[DEBATE] : (Fwd) Moeletsi Mbeki and Dumi Gqubule v SA economy

[Patrick Bond]

(Gqubule says: "Most of the capacity problems in the emaciated public 
sector are due to such macroeconomic mismanagement and the unnecessary, 
insane, inexplicable and mindless slash-and-burn policies which 
prevailed until 2002." But what really changed after 2002? Tx to Dominic 
for his post of these at 
http://amadlandawonye.wikispaces.com/How+SA+kissed+redistribution+goodbye%2C+Moeletsi+Mbeki%2C+S+Times 
and 
http://amadlandawonye.wikispaces.com/Mbeki+slash-and-burn+economics%2C+Duma+Gqubule%2C+Sunday+Times)

Sunday Times, Business, Johannesburg, 04 March 2007


How SA kissed genuine redistribution goodbye


Moeletsi Mbeki: Another view

The article that appeared last Sunday in the Business Times on Cheryl 
Carolus’s Black Economic Empowerment group is an incorrect and 
superficial presentation of the massive damage that BEE is doing to the 
economy and politics of this country.

Invented by South Africa’s white-controlled mega mining and finance 
corporations in the early 1990s, BEE as it is now affectionately called, 
is a magic wand that turns previously disadvantaged black politicians 
into instant millionaires.

Whites in South Africa invented black economic empowerment, you ask? It 
may sound unbelievable but it happened.

When Mandela came out of prison in February 1990, in the first public 
speech that he made, he restated the ANC’s political platform for which 
he had spent 27 years behind bars. The ANC manifesto, called the Freedom 
Charter, which was adopted in 1955, among other things advocates the 
nationalisation of the mines, the banks and other commanding heights of 
the South African economy.

Speaking on the steps of the Anglican Cathedral in Cape Town soon after 
his release, Mandela said he and the ANC, stood by the nationalisation 
objective.

This understandably struck fear in the hearts of South Africa’s white 
mining, banking and insurance oligarchy. Far from taking to their heels, 
however, the oligarchs immediately got to work to find another formula 
that could placate the angry ex-political prisoner and his fire-eating, 
radical communist and trade union associates.

BEE was the counter-proposal that the oligarchs eventually put on the table.

BEE looks deceptively like a form of reparation. It appears as a way for 
South Africa’s rich whites, to atone for their sins of exploiting cheap 
black labour to dig for the fabulous diamonds and gold for which South 
Africa is famous.

The reality, however, is very different. BEE is a formula for co-opting 
— and perhaps even corrupting — ANC leaders by enriching them as private 
individuals.

The objective was to play on the leaders’ weakness of many years of 
deprivation in prisons and in exile by dangling in front of them 
unimaginable riches that would be given to them by the oligarchs, free.

The first company to implement this magic formula was Sanlam, the 
second-biggest insurance company in South Africa — which had been 
closely associated with the apartheid regime.

Sanlam owned a subsidiary called Metropolitan Life, Metlife, most of 
whose policyholders, in keeping with apartheid strictures of “separate 
but equal”, were black. Metlife had assets in the region of R2-billion — 
small change in Sanlam’s world, but unimaginable wealth in the eyes of 
erstwhile black anti-apartheid political activists who had spent much of 
their lives in the dungeons of the apartheid government.

To make this asset transfer look like a serious, arm’s-length commercial 
transaction, Sanlam assisted its black partners — made up of Mandela’s 
family doctor, the secretary-general of the ANC, the vice-president of 
the Pan Africanist Congress, and the leader of a black business chamber, 
among others — to obtain a loan from an apartheid state bank called the 
Industrial Development Corporation.

Through further financial wizardry, Metlife’s shares were split into 
high-voting and low-voting shares so that the black shareholders, by 
owning a tiny portion of shares, could control the company.

Needless to say, once they controlled the company, the black 
shareholders paid themselves large sums in directors’ fees. Several of 
them built themselves palaces a few kilometers outside of Johannesburg 
that make Kubla Khan’s stately home in Xanadu look like a bungalow.

As they say in the movies, the rest is history. The ANC has long 
forgotten about nationalising the commanding heights of the economy. And 
you will be hard pressed to find an ANC minister or senior civil servant 
or former ANC minister or former senior civil servant who is not in, or 
working on, a BEE deal. Seventeen years after Mandela made his 
nationalisation speech on his release from prison, South Africa remains 
an oligarch’s paradise, which it has been since the British defeated the 
Boers in 1902.

But what about the black masses? Well, the English have a famous song 
(sung to the tune of the Red flag) which goes: The working class can 
kiss my arse; I’ve got the foreman’s job at last.

Mbeki is deputy chairman of the South African Institute of International 
Affairs, an independent think tank based at the University of the 
Witwatersrand in Johannesburg

From: 
http://www.sundaytimes.co.za/PrintEdition/BusinessTimes/Article.aspx?id=401799

***

Sunday Times, Business, Johannesburg, 04 March 2007


Mbeki’s slash-and-burn macroeconomic policy

DumaGqubule.jpg

Duma Gqubule: Comment

With two years left in office, the focus has shifted to the economic 
legacy of President Thabo Mbeki.

As Deputy President after 1994 and President since 1999, he has played a 
leading role in shaping South Africa’s economic development trajectory. 
However, the entire ANC leadership is collectively responsible for the 
economic policies adopted since 1994.

South Africa’s GDP grew by 3.3% a year between 1995 and 2005. GDP per 
capita, the international benchmark of average living standards, grew by 
1.3% a year over the same period. This is a pathetic performance, 
whichever way one looks at it, especially when one considers our 
country’s massive development challenges.

