globalise and disinvest from the South African economy. Austerity and conservative monetary policy have stimulated investment in the financial sectors at the expense of jobs in the industry. Disinvestment and deindustrialisation are the results.

With the memory of the destructive July “food riots” fresh, it is appropriate to recall an editorial comment of the UK Financial Times, one of the leading mouthpieces of the Western business elite: “Radical reforms – reversing the prevailing policy direction of the last four decades – will need to be put on the table. Governments will have to accept a more active role in the economy. They must see public services as investments rather than liabilities and look for ways to make labour markets less insecure. Redistribution will again be on the agenda; the privileges of the elderly and wealthy in question. Policies until recently considered eccentric, such as basic income and wealth taxes, will have to be in the mix.”

This Financial Times view should be taken together with US President Biden’s programme of massive spending to renew US infrastructure and many other government interventions in the time of Covid-19 and the climate emergency. It represents a repudiation of what the South African government considers appropriate for a society collapsing under multiple and deepening crises.

Privatisation on the cards
As the financial crisis of many state-owned enterprises deepens, there are increasing indications that plans for their privatisation are at a developed stage. As Deputy President David Mabuza recently told the National Council of Provinces, “government was looking for a strategic equity partner that can ease Eskom’s current bottlenecks.”

Deputy Finance Minister David Masondo spoke in the same vein when he briefed the parliamentary finance committee. He said introducing private sector involvement in state-dominated industries like electricity and freight can stimulate much-needed competition and efficiencies, especially where there are market failures.

This follows the “tough love” approach of Minister of Finance, Enoch Godongwana. Following the neoliberal, austerity dictates of the credit rating agencies, IMF and World Bank, and the investor community more generally, he turned the tap off further bailouts to distressed SOEs. Currently, the debt of the 10 biggest SOEs amounts to R883 billion; of this, R689.8 billion (78%) is government guaranteed. The implied logic is that SOEs must stand on their own feet and compete in the market like any other corporate player.

This kind of “tough love” approach has already led to the privatisation of SAA, where control and majority shareholding have been handed over to private investors.

Privatisation takes many forms
Privatisation takes many forms and is given many disguises, given widespread public opposition and trade union resistance. For example:
● SAA was not privatised; an “equity partner” was found to bail it out.
● The introduction of the Renewable Energy Independent Power Producer Procurement Programme (REI4P), is not privatisation. It’s just bringing the private sector into the electricity market.
● The unbundling of Eskom, of course, has nothing to do with privatisation.
● And there are Public-Private Partnerships (PPPs) in the form of Build Operate and Transfer contracts.

In these, a private company finance and operates an infrastructure project and gets profitably paid over 20 – 30 years. Thereafter it hands over control to the state.
● And then there’s the general word to cover the rest of privatisation – “restructuring”.

Meanwhile, various proposals are being considered by the Department of Transport to open up rail freight and the ports to the private sector.

The general approach of the government is set out in the 2017 Draft White Paper on Transport Policy, which amongst many things states: “In the transport sector, a level playing field will be provided, in which State-Owned Companies (SOCs) are expected to compete with private sector players without undue shielding from competitive forces.”

Just as in the case of electricity, the government is intent on breaking the current state monopoly and liberalising the sector. This is similar to the role Independent Power Producers play in generating renewable energy. Private companies are being encouraged to operate rail and port services.

Call for action
The privatisation and austerity agenda of the government is going to contribute to many more thousands of workers losing their jobs. And as vital industries and services are subject to “market dynamics”, the prices of services and goods increase to serve the dominant logic of a competitive market. In a privatised service, profits must be paid to shareholders, not reinvested in better services.

There are many more problems with privatisation – lack of accountability, loss of sovereignty, sharpening of existing social divides between rich and poor, etc. But most importantly, in this era of extreme crises, (mass unemployment, Covid-19 and the climate emergency), this country/nation lacks the vital infrastructure, capacities and institutions. Spain discovered its capacity deficit in the first wave of surging Covid-19 infections and had to make up for it by nationalising private hospitals.

A vision for transforming SOEs
It is urgent for labour and social movements to unite around a programme to resist both privatisation and austerity. But this is easier said than done. The problem is not just the weakness of the trade unions and popular organisations. There is also great public scepticism of the state and state-owned enterprises like Eskom and Prasa.

A democratic vision of transforming all the state-owned industries is necessary, a vision that goes beyond just having trade union representatives on the Board. The enterprises need to be repurposed to serve social needs. Their mandates must change, and for that to happen their legal form will need to change too.

SOEs must be viewed as providers of public services, not corporate profit- (or loss-) making enterprises. Their corporate structure and cost recovery model must be stripped away. Clearly, this cannot happen without a reversal of the current austerity measures.

This will be costly. But the costs have to be weighed against those of mass unemployment, the millions of lives and livelihoods destroyed by Covid-19, and the many more to be destroyed by the climate crisis. This comes at a moment when economic, social, political and environmental breakdowns demand urgent, ambitious and coordinated political action. Budget day in February 2022 must be a day of rage, resistance and the expression of real alternatives.

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