South Africa’s Long Trek to Deliverance: the Lessons of Apartheid, Transition and Democracy

Where Do We Go from Here?

Since the advent of democracy, South Africa has turned into a dominant-party state (as opposed to one-party state, the example of which is Zimbabwe under Mugabe’s ZANU-PF), in which the African National Congress is able to reproduce itself in power, with no end in sight, by virtue of winning successive elections. The white settler population, now deprived of the racial privilege, has been allowed to participate in the democratized political life, albeit on the terms defined by the national liberation movement. Post-apartheid politics has been characterized by the ANC’s desire to centralize power and its ‘playing the race card’ in order to dismiss criticisms emanating from white opposition parties. The relatively benign phrasing in South Africa of grievances aimed at ongoing white economic and institutional control, stemming partly from the ANC’s tradition of non-racialism, distinguishes it from other former colonies like Zimbabwe where blunt xenophobia prevails. The formal racial equality is to a great extent counterweighted by a de facto racial coalition of ANC, SACP and COSATU (where all three are significantly personally overlapping) guaranteed to last through simple demography. The government has proved to be willing and able to utilize racial liberation rhetoric in order to obscure growing inequalities among the formerly oppressed. Generally, research shows that in South Africa as well as in other countries (e.g. Namibia), discontented ruling party supporters do not vote for the opposition, but simply stay away from polls. There is no single party or combination of parties that presents an electoral threat to the ANC. A sea change would only be possible if the tripartite alliance between the ANC, SACP and COSATU broke up, with the latter two forming a new entity. So far, however, the ANC has been able to continue centralizing the power, progressively blurring the distinction between party and state. This strategy of centralization comes in numerous forms, notably via strengthening of the presidency vis-à-vis other branches of the civil service, appointing ANC members to most senior positions of state and their moving from parliamentary to other offices and vice versa, the superiority of party discipline over the service in parliamentary committees, and floor-crossing⁵³ (Southall Democracy 258-259, 261-262). Thus, many observers have come to realize that the basic premise of liberal democracy, i.e. alternating governments, has been undercut. Moreover, within the liberal democratic model that has been chosen, the conduct of elections alone, while certainly necessary, is insufficient as a means of empowerment of citizens. Liberation from poverty and inferior education, as it were, is yet to be delivered to the masses of ordinary people. When it comes to injustices, liberalism is simply unable or unwilling to intervene. Citizens are therefore growing disillusioned with the electoral system, which may be a procedural prerequisite but not a guarantee of real participatory governance. In South Africa under the ANC rule, not only is there evidence to believe that parliamentary checks on the executive branch have been neutralized by the preponderance of the ruling party, but also the black political power continues to be faced with white control of the economy, often via international companies which have either indirectly threatened to, or actually did, relocate headquarters and/or operations overseas in order not to have to cohabit with a former liberation movement (266-267).
Gearing Up

As Heribert Adam aptly commented, the ANC’s historical role, particularly after the 1994 democratization and coming to power, is to represent and control the poor majority (161). For those concerned with ethnic minorities and their potentially being victimized by the dominant party, it is important to understand that political and economic well-being of the country is not threatened by whites but by the impoverished masses of Africans whose situation is unlikely to improve rapidly in the short-to-medium term. The state attempts to arbitrate the conflicting interests of labor and capital rather than siding with one of them, concerned with managing the masses of Africans rather than suppressing minority groups. For one thing, the state needs the know-how and investment that come with business, and thus depends on the – white-dominated – business sector. Recognizing the need to negotiate rather than wrestle, according to Adam, post-apartheid South Africa began to adopt corporatism early on while it relied on a short-term consociationalism in the form of the Government of National Unity. The consociational dimension was, to a degree, always present in the tripartite pacting because the political parties, labor unions and business organizations each commanded the support of constituencies dominated by distinct ethnic groups (Adam 351, 360). Adam wrote:

Short of divisive redistribution, only with economic growth can the enormous inequalities be diminished. Leaving the material cleavages to laissez-faire pluralism […] provides a sure recipe for destructive class warfare. […] Therefore, a country such as South Africa has no other option but to pursue corporatist social harmony (349).

