Cyril Ramaphosa’s poisoned chalice
South Africa’s new leader has a near-impossible task ahead of him
Cyril Ramaphosa arrives with his wife to deliver his State of the Nation address, February 16 (©NASIEF MANIE/AFP/Getty Images)
Relief at the end of the corrupt and illiberal regime of Jacob Zuma has quickly given place here in South Africa to swooning adulation for the new President, Cyril Ramaphosa. South African political culture is very much leader-focused and the recent experience of democracy means that it is also naive. One realises that electorates get more sophisticated with time and even understand a bit of comparative history. That is how you get an electorate smart enough to reject the massively popular Churchill for the rather anonymous Attlee because the latter was better suited to the work of postwar reconstruction. No such scepticism exists in this case. Ramaphosa has known how to press all the right buttons and has led an extended charm offensive, piling on the rhetoric of consultation and conciliation with a trowel. The idea — clearly successful — has been to position himself as the man who negotiated the country’s first democratic constitution, who will bring the same skills to dealing with the country’s problems now, and fulfilling the promise of Nelson Mandela. This is heady stuff and were an election to be held today he would clearly win by a mile.
In large part this is due to sheer relief at the end of Zuma’s blundering and stealing and the way in which he allowed the state’s capture by a gangster elite. But this is a good moment to look at South Africa’s leadership under the ANC since democracy was won in 1994. Mandela was a dear old man, greatly loved, and his message of racial conciliation and forgiveness was just what the country needed. In every other way he was a hopeless president. He never understood or did the job, instead spending all his time with pop stars, sportsmen and the mega-rich. He neither presided over the cabinet nor even bothered to stay right through its meetings. There was simply a hole in the middle of government where there needed to be hands-on executive leadership. Corruption began to flower under his administration, particularly in the infamous arms deal of 1999.
Next came Thabo Mbeki, in many respects more capable but given to stealthy behind-the-arras elimination of possible rivals and to grandiose visions of himself as the leader not just of Africa but of the entire Third World. He also used nakedly racist rhetoric against whites. His combination of paranoia and grandiosity led him to believe that the anti-retroviral drugs used to treat the HIV-positive were just a scheme by Big Pharma and that he knew better than medical science. Accordingly, he deprived the HIV-positive of antiretroviral drugs (ARVs). A later Harvard study showed he had caused 300,000-365,000 unnecessary deaths, almost all Africans — a true genocide and at least 20 times more than had died for political reasons under apartheid. Under him corruption became structural as part of the vast ANC patronage network. Even when cadres were found stealing, no one was punished. Finally, there was Zuma, under whom a corrupt mafia took over the entire state. The president, a semi-literate, warned people against witches, told them the ancestors would be angry if they didn’t vote for him and also said that God supported the ANC. He made up policy without the least regard for legality or affordability and seemed quite ignorant of the constitution.
The net result is that after 24 years of ANC rule there has not yet been one good executive president and the country has suffered enormous damage. In addition, very few cabinet ministers are competent and many of them get rich with suspicious speed. The ANC is, moreover, still working towards the old Soviet slogan of the National Democratic Revolution, which is supposed to see the transition to socialism. Even the most corrupt claim to be revolutionaries and call one another “comrade”. The party has just vowed to proceed with expropriation of land (and, by implication, other property) without compensation. The whole emphasis is on redistribution rather than growth, on consumption rather than investment. The result is that under ANC rule unemployment has grown from 3.7 million to 9.4 million. Unsurprisingly there has been an investment strike and the last few years have seen a massive outflow of capital as panicking South African firms and individuals rush to buy foreign assets.
There is indeed, a curious symmetry with Venezuela, whose President Maduro is much admired by the ANC: it has the largest oil reserves in the world and is now plunged into hopeless poverty and debt. South Africa has the largest mineral deposits of any country on earth and it also has record (40 per cent) unemployment, increasing inequality, slow growth and falling per capita income.
To further spice things up we have also had the spectacle of the three Guptas — Ajay, Atul and Tony — once the most powerful family in the country, able to sack and appoint ministers, now becoming fugitives from justice. The deal was simple. Working through crooked ministers (whom they had effectively appointed) they secured the appointment of Gupta creatures on the boards of all the state-owned enterprises (SOEs) who then diverted a stream of contracts to Gupta companies. Zuma would report to them after every cabinet meeting, driving with the presidential cavalcade to their luxurious home, and in return they would divert great wealth the way of the Zuma family. Now we have the inglorious spectacle of the ministers who collaborated in this daylight robbery suffering amnesia, denying things they are forced to admit on the next day and generally trying to evade responsibility. The Guptas, meanwhile, have fled the country and are invisible though the law enforcement agencies of several countries are keen to know their whereabouts. They may have stolen as much as $5 billion or even more. Their Cape Town house, bought from Mark Thatcher, stands vacant. Zuma’s son, Duduzane, a major Gupta associate and beneficiary, has also fled.