Lest we forget, we live in a country where 50 people are murdered and 
1000 people die of HIV/Aids-related diseases every day. By comparison, 
deaths in the Iraq war last year were 56 people a day. Every two days, 
more people die in South Africa of HIV/Aids- related diseases than were 
killed during the recent war in Lebanon.

The mismanagement of the epidemic is also mismanagement of the economy, 
because it has resulted in a massive destruction of human capital. More 
than two million people have died of HIV/Aids-related diseases. Most of 
these deaths could have been avoided. The life expectancy of the average 
South African has dropped to 50. HIV/Aids is not a global disease: South 
Africa, with just 0.7% of the world’s population, accounts for 14% of 
the global number of people living with HIV/Aids and 12% of global 
annual Aids deaths.

We also live in a country where 1.7 million economically active people 
have no schooling and 7.2 million people are functionally illiterate. 
Eight million people are unemployed, according to the expanded 
definition, and another four million are underemployed and earn less 
than R1000 a month.

There are 12 million people, 61% of the economically active population, 
who are either unemployed or underemployed. The figure rises to about 
two-thirds for black Africans. Among black Africans, 6.2 million people, 
or 73% of those who supposedly work, earn less than R2500 a month.

In total, 7.4 million people who “work” earn less than R2500 a month, 
according to the March 2006 Labour Force Survey (LFS). There are 15 
million people who are either unemployed or earning less than R2500 a 
month — 75% of the economically active population.

According to the 2005 General Household Survey (GHS), 7.6 million black 
African households — 77% of all black African households — had a monthly 
expenditure of less than R1200; 90% had a monthly expenditure of less 
than R2500. South Africa Inc works for a minority of the population, 
most of them white and including a tiny, BEE pink-shirt brigade.

The richest 10% of households get 45% of income compared with 22% in 
South Korea, says economist Neva Makgetla. If South Africa really cares 
about inequality, why does the finance minister always dish out massive 
tax cuts to the employed elite?

It is often claimed that government policies have created a large black 
middle class, which is driving consumer spending. This is an urban 
legend. The black middle class is everywhere, except in the official 
statistics. Only 366 000 black Africans earn more than R8000 a month 
according to the LFS. Only 275 000 households had a monthly expenditure 
of more than R5000 a month, according to the GHS. Only 10% of black 
African households own a car compared with 93% of white households, 
according to Statistics South Africa.

More recently, between 2004 and 2006, the economy has broken out of its 
“Hindu” rate of growth. This is because the world economy is growing at 
its fastest rate since the 1960s and because the government’s 
macroeconomic policies are less deflationary than before. Most of the 
growth has been driven by lower interest rates, which have fuelled a 
consumption boom.

Government’s fiscal policies have made little contribution to growth and 
planned infrastructure spending will provide a negligible stimulus.

Infrastructure spending, as a percentage of GDP, will merely increase to 
what prevailed in 1998. Over the next few years, economists predict 
average growth of 4.5% — only 1.2% above the trend of 1995 to 2005.

This is far below the average annual growth rate of 8% for East Asia 
over five decades and below the current average 7% growth rate of all 
developing countries. The current growth path does not match the level 
and quality of growth in other developing countries.

For example, 54% of the 1.1 million jobs supposedly created between 
March 2003 and March 2006 are in the informal sector — hawkers 
descending on to the country’s streets to get some of the crumbs from 
the shallow middle-class boom. Someone still has to explain how the 
government can claim that it has created an informal sector jobs market. 
Of the formal jobs created, the majority are in retail, where working 
conditions are poor.

According to the standard discourse, the economy is well-managed. The 
1996 Growth Employment and Redistribution Strategy (Gear) produced 
macroeconomic stability — a low budget deficit and inflation rate.

However, the ultimate indicators to evaluate the success of economic 
policy are not the budget deficit or surplus or the inflation rate. They 
are the rise of average living standards and the visible reduction of 
poverty, unemployment and inequality, which are the real macroeconomic 
fundamentals. A well-managed developing country should double average 
living standards in 13 years.

Moreover, there is overwhelming evidence that there was no macroeconomic 
stability in the first place, if one accepts for a moment the narrow and 
dubious neo-liberal definition of macroeconomic stability.

In 1996, the debt to GDP ratio was just above 50%, well below the 
current average of rich countries. The budget deficit was at about 5% of 
GDP. It was 2.9% of GDP in 1994 if one excluded the liabilities to the 
Public Investment Commission. The inflation rate was at 7%, its lowest 
level in two decades.

However, government introduced savagely deflationary macroeconomic 
policies. They included sky-high interest rates and indiscriminate cuts 
in public spending. Everything from capital spending to the training of 
nurses and adult education suffered as: government used primary 
surpluses of R200-billion between 1998 and 2002 to service a phoney 
debt; blew R100-billion on unproductive tax cuts for the rich; and 
wasted R150-billion pre-funding public sector pensions. Most of the 
capacity problems in the emaciated public sector are due to such 
macroeconomic mismanagement and the unnecessary, insane, inexplicable 
and mindless slash-and-burn policies which prevailed until 2002.

All South Africans must now participate in a debate on what will replace 
the Mbeki legacy. After 13 years, South Africa still does not have a 
comprehensive economic development plan. It has no industrial or 
employment strategies. There is no leadership, vision or ambition. The 
economy is on autopilot. There are no new ideas. The smug ruling elite 
is satisfied with its mediocrity. We deserve better. We cannot continue 
on the same path.

The starting point of the debate must be the need to achieve full 
employment, reduce inequality and double the rate of growth.

There is a generic template in East Asia which shows how a country can 
achieve an economic growth rate of 8% a year and more, sustain it for 
four decades and more, and make the leap from dirt-poverty to achieve 
the status of a newly industrialised country with full employment.

A new economic model must combine the developmental mindset of East Asia 
with the egalitarian policies of Scandinavia.

Gqubule is a businessman