Corporatist arrangements were facilitated by the broad political Left, a prime example being the SACP-authored Labour Relations Act, acclaimed for its sophisticated conflict resolution mechanisms. Congress of South African Trade Unions (COSATU) did not want to jeopardize the ANC’s, its government partner’s, growth strategies and restrained industrial action (strikes). Nevertheless, this power-sharing arrangement was not unconditionally welcome, to say the least. For some in the socialist camp, corporatism equals sneaky cooptation of trade unions by the capital, whereby the more influential business sector is able to dictate the terms of cooperation to weaker unions and ‘the rule of capital’ is once again re-imposed on labor, disguised as a tripartite partnership. Neoliberals and conservatives criticize tripartitism for what is in their opinion an undue share of power for unions. While socialist critics usually fail to appreciate the global economic pressures and treat South Africa in isolation as if it were an abstract model, neoliberal commentators typically overrate the clout of unions with the government. Corporatism is supposed to bring opponents together in a rational conflict resolution. Yet with ANC’s growing confidence, the role of corporatist forums⁵⁴ has progressively been diminished and the government moved to implement macroeconomic legislation without lengthy consultation. In reality, the state bureaucracy did not remain neutral either, but its numerous factions usually took sides when business and labor interests clash. The only mantra that all parties paid lip service to is the Reconstruction and Development Programme, for it was easy to embrace the noble intentions encoded in the RDP without prioritizing its many visions. Unsurprisingly then, the concretization of macroeconomic policy by the government in the Growth, Employment and Redistribution strategy became much more contested (351-354).

Gearing Down

In 2003, Sabeel Rahman of the Harvard International Review summed up:

It still doesn’t pay to be black in South Africa. Much of this despair can be attributed to the collapse of what were perhaps unreasonably high expectations since 1994. Indeed, South Africa remains an economic and political bright spot in a continent rife with warfare and poverty. The ANC government remains popular and stable. Since 1999, growth has hovered around three percent per year, the deficit has slowly eroded, public debt has decreased, and the government has turned a trade deficit into a slight surplus. Despite these rosy figures, the socioeconomic crisis facing South Africa is very real. Unemployment has increased to an official rate of 30 percent, but is probably much higher in reality. Furthermore, the economic transition promised by the ANC government under Thabo Mbeki’s presidency has not materialized. South Africa remains heavily dependent on its natural resource exports, foreign investment has not responded to government incentives, and inequality has increased dramatically between South Africa’s rich and poor, urban and rural. At the center of this socioeconomic crisis is the government’s economic policy, a traditional neoliberal regime centered on the Growth, Employment, and Redistribution (GEAR) policy (Rahman).

When presented in 1996, the GEAR strategy explicitly recognized that

job creation, which is a primary source of income redistribution, remains inadequate. [T]he present growth trajectory of about 3 percent per annum […] provides inadequate resources for the necessary expansion in social service delivery. […]An expansionary fiscal strategy could be considered. However, even under the most favourable circumstances, this would only give a short term boost to growth since it would reproduce the historical pattern of cyclical growth and decline. […]In brief, government consumption expenditure should be cut back, private and public sector wage increases kept in check, tariff reform accelerated to compensate for the depreciation and domestic savings performance improved. These measures will counteract the inflationary impact of the exchange rate adjustment, permit fiscal deficit targets to be reached, establish a climate for continued investor confidence and facilitate the financing of both private sector investment and accelerated development expenditure (Growth, Employment and Redistribution. A Macroeconomic Strategy 1, 3, 5).

