Neoliberalism and Resistance in South Africa: Economic and Political Coalitions

In the first quarter of 2021, amidst the social and economic devastation wrought by the Covid-19 pandemic, the South African Treasury announced, and subsequently defended, its decision to refrain from increasing the country’s extensive social grant payments—which now reach 18 million impoverished citizens—beyond the growth in inflation. Treasury officials have argued that a larger increase in social welfare protection is simply not currently feasible given the country’s rapidly rising public debt—which has now breached 80% of the debt/GDP ratio—and investor demands for fiscal consolidation. This type of fiscal restraint is unfolding in a context of heightened wealth inequality and an official unemployment rate now above 30%.

Those familiar with the financialization scholarship pertaining to developing countries—that strand which portrays the global financial markets as a force that can alter committed policy trajectories on a whim (Koelble, 2004), as well as the more nuanced literature (Mosley, 2000; Hager, 2017; Streeck, 2014; Ansari, 2017)—may recognize the Treasury’s framing of South Africa’s fiscal dilemma. However, as much of the international development literature on industrial upgrading and state policy has noted (Wade, 2018; Alami, 2019; Rodrik, 2006), there is a third option available to policy-makers in developing countries beyond the binary of debt build-up vs. austerity; namely, comprehensive, employment generating state-led development.

This is precisely the case I make in my new book, published by Palgrave (2021), Neoliberalism and Resistance in South Africa: Economic and Political Coalitions. In addition to documenting the onset of a financialized accumulation regime in post-apartheid South Africa since the democratic transition and the ANC’s adoption of economic liberalization, the monograph also highlights the missed opportunities that could have allowed the country to embark on a self-sustaining path of industrial up-grading, inclusive development, and internal revenue generation. Such missed opportunities include the early rejection by party leaders of the heterodox “Macro-Economic Research Group” (MERG) policy cluster, the removal of the trade unions from broader macro-policy-making processes, the rejection of a modest reconstruction and wealth tax, and the abandonment of much of the “Reconstruction and Development Program” (RDP) platform in favor of the orthodox “Growth, Employment, and Redistribution” (GEAR) package in 1996. Had some of these missed opportunities been pursued, South African state officials would likely be in a much better position to currently adopt expansionary fiscal policies, and perhaps could have lifted their citizens out of poverty via inclusive development instead of cash-transfers.

Yet, as my monograph further documents, since the democratic transition Treasury officials have continued, despite recommendations from other government ministries such as the Department of Trade and Industry (DTI), to veto or oppose heterodox policy proposals that could potentially offer South Africa a path away from the current neoliberal quagmire. Such proposed polices include capital controls, export taxes on raw materials, the utilization of foreign exchange reserves to capitalize State-Owned-Enterprises (SOEs), and targeting specific industrial sectors for subsidies and state promotion.

It will of course be argued by some that modern processes of financial globalization have made it extremely difficult, if not impossible, for currently developing nations to replicate the successes of the Newly Industrialized Countries (NIC) in East Asia. However, as several chapters of my book argue, financialization is not a totalizing force that fully constrains state actors; it also creates opportunities, and the manner in which global finance shapes a national economy will in part be determined by the structure and strength of specific domestic institutions. Indeed, as Chapter 2 of the book carefully documents, neoliberalism and financialization in the post-apartheid period unfolded, and gained momentum, in a political environment in which the Treasury was centralizing its control over macro-economic policy-making in the context of a fragmented bureaucratic landscape. As a result, key progressive actors, such as the Congress of South African Trade Unions (COSATU) and the South African Communist Party (SACP), were excluded from the state channels of policy formulation. Thus, not only has the implementation of economic policies become insulated from democratic pressure, but the post-apartheid bureaucracy has been deprived of the type of centralized economic planning unit that was responsible for much of the regulation and successes of the traditional developmental states. Moreover, this institutional design, which upholds Treasury dominance, exists despite the fact that pockets of technocratic expertise exist in several South African government departments, and could be tapped into for purposes of industrial upgrading if the political will existed.

It is important to stress, however, that the argument here is not that developing countries can simply pull themselves out of poverty and wealth inequality through technocratic problem solving from above. A key theme running throughout the book is that class power and political coalitions are crucial factors that drive the developmental process. State-led development policy would have to contend with the opposition to heterodox programmes from associations such as the Chamber of Mines and Business Leadership South Africa, both of which represent transnational corporate interests, as well the ‘Minerals-Energy Complex’ (Fine and Rustomjee, 1996), and have lobbied vigorously against state interventionism. The ‘Minerals Energy Complex’ (MEC), which consists of both a set of sectors linked to the mining industry as well as a system of accumulation, would serve as a particularly stubborn obstacle to state-led industrial upgrading. Historically, the MEC has structured the dynamic and pace of industrialization in South Africa, with the large mining firms often directing investment into sectors closely linked to beneficiation, while avoiding the large-scale development and advancement of strategic down-stream manufacturing industries.    

The task of state-directed inclusive development may therefore seem daunting; however, as Chapter 3 fleshes out, grassroots resistance and class struggle outside of the official channels—‘wildcat’ strikes being one example—have begun to slowly lay bare the vulnerability of the governing party and the neoliberal regime. It is thus possible that continued struggle from below will generate a new set of economic and political incentives that compel political elites to begin the process of initiating a new developmental model based on employment generating growth. The alternative—rising wealth inequality and a public debt fueled by foreign capital inflows in the context of self-imposed austerity—is unlikely to be sustainable for much longer.

Shaukat Ansari received his PhD in Political Science from the University of Toronto, Canada.    

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s