THE ENDURING LEGACY OF GEAR and the urgent need for a new economic paradigm in South Africa

by Aug 18, 2022All Articles

RDP houses in Mamelodi. The implementation of Gear marked a turn away from the ANCs redistributive macroeconomic policies, notably the 1994 Reconstruction and Development Programme (RDP), a policy that had some resonance with the ANC’s earlier socialist leanings.

AS THE ONGOING SOCIAL and economic crisis intensifies in South Africa, it is worth reflecting on the policy choices that have brought us here.

Many politicians, liberal economists and others who hold immense power would have us believe that history doesn’t matter and that the choices and decisions made in the past have no direct influence on the existing economic crisis. A case in point: a few weeks ago, former Finance Minister Tito Mboweni took to Twitter to express disdain toward Minister of Education (and Chairperson of the South African Communist Party) Blade Nzimande, after a speech he made about the state of South Africa’s economy. In his speech, Nzimande spoke critically about the ANC and blamed economic policies, particularly the Growth, Employment and Redistribution strategy (Gear). In his tweet, Mboweni expressed shock that Nzimande was: “still talking about Gear today. He sounds like a brocken (sic) 1970s long play record. The fellow has been in the SA Cabinet for years. I think that he suffers from an Existential Crisis.”

We cannot forget
Putting aside the messy politics of both ministers in question, the suggestion in Mboweni’s tweet that we should “move on and forget” is misguided. It hides the economic policies that played a crucial role in shaping the economic crisis South Africa faces today and the fact that the same failed economic policies are still being used in current economic policies. To forget about Gear would be to forget about how we got here and to misdiagnose the roots of SA’s existing economic challenges. This forgetting plays into many disingenuous arguments made by South African pundits and conservative economists alike: that since 1991 SA’s economic policies have been comprehensive enough and that its current failures are primarily because of a lack of effective implementation. There is some merit to the argument about institutional and governance failures that existed both prior to and after the onset of democracy. But reducing the economic crisis to an issue of implementation evades important questions about the relationship between ANC’s earlier economic policies like Gear and its existing macroeconomic

Gear was implemented in 1996 at a time when South Africa, and the rest of the Global South, were lured by the promise of integrating into the international economy. The rules of that economy were spelled out clearly: an increasing retreat of the role of the state in basic social provisioning, in favour of a highly marketised economy. The implementation of Gear marked a
turn away from the ANCs redistributive macroeconomic policies, notably the 1994 Reconstruction and Development Programme (RDP), a policy that had some resonance with the ANC’s earlier socialist leanings.

Dominance of neoliberalism
This shift also represents the domination of neoliberal economics, again guided by international financial institutions. South Africa was no exception to its adoption. Economic policies under a neoliberal agenda fall under three main categories: privatisation, deregulation and fiscal austerity. For many African countries, for example, trade liberalisation with non- African countries – primarily located in the Global North – led to an increasing reliance on export of commodities, such as gold and coal. This left their economies prone to the vagaries of price fluctuations in the global market. Africa remains in a subordinate position within the global trade order. Take a practical example – titanium sand. For every $100 Africa earns in export revenues for titanium sand, countries outside of Africa earn $100,000 in sales revenue from titanium products.

The results of adopting a market-based economy in South Africa were an increase in the concentration of wealth and an acceleration in the commodification of basic services. This made access to these services increasingly less available to those further away from the centre of financial power. Within this paradigm, “the market” is presented as the most efficient allocator of resources. This accompanies the belief that the pursuit of profits, at all costs, will create wealth that will “trickle-down”. Neoliberalism has also supported the increased financialisation of the economy. This means, the penetration of financial markets into more and more facets of economic, social, and political life. This has systemically undermined production, wages, job security and environmental sustainability and fuelled rising personal debt and inequality.

The logic of the privatisation of public goods has led to the mindset that the public provision of goods and services – which typically falls outside of the market – should be limited as much as possible. This should be the case even for essential public goods like healthcare and education. Privatisation in South Africa has resulted in significant changes in ownership since the 1970s, as assets move from public to private hands. This also entails a shift in power, as greater decision-making is held in the hands of fewer people and vested in multinational corporations and asset managers. This often comes with a greater degree of influence over state decisions, further undermining democracy to the detriment of the vast majority of people. This has played a big role in rolling back regulations, be they for worker or environmental protection, which have historically risen and fallen together.

SA’s economy is structurally incapable of responding to crises. Fast forward to 2020, when the most defining health crisis in recent history forced governments to advance rescue and recovery economic packages to save lives and livelihoods. While devastating and unprecedented, we cannot view the Covid-19 pandemic in isolation from the economic crisis triggered by an outright commitment to neoliberal economics. The government’s response to the Covid-19 pandemic did not present anything different from what has already failed, including an austerity policy, ironically championed by Tito Mboweni himself.

We have an economy that is shaped by a highly extractive economic and political system that prioritises profit over people. It threatens the wellbeing of the majority in favour of extreme luxury for the few. An economy like this is not well suited to respond to a crisis like Covid-19. Two years after the height of the pandemic, it is clear that the existing neoliberal economy has not only created the social, economic and ecological conditions under which Covid-19 has emerged but has also weakened the very institutions that would help fight it – like a strong public healthcare system or robust socio-economic safety nets. Public healthcare, for example, has seen decades of underfunding and in some countries privatisation. This has led to outcomes such as 15 of the largest pharmaceutical companies giving up the research and development of new antibiotics and antivirals because they are not as profitable as other areas. A drive to improve “efficiency” and profitability is poorly suited to the provision of something like healthcare.

Beach sand at Xolobeni where Amadiba Crisis Committee is battling mining for minerals including titanium. For every $100 Africa earns in export revenues for titanium sand, countries outside of Africa earn $100,000 in sales revenue from titanium products.

New frontiers of privatisation
The legacy of Gear continues today as newer forms of privatisation appear in key economic policy documents, including the ANC’s “post”-Covid-19 economic rescue and recovery plan, announced by Cyril Ramaphosa in October 2020. Included in these documents are interventions such as the reliance on scaling up investments in Private-Public Partnerships (PPP) and blended finance for both its infrastructure drive and its climate change policies. These policies seek to leverage private capital investments, using government finances and what is termed “de-risking”. De-risking policies entail shifting the bulk of potential financing risks for large projects onto the public sector. Different financing mechanisms are used. The purpose is to make investments attractive to, and lucrative for, the private sector. The main assumption these policymakers make is that private investors will substantially increase their investments in infrastructure development if the government absorbs greater risks associated with these investments. This includes guaranteeing to remove any risk to revenue from the project, so the company is paid whether there is revenue or not. It also involves offering subsidies to lower the costs for private participants, and investment grants such as equity financing.

Reclaiming public goods
An alternative way of thinking and doing economics in South Africa is desperately needed. It is impossible to recover an economy that is not fit for purpose. The fundamental structure of the South African economy needs to be transformed to set it on a completely different path. It is crucial that we reclaim the power of public investment that is geared toward social provisioning and not private profit-making. Now, more than ever, it is critical that we begin to build social solidarities that dismantle the current economic order.

Sonia Phalatse is a feminist economist researching and writing at the intersection of economic and climate justice. She previously worked for the Institute for Economic Justice as a researcher/economist in the Climate, Infrastructure and Energy programme.

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