It promised a sustainable GDP growth rate of 6 percent per annum and job creation of 400.000 per annum by the year 2000. Why did it not deliver? Did the political establishment believe the goals were achievable? Apparently, according to Bond, the strategy itself, alongside the models by neoliberal bulwarks such as the World Bank, Reserve Bank, Development Bank of Southern Africa and Stellenbosch Bureau of Economic Research upon which it was ultimately based, was theoretically quite orthodox. One of the features that gave it away was that it treated markets as reliable, not-to-be-intervened-in institutions. ‘Excessive’ was a label that GEAR attributed to government consumption expenditure (wages/services) as well as tax rates (both corporate and personal). Through this lens, progressive income tax policies⁵⁵ would be shirked from. Thus, more money would have to be raised from the Value Added Tax, whence it followed that poorer people would have to shoulder a greater relative burden of supporting the government. The Finance Ministry stepped up liberalization of exchange controls⁵⁶ for both foreign investors and South Africans. Finance Minister Trevor Manuel continued to insist on dismantling the controls as soon as favorable, notwithstanding what was sure to be a flood of money out of the country. The government tried to encourage import competition by lowering tariffs. Despite faster trade liberalization, GEAR estimated a 6 to 8 percent inflation by late 1996 (Bond 78-79). The government therefore asked that business and labor keep wages and prices stable, in the process promising a commitment to a broad social agreement which, however, never materialized. Included in GEAR were fairly typical neoliberal supply-side measures such as tax incentives for new manufacturing investments and (six-year) tax holidays for projects that met, above all, the criterion of job creation. Eventually, these measures did not bring the desired results, as the conditions for the domestic market’s expansion were not created and the growth of GDP was substantially slower than expected (and sank into recession in late 1998). Indeed, what followed the passage of GEAR was a period of ‘jobless growth’, at best. Throughout the decade, the common characteristic of almost all new investment was that it was labor-saving and capital-intensive.⁵⁷ GEAR relied on volatile foreign capital flows to solve the deeper issues often at odds with each other – the pressures of globalization and socioeconomic development –, without offering a direct policy mechanism suited for dealing with the deeper crises: inequality, unemployment, crime and public health. Some analysts argue that stable capital inflows have eluded the new South Africa precisely because these structural worries have scared away long-term investors. The restructuralization of state assets – a pseudonym for privatization – was among the top priorities in the quest for attracting new investment, too. In 1996, the government announced its plans to privatize (and establish joint ventures) in the sectors of mineral resources, energy sector, telecommunications, agriculture, public transportation and forestry, effectively canceling a preliminary agreement with COSATU whose subjects – particularly workers in the abovementioned industries – expressed worries about the security of their jobs and wages. Not least, when commercial and cost-recovery principles won the day in the big parastatals charged with service delivery, the ordinary consumers had little hope for the RDP-postulated cross-subsidies to come to be realized. In Telkom, for instance, new (Texan and Malaysian) shareholders suppressed Jay Naydoo’s attempt at cross-subsidizing of rural and township accounts by large phone users. It is true that the Finance Ministry anticipated increased public investment, particularly in education, housing, health services and infrastructure. But these investment hopes were based on the false premise that market-oriented policies would deliver the goods. The GEAR strategy did not reflect on other instruments at hand to address the problem of South Africa’s foreign reserves, such as higher import tariffs on luxury goods, renegotiation of the apartheid debt ($25 billion) and greater use of exchange controls (Rahman; Bond Elite Transition 80-82).

As Rahman commented:

Upon GEAR’s inception in 1996, the ANC government believed that a rise in foreign investor confidence would result in more foreign direct investment (FDI) and create new export sectors, jobs, and vital funds for poverty alleviation programs. Unfortunately, […] the attraction of new FDI failed to materialize. GEAR viewed FDI as a “development deus ex machina,” believing that the investment would automatically flow in. Certainly there have been some high profile successes, notably the establishment of BMW and Mercedes automobile manufacturing plants in South Africa. However, a closer look reveals that FDI did not increase under GEAR, and what money did flow in focused on acquiring existing assets rather than building new plants or creating new jobs. At the same time, the influx of FDI and foreign ownership of South African plants have resulted in the competitive displacement of other domestic machine component manufacturers. Under GEAR, the South African economy has reinforced its dependence on natural resources such as metals, diamonds, and gold. Capital goods and machinery have become South Africa’s highest imports, displacing its budding manufacturing sector, further contributing to job losses. South Africa’s experience with GEAR shows that neoliberalism alone is at best an inadequate policy tool (Rahman).

“Just call me a Thatcherite,” remarked Thabo Mbeki during a GEAR-presenting press conference (Bond 83). Indeed, the losers would be the unskilled and working-class workers, township residents, women and the disabled – all the historically disadvantaged groups. According to national surveys, an estimated 10 million people had their water cut off and about 10 million were subjected to electricity disconnections. Municipal statistics further suggest that it must have been dire poverty rather than a ‘culture of non-payment’ involved, since 60 percent of disconnections were still left unresolved after six weeks (Bond Class Apartheid 48). As Jacobs and Krabill (160-161) summed up, when governments turn from service providers to service enablers, and citizens are reduced to consumers, many of the previous rights disappear, replaced by an opportunity to pay for services at a market price.

