What Went Wrong in South Africa?

GEAR was drawn up almost solely by 15 economists picked from the World Bank, neo-liberal think tanks, and various African development banks. The GEAR program emphasized commercializing and then privatizing all of South Africa’s public companies and services. It drastically cut government spending and secondary taxes on corporate profits. It meant substantially and prematurely reducing tariffs designed to protect South Africa’s key infant economic sectors, including textiles and value-added manufactured agricultural goods. 

GEAR also liberalized capital controls and foreign exchange rates that left the value of South Africa’s national currency, the Rand, and South Africa’s import and export economic activity highly susceptible to the volatile and rapidly changing nature of international capital markets. Thus South Africa, a newly emerging semi-developed economy, was forced to adopt economic standards of liberalization that no developed economy, including the United States, has been able to implement successfully. 

GEAR Turns The Screw 

S outh Africa’s next president, Thabo Mbeki, elected in 1999, was even more enthusiastic about neo-liberal policies than Nelson Mandela and was one of the main political forces behind the adoption of GEAR. The GEAR program has accomplished the exact opposite of its stated aims. While the International Monetary Fund (IMF) praises the fact that the GEAR programs have resulted in an economic growth rate of around 3 percent for 2003, the Congress of South Africa Trade Unions (COSATU) and the ANC estimates that South Africa will need an economic growth rate of at least 6 to 8 percent to achieve even minimal reductions in unemployment. 

Although GEAR promised 120,000 new formal sector jobs in its first year of implementation, South Africa lost more than 100,000 formal sector jobs by the end of GEAR’s first year. For the remaining 11 million employed people in South Africa in 2003, at least 4 million are employed in the volatile, low wage informal sector and engage in temporary, subcontracted economic activity ranging from prostitution to street hawking. 

South Africa, under the ANC, has the dubious distinction in 2003 of having a larger income gap between the rich and poor than any other country in the world except Guatemala. The most surprising aspect of South Africa’s post-apartheid economic programs was that the ANC embraced these programs so wholeheartedly. South Africa, with its comparatively low foreign debt of only around 5 percent of its total budget deficit in the 1990s, was under no pressure from the IFIs. While highly indebted states throughout Africa were having neo-liberal programs imposed on them, South Africa adopted them willingly. 

Patrick Bond, a professor at Witwatersrand University in Johannesburg, termed these ANC policies “homegrown structural adjustment.” South Africans are now forced to deal with self-imposed corporate-controlled globalization in increasingly desperate ways that meet with increasing repression. Even though all South African citizens are constitutionally guaranteed “sufficient food and water” in South Africa’s Bill of Rights, the ANC, encouraged by World Bank advisors, embarked on a nationwide campaign to privatize South Africa’s public-owned and operated water systems, contracting the management of water systems to large multinational bidders. 

The ANC ignored more realistic, viable, and legal methods of ensuring water access to South African citizens. They might easily have funded small-scale local service providers and maintained overall regulation of the national water system to ensure water access to the low income groups that would not be able to afford the new privatized water rates. Nor did the ANC contractually obligate the water-MNCs to provide water to the poor. The results of this privatization without corporate accountability in a country in which the majority of the workforce is unemployed was disastrous. 

By 2001 there was a massive cholera outbreak that spread from rural areas in Kwa-Zulu Natal Province to the outskirts of Johannesburg. It sickened hundreds of thousands and killed at least 300 people who had to turn to polluted, cholera-infected water systems after they could no longer afford the water charges of the new privately owned water companies. The cholera epidemic cost the South African government millions of dollars as it sought to treat infected people and contaminated river systems. 

Water prices increased by 300 percent in the town of Fort-Beaufort and to similar heights in other urban areas throughout South Africa. In 2003, the village, town, and city councils tried to cancel the contracts with the water multinationals (MNCs). The urban councils are contractually obligated to pay the debts to the MNCs. Nevertheless, the ANC continues to illegally restrict access to water despite the constitutional right of all South Africans to water. 

The government also continues to arrest individual citizens and members of community organizations. Prominent among these are the Anti-Privatization Forum (APF) and the Soweto Electricity Crisis Comittee (SECC). In addition, anti-housing eviction campaigns risk arrest and detention as they try to restore electricity to residences, prevent housing evictions from taking place, and destroy prepaid water meters, installed so water can only be accessed by those who can pay.

The chairperson for the APF, Trevor Ngwane, is a former ANC member who was expelled from the party for opposing its privatization policies. He was arrested and held without bail in 2002 for protesting outside Johannesburg Mayor Masondo’s property. Ngwane has said, “Corporations seeking profit from a natural resource will never create a product or system that will benefit the disadvantaged.” 

“Free Trade” Straitjackets 

I nstead of taking South Africa’s status as a low-income country and the needs of its impoverished majority into account, the ANC governments embarked on a system of complete privatization of its essential services. This centralized corporate-mercantilist control of South Africa’s resources will become even more entrenched under trade agreements whether already completed or on the table with the United States and the European Union (EU). The World Trade Organization (WTO) recognizes that semi-developed economies like South Africa need “special” and “differential” terms permitting trade tariffs and other trade protections to shield their developing economies. But the current bilateral negotiations have undermined those WTO prescriptions as well as South Africa’s industry, agriculture, and labor force. 

For example, the trade agreement with the EU forces South Africa to open 90 percent of its trade to the EU. The EU in return only allows the South African economy access to 50 percent of its market. The EU has also enacted further non-tariff barriers (NTBs) to trade with South Africa, such as strictly enforcing health and safety regulations that block many South African goods from entering the European market. 

The EU trade agreement also encourages South Africa to export only cheap raw materials instead of more value added manufactured goods, which reinforces South Africa’s position as a dependent, periphery economy. South Africa has also entered into trade negotiations with the United States, along with the other semi-developed southern African states that belong to the Southern African Customs Union (SACU), such as Namibia and Swaziland. These negotiations are due to conclude at the end of 2004. 

This trade agreement with the U.S. will increase corporate control of southern Africa’s economies, resources, and labor. Indeed, in order for southern Africa to qualify for “free” trade with the United States, all southern African states must “liberalize” all sectors of their economies, including social services. Corporate taxes have to be reduced or eliminated. Corporations must be allowed to purchase social services, land, and resources wholesale from African governments. At the same time, duties and tariffs on manufactured goods from the U.S. must be substantially reduced. 

The U.S., EU, and large multinationals aim to gain as many concessions as possible from South Africa through these trade agreements while simultaneously seeking to avoid even limited concessions and access to markets in return. South Africa cannot compete with the developed economies, so economic development within South Africa has collapsed. While there is economic growth in assets such as stocks and property, these assets are concentrated among the wealthy minority. The ANC government remains unenthusiastic about national development strategies designed to lift the poor black majority out of wrenching poverty. According to the Landless People’s Movement (LPM) of South Africa, the government, although constitutionally obligated to do so, has not initiated even small-scale land redistribution to impoverished black South Africans. In 2003, 86 percent of the land in South Africa is owned by around 120,000 white farmers and the central government. 

Government economic policy has favored rigid, narrow growth strategies designed to increase corporate profit and roll back the state. South Africa’s economy depends overwhelmingly on the economies of the developed countries. The extreme concentration of wealth, the collapse of social services, the explosion in social problems like prostitution, crime, urban terrorism, and gang warfare, and the rapid spread of AIDS, mean the end of hopes for a better future. The dreams of millions of South Africans, which rose to such heights after the collapse of apartheid, have turned into a national nightmare with no end in sight.