South Africa is now in a parlous position. Two of the three big ratings agencies have downgraded its credit to junk status, the government has run out of cash, the civil service is far bigger and far better-paid than in any comparable country and the big state-owned enterprises (SOEs) have been looted and mismanaged into bankruptcy. So much has gone wrong that it is difficult to know where Ramaphosa should start. His first state of the nation address was full of commitments to hold jobs summits, set up commissions, advisory councils, task teams and working committees, all premised on the assumption that if you can get business and labour round the table with government all problems can be solved. The Communist Party and their allied trade unions, Cosatu, immediately demanded that Ramaphosa, whose election within the ANC they had supported, must consult them first. They have branded his first budget “a betrayal”.
Ramaphosa’s commitment to corporatist consultation sounds very democratic. But it is a mistake. For almost ten years now the World Bank, IMF, OECD and the ratings agencies have all said that South Africa needs serious structural reform. It must radically reform its education system — the weakest in all Africa. It must liberalise its labour market, which currently works only to the advantage of a tiny labour aristocracy; it must slash its public service both by personnel and wage cuts and it must clean up its SOEs, which have all been bankrupted by their venal and incompetent management. The problem is that in each case this would involve confrontations with the trade unions which are a key part of the ANC’s alliance, so the government has always backed away and instead promised to bring down the budget deficit.
However, the failure to enact structural reform has undermined all efforts at fiscal consolidation. The public service unions (the main component of Cosatu) continually insist on and get wage settlements way beyond inflation. In their last three-year deal, concluded when the economy was actually shrinking, they got 26 per cent plus an increase in benefits worth another 3 per cent. The shortage of well-qualified personnel — due to the weak education system — pushes up salaries for the elite. And the SOEs need continual large bail-outs to save them from bankruptcy. There is simply no hope of Ramaphosa getting out of this mess if every policy has to be carefully brokered between government, business and the trade unions.
Take the SOEs. The state arms-manufacturer, Denel, and the South African Broadcasting Corporation both ran out of money to pay salaries a few months ago and only desperate temporary expedients are keeping them from closing. South African Airways has been bankrupt for many years now and exists only on continual state bail-outs. But by far the most important, Eskom — the electricity company — now owes more than $35 billion, has seen its staff double in the past five years even as its output fell, pays the highest average salaries in the country and has run out of money to pay salaries.
The government’s answer was to illegally raid the civil service pension fund to keep things going and to ask the local banks to lend Eskom $1.72bn. to tide it over for a few months. All foreign banks have backed out, the local banks are “considering” and even so Eskom’s bankruptcy will be only months away. This was, under apartheid, the world’s eighth biggest utility, legendarily profitable and producing the cheapest electricity in the world. Yet the government can’t afford Eskom to go bankrupt because all its debts are government-guaranteed and because cross-default clauses mean that any SOE that goes bankrupt automatically results in a calling in of loans to all the rest.
It is obvious that any solution to the Eskom mess has to include large staff redundancies, a pay freeze, and the large-scale sale of assets — and something similar applies to all the other SOEs. There is no hope of getting such solutions agreed by Cosatu or the Communists. The same is true of the crises in education, the rigidity of the labour market, and public service pay. There is simply no road to structural reform through consensus-seeking corporatism. Yet to agree to structural reform is to admit that the whole trajectory of ANC government since 1994 has been wrong — and it also means a fight to the death with the South African Comunist Party, the unions and the ANC Left.
This is why Ramaphosa is committed to his corporatist path. It may even get him through the 2019 elections. But it is bound to fail. The real question is what happens then. One way of answering that question is to realise that in the situation Ramaphosa now faces the logical thing to do would be to call in tbe IMF, apply for an emergency loan and then take the tough medicine imposed by IMF conditionalities. This is, however, anathema to the ANC not only because of the loss of economic sovereignty it entails but because of the public admission that ANC government has failed. But one senses that sooner or later this is where we shall end up. What it boils down to is that the political system, sunk in its parochial fixations, its past historical resentments, and its outdated ideology is incapable of carrying out indispensable reforms itself and that they will happen only when they are externally imposed. Much as the end of apartheid — another outdated ideology — was brought about to a large extent by sanctions, boycotts and international pressure.
South Africa became a democracy in 1994, fully 30 years after the rest of Africa and many of its problems now are simply a re-enactment of where most of Africa went wrong. Everywhere the continent is governed by a bureaucratic bourgeoisie which is almost wholly unproductive and parasitic. Someone had to pay for the salaries and privileges of this new bourgeoisie — since it produced nothing itself — and inevitably that had to be the 80 or 90 per cent of the population that were still peasants. This meant a perverse redistribution from the poor to the rich, with a consequent increase in inequality. This siphoning-off of resources from the peasantry saw one African country after another plunge into dependency on food imports.
Exactly the same process has occurred in South Africa, with the