Economic Outcomes

The economic policy of the South African government of the late 1990s and early 2000s, epitomized by GEAR and characterized by fiscal discipline, privatization and deregulation, failed to deliver jobs and growth and created conditions for reconsideration of the governmental developmental strategy. The post-apartheid economy has been decimated by low investment and rising unemployment (about 31 percent in 2003 – higher than in other so-called ‘middle-income’ countries of comparable economic performance – e.g. Brazil, South Korea and Egypt). In response to the crisis, the government had not come up with a systematic approach; yet it adopted some reforms, in the process increasing expenditure on housing and basic social services. Still, the state treated anti-poverty measures separately from its economic policy, as if these measures were merely assistance to the poor, unincorporated into the overall growth strategy. The Growth and Development Summit of 2003 manifested that there is an ongoing debate and profound disagreement within the ruling elite as to what the strategy should be. Some view the weak performance of neoliberalism in South Africa as the temporary cost of transformation and preach that rapid growth must be around the corner. Others retort that South Africa needs more interventionist policies (Makgetla 263).

Table 3. Growth, investment and unemployment compared to other countries
	GDP growth 1990-2001	Investment as % of GDP (2001)	Unemployment rate^*
^South Korea ^Egypt ^Brazil ^South Africa	^5.7% ^4.5% ^2.8% ^2.1%	^27% ^15% ^21% ^15%	^4% ^8% ^10% ^30,5%

Source: adapted from Makgetla, 264. (^* The unemployment rate is given for 2002 for South Africa and for one year between 1998 and 2001 for the rest of the countries.)
Officially, unemployment rose from 16% in 1995 to 30,5% in 2002. However, when the workers too discouraged to seek work are included, the figure grows to alarming 40%, which is extremely high by world standards. Associated with unemployment is a shift into informal work sector, which in the same period rose from 17 to 20 percent of total employment, and falling remuneration (inflation cut the purchasing power of 1,000 rand by almost half). Statistically, unemployment is highest for the young, blacks and women. In 2002, the unemployment rate was still heavily racially biased, affecting 47% of Africans while only 8% of whites. For African women, the rate was 53%. Corresponding to this was a steep fall in African households’ incomes (265). According to governmental statistics, average black household income fell 19 percent between 1995 and 2000, while white household income rose 15 percent. Absolute poverty increased, too, as the percentage of households earning less than $90 per month rose from 20 to 28 percent in the same period of time. Characteristically, the 10 percent of the wealthiest whites and a small elite of affluent blacks enjoy insulation from the majority and the most conspicuously luxurious lifestyles on the planet (Bond Class Apartheid 48, 53). In terms of regions, the national GDP somehow masks the substantial differences in economic performance. The regional income distribution is heavily diverging, with relatively poor regions likely to become even poorer and richer regions maintaining their leading positions as local growth poles, absorbing economic activity from their surroundings. More, this core-periphery pattern obstinately resists amelioration by government policies (Bosker and Krugell 493).

Table 4. Unemployment in South Africa (% of population)	1993	1998
Unemployment (strict definition) African Coloured Indian White Total	15.7 15.1 7.1 3.2 12.7	33.4 15.8 14.8 4.5 26.1
Unemployment (expanded definition^*) African Coloured Indian White Total	37.7 20.9 11.0 4.6 29.4	47.6 23.9 12.8 6.6 38.6

Source: Butler, 71. (^* The expanded definition includes discouraged work-seekers.)

Labeled ‘excessive’ by GEAR, government expenditure decreased and thus contributed to a decline in investment, with the state’s share in total investment dropping from 36% in 1990 to 25% in 2002 – the lowest level since 1946 (when figures were first available). One of the main points in the ongoing debate on economic policy thus remains whether rapid growth is practicable without addressing the extraordinary disproportions in wealth and income. Makgetla characterizes the ANC’s policy as a competitiveness strategy, whereby the government sought to boost productivity without channeling investment into selected industries,⁵⁸ and limited its interventions to the typically neoliberal ones, i.e. privatization and deregulation of markets, abolishing subsidies and reducing tariffs (while at the same time adopting ‘supply-side measures’ to support exports) and exercising fiscal restraint, and perceiving the decline in employment and growth as the unavoidable cost of restructuring. When virtually none of GEAR’s ambitious goals for 1996-2000 were met, its proponents claimed that the turning point must have been delayed by investors’ inclination to view investment in Africa as hazardous, combined with low skill levels of Africans inherited from apartheid and unfair terms of international trade, especially protectionism practiced by the USA and the EU (266-269).

Table 5. GEAR projections and actual achievements 1996-1999
^Fiscal deficit (as % of GDP) ^Average tariff (as % of imports) ^Real private sector investment growth ^Real non-gold export growth ^GDP growth ^Inflation ^Annual change in formal, non-agricultural ^employment	^Annual average ^projected in GEAR	^Actual achievement
	^3.7% ^7.6% ^11.7% ^8.4% ^4.2% ^8.2% ^270,000	^3.1% ^4.4% ^1.2% ^6.7% ^2.4% ^6.6% ^-125,000

Source: Makgetla, 269.

The competitiveness strategy is flawed because it relies not on thorough research of the South African economy, but on theory that postulates that left alone in a free market, capital will engage in some productive activity and this will benefit the society. Export industries, the focal point of the competitiveness strategy, are important but cannot meet the needs of the impoverished masses. In the early 2000s, minerals still made up half of South African exports and refining was encouraged by the government to raise the value added of production for export. Refining, however, is greatly capital-intensive while creating few jobs. One of the main shifts in the character of South African production – each of which, incidentally, caused job loss – was a move from gold to platinum, which employs a lot less people.⁵⁹ Moreover, with lifting of the apartheid-era sanctions and liberalization, the big mining and finance companies were allowed to operate globally, and the key firms like Anglo American, Old Mutual and SA Breweries relocated their financial operations to London. In contrast, the RDP stressed the significance of production for the domestic market. A developmental approach (as opposed to the competitiveness strategy) would require clinging to more labor-intensive production (thus supporting job creation), particularly moving from heavy industry (mining and refining) to services and light industry like textiles, food processing and manufacturing. An administration committed to progressive agenda would also utilize more effective measures to transform the structure of ownership and organization – in 2002, whites represented only 14 percent of the workforce but held more than 50 percent of senior management positions (270, 278). In 2004, Makgetla wrote:

National government departments now enjoy considerable independence from overall control, and no authority is responsible for ensuring the economy supports equity and employment… [T]he structure of decision making on economic policy favours business rather than the ANC’s historic constituencies (270).

To some extent, the ANC kept its promise of improved access to basic infrastructure and housing. However, new programs mostly failed to substantially ameliorate the unemployment and underemployment inherited from apartheid, especially in townships and homelands, because the services provided were generally of low quality and high cost. Almost all new housing was built far from city centers (i.e. from economic opportunities), basically reproducing the spatial pattern of apartheid. Thus, access to household infrastructure per se improved, but access to employment did not. The broader picture worsens when the poor quality of the general education system is added: in 2002, 34 percent of Africans under 30 had less than 8 years of schooling. Only 12 percent of schools, almost exclusively in historically white areas, provided computers for their students.⁶⁰ Differences in salaries, advancement and hiring between black and white academics are likely to continue to be a source of bitterness in spite of government’s pronouncements (and real achievements) about equity (Anderson 387). Nonetheless, educator salaries are relatively high compared to other middle-income countries, and because teachers in poor rural areas enjoyed the greatest pay rise, the reallocation of funding was seemingly redistributive. As research shows, this greater expenditure did not correlate with an improvement in the quality of education, and thus appears not fully justified. One of the major reasons for it was that teachers and their unions had successfully stifled efforts to render them more accountable for poor performance (Seekings 304-305). Education also deserves heightened attention for a deeper, structural reason: “education and socio-economic mobility magically reduce the tendency of groups to politically operationalise separate racial and regional identities” (Jackson 208). As a government priority, housing was differentiated into numerous subsidy programs, with projected expenditure in 2003/2004 of about 9 million rand, or 2.6 percent of the total government spending. Housing policy was criticized, however, for effectuating construction of a very large number of poor quality dwellings in areas far from job opportunities. Furthermore, many new owners had to sell their property to wealthier buyers because of being unable to sustain the costs. The government partially responded to the shortcomings via channeling its energies into the delivery of basic services (the most important being potable water and sanitation) and leaving the construction of housing units to the communities (Makgetla 271; Butler 79-80). Notably, Chipkin (141) commented that it is not mere delivery, even if effective and efficient, of housing stock and municipal services, that makes a local government ‘developmental’. It is questionable whether the departmental and bureaucratic staff ever thought about it that way, but what the RDP inadequately considered an end in itself (a housing unit, for example) and a measure of development, may actually be ‘non-/anti-developmental’ – for example, when a house/site does not grant to residents a resource through which to access economic opportunities or burdens them with an unaffordable product (Chipkin 139).

Black Empowerment

Affirmative action facilitated by the ANC government has without overtly challenging the concentration of wealth led to the creation of a very limited educated black upper class. Criticisms have often stressed that the policy became reduced to support for medium and big black companies. It came to be dubbed Black Economic Empowerment (abbreviated BEE, sometimes also termed in a colorblind fashion as ‘Broad-based’ Economic Empowerment, after the law passed in 2003). For the structural and political reasons mentioned throughout this work, after 1994 blueprints and campaigns tailored for redistributionist ends were benign and non-threatening to the overall structure of ownership. Because the strictly neoliberal, market-oriented approach did not bring about the much willed development, the ANC has since the early 2000s adopted a more assertive version of affirmative action. Since a radical redistribution (nationalization) of wealth was unavailable precisely because it was no longer deemed desirable, the post-2000 ANC approach could be characterized as aiming to create a prosperity-making, ‘patriotic’ black bourgeoisie. The ANC’s partners in the tripartite alliance, COSATU and SACP, welcomed the project ambivalently (Southall Black Capitalism 313).

The theory behind the black capitalist class-creating project was called the ‘National Democratic Revolution’ (NDR).⁶¹ The NDR argues that the objective of the white capitalist after 1994 is to allow for a limited deracialization of the economy, whereas the objective of the NDR remains to overcome the legacy of racial discrimination and forge a united, democratic polity, while transforming power relations in favor of the historically disadvantaged. Market forces are hereby counted on to play an important role in the economy. Facilitating Africans’ upward mobility, the success of the NDR, Southall argues, will lead (in fact, is leading) to the formation and growth of a black capitalist class. The problem here is that the white capital may be ready to allow the ascent of a limited number of blacks to higher positions in business in order to maintain the status quo. Black professionals gain from advancement but their relative advantage may weaken their links to the interests of the poor. The ANC’s business should be to prevent them from becoming the puppets of big capital interests. Because it is the ANC that plays an important role in the emergence of black bourgeoisie, the movement ought to elaborate, and see to the observance of, some standards of conduct that would serve the delayed goals of national liberation – that is what the term ‘patriotic’ ought to stand for. Southall calls this process ‘conscientising’ (315). To sum up, the NDR theory thus advocates cooperation with white capital at the same time that it reinvigorates the ANC’s historic role, authorizes a more interventionist role for the state, and justifies the creation of black bourgeoisie as long as it is ‘patriotic’ (314-315).

In a wave of politically stimulated deals, black business reportedly acquired a 10 percent share of the Johannesburg Stock Exchange (JSE) from 1994 to 1997, before the JSE crashed (in 1997) and the black stake dwindled to 1 percent. Also because of the economic turmoil, the value of BEE ventures dropped from R21 billion in 1998 (110 companies) to R3.4 billion the next year (45 companies), with the prices of shares declining by at least 50 percent for all black firms, and a decrease in the number of BEE deals. Empowerdex, an empowerment index, reported that in 2002, Africans owned almost 10 percent of the total share value (R143 billion) of the top 115 companies on the JSE list (in contrast, BusinessMap argued for a lesser figure: 2%). In the same year, however, the private business sector was still completely run by whites: 98% of CEOs of JSE-listed firms were white males. Despite the differences in numbers produced by various indices (which generally result from the application of different methods and criteria), the single most significant point was that the ownership and management of the corporate sector by blacks remained minuscule. The importance of state intervention for the rise of black business only grew with the departure of certain English corporations, whose place would be occupied by Afrikaners. In addition to appointing of black managers to executive positions in big parastatals like Telkom and Transnet, the state helped facilitate black privatization via the so-called SPVs (special purpose vehicles, frequently used especially until 1998), financial instruments used to introduce aspirant black capitalists without necessary capital into the corporate ranks. SPVs required expensive borrowing and black investor groups typically did not purchase more than a 20 percent share in the companies they had been offered, thus not gaining executive control and not becoming involved in company investments. Even small shares entailed expensive borrowing by black investors who naturally had no opportunity to accumulate capital in the past. The principal risk was borne by the core investors rather than the BEE investors, and the latter had little to lose and lacked motivation to add value. They had been criticized by President Mbeki for becoming rentier capitalists. Some of the attempted high-profile sales by the government to black capital collapsed due to difficulties with financing (e.g. Airports Company and Aventura Resorts). Because the majority of ordinary Africans still lived in poverty, the spreading perception that black empowerment only worked for the enrichment of a small black elite could and often did turn pride into outrage (318-320, 323).

In any case, the ‘blackening’ of South African capitalism was long delayed, and the interventionist perspective started gaining frequency in the decision-making circles. Because the post-1994 initiatives did not bring about any thorough-going transfer of ownership to the African majority, the Black Economic Empowerment Commission (BEEC), established in 1998 by black business as a consultative platform chaired by Cyril Ramaphosa, recommended the adoption of wide-ranging, state-driven program, demanding that the private sector adopt targets for black participation in the economy. BEEC report argued for the establishment of quite a few specialized government agencies (National Empowerment Funding Agency, National Procurement Agency, Rural Development Agency) and systematic transformation of crucial sectors of economy via biased allocation of resources. Cyril Ramaphosa warned that should South Africa hesitate over thorough-going reform, “another Zimbabwe” could happen (321-322).

The first major initiative, leaked in mid-2002 from the Department of Mines and Energy, proposed that all mining operations would be required to be 51% black-owned in 10 years. Following intense negotiations, the final charter presented considerably milder empowerment targets: 15% of ownership for blacks in five years, 26% in ten years. The problem of financing was to be resolved through a ‘New African Mining Fund’ (intended to reach R2 billion in years) aimed at ‘green field’ projects, complemented by R100 billion pledged by the mining companies. In the finance service sector, resistance to high ownership targets reflected the astronomic amounts of money involved. The acquirement of 25% in any of the four large banks (Absa, FirstRand, Nedcor and Standard) would cost about R10 billion, that is beyond the reach of black entrepreneurs. All in all, these developments have signalized that the corporate South Africa began to take BEE seriously. Furthermore, Southall claims that if the rhetoric of the ANC, still marked by a lot of residual Marxism, is stripped to the core, it is basically a neoclassical argument: the creation of a black bourgeoisie ought to be justified by its historic function of raising productive forces (thenceforth enabling redistribution). The ANC’s role ought to be to ensure that this new bourgeoisie remains “socially responsible at the same time as they become filthy rich” (325-326).

The level of compliance by corporate South Africa and transnational firms with the BEE, which the Wall Street Journal labeled “the world’s most extreme affirmative action program” (qtd. in Iheduru 334), may seem somewhat puzzling. Tony Leon, formerly an opposition party leader (Democratic Alliance), ranted about the BEE being unconstitutional because of violating the guarantee of non-racial citizenship. It begs the commonsensical warning that such requirements could propel manufacturers to relocate their operations abroad. The South African government of the early to mid-2000s is certainly among the very few that embarked on a daring program that goes well beyond standard regulatory mechanisms in order to nurture black capital. Yet instead of flight, there has been what the Financial Times described as a ‘race to comply with BEE’ (Iheduru 334) by businesses of all sorts throughout virtually all sectors of the economy. It even prompted a one-time anti-apartheid MP Helen Suzman to coin a metaphor, saying that ‘Anglo licks the ANC’s boots’ (334). The situation is indeed remarkable, noting that through the so-called ‘Sector Empowerment Charters’ (SECs), the private sector is being compelled to transfer 25 to 50 percent of the ownership to the historically disadvantaged. If anything, the motivation behind the program ought to be clear: nearing a decade and a half since the transition to democracy, 80 percent of the economy is still controlled by whites (333-335).

After 1994, corporate South Africa was becoming aware that in order to evade being vulnerable to political populism, some alliances with black capitalists were advisable. More importantly maybe, the investments of local and international capital in South Africa were too deep, and the pressures in globalized markets too intense, that capital could neither simply leave, nor attack the government. Initially, the big business drafted their own ‘pre-emptive’ versions of BEE, trying to avoid restrictive measures. This created the negative public image of BEE as nurturing a tiny elite while keeping the economy white. The government responded with an interventionist initiative centered on positive discrimination in select sectors (mainly energy, mining, motor industry, agriculture and IT). The new strategy was inaugurated in 2003 by the Broad-Based Economic Empowerment Act (No. 53) which explicitly sets out to increase the number of blacks in management and ownership of the ‘means of production’.⁶² To answer accusations of racism, the Act defines ‘black people’ as Africans, Coloured and Indians. Tracking corporate compliance are a so-called BEE Code of Good Practice and ‘Empowerment Scorecard’, introduced in 2004. Crucially, the ownership targets prescribed by the BEE Act apply also to all suppliers and subcontractors of each company that does business with the state.⁶³ The half of the annual R400 billion government budget on infrastructure has proven a magnet for corporations, which accept the BEE charter requirements in order to do business with the state-owned enterprises (SOEs) which supervise these funds. Thus, having as good a BEE score as possible has become a necessary prerequisite for successful business in South Africa. More than 100 ‘racial auditing’ (as the Economist called it) companies, or businesses specializing in measuring BEE, proliferated. The BusinessMap Foundation calculated that corporate South Africa might have transferred about R310 billion through BEE deals from 1995 to 2006, and BEE deals meanwhile became the strongest motor behind mergers and purchases. According to the Department of Trade and Industry of South Africa, between 2000-2006 more than 50 percent of the top 40 JSE-listed firms contracted BEE transactions involving 10 or more percent of their assets. Prominent interest groups have shirked from direct confrontation and instead expressed public support for BEE, although in general, the primary factor in BEE compliance is the degree of government’s leverage over a given sector.⁶⁴ When the Minerals and Petroleum Development Act of 2002 brought private mineral rights into state ownership (such is the worldwide norm), the government used its clout with the mining giants – since energy and minerals sectors remain among the most heavily subsidized – to make them either comply with the BEE policy or face liberalization. The automobile industry also has a good reason for endorsing BEE because statistics demonstrate that South African consumers help subsidize production not only for the domestic market but exports, too. In spite of the (sometimes well-earned) criticisms of BEE, it is for sure that it did not spark an economic decline (340-344, 349, 350-351, 359).

5. Conclusion

It is hard enough to imagine the hardships that the South African apartheid regime put its citizens through. It categorized them according to their ancestry and physical features, so that they could not petition (even though some of them tried) for change and thus better treatment. This extremely malevolent nature of the regime prompted popular reactions ranging from silent suffering to the armed struggle of the liberation movements. Nelson Mandela and his likes, armed with real weapons and an anti-imperialist ideology, fought fire with fire, and in the end, were redeemed, although not on the most favorable terms. Indeed, the terms and conditions of the relatively peaceful transfer of power and transition to democracy put the liberation movement into an unfavorable position, since after the collapse of the Soviet-type economy and ideology that it had long adhered to, expropriation and nationalization was no longer advisable. The new democratic government, led by the African National Congress for years to come, nevertheless adopted a more benign version of a redistributionist blueprint, called the Reconstruction and Development Programme. Policy guidelines included in the RDP, while condemned as too radical by political/economic liberals and conservatives, were deemed practicable by the broad left. Neoliberal agents such as the Development Bank of Southern Africa and World Bank, backed by big business and assisted by a myriad of pro-capital think-tanks and NGOs, were able to engage the top-ranking officials and economic experts, many of them one-time Stalinist hardliners, in a series of so-called scenario planning exercises designed to neutralize opposition and open the door to full-blown neoliberalism. These aspirations came to be realized with the adoption by the government of the Growth, Employment and Redistribution program in 1996, which basically confirmed the suspicion that the ANC was tailoring its own homegrown version of a structural adjustment program. The subsequent period was characterized by jobless growth, job losses and nothing remotely close to the expected levels of foreign direct investment. Inflows of foreign direct investment were counted on to boost the economy so that some limited redistribution could take place. Export-led growth, also one of the main pillars of this economic strategy, could not possibly bring in the resources needed by masses of impoverished Africans. Around 2000, the ANC-led government changed its outlook and started adopting a more interventionist stance, mostly characterized by a new model of black economic empowerment policy, requiring the endorsement by corporations in numerous key sectors of BEE charters, facilitating the transfer, typically within 10 years, of 25 to 50 percent of ownership to the emerging black capitalist class. In line with the guiding theory of National Democratic Revolution, the ANC learnt to avoid socialist posturing (and maybe abandon socialism altogether practically, if not rhetorically) and work with capital on the project of creating a black ‘patriotic’ bourgeoisie, whose economic success is expected to spill over and cascade towards the masses of African population. While business press decried the new, assertive version of BEE, big business has been surprisingly responsive to the BEE requirements. One of the principal reasons might be that global competition in combination with resources already invested in the country prompted the (still mostly white-controlled) capital to go with the flow and try to secure favorable positions. Black economic empowerment became a billion-rand industry itself and corporations simply sensed their chance. It seems that the South African government, after an unhappy marriage with neoliberalism, finally struck a balance between cohabiting with and catering to business and meeting the long delayed needs of the masses of ordinary citizens. The strategy has worked fairly well so far, the real long-term benefits remain yet to felt.
List of Works Cited
1950s Legislation. 2009. 18 Sep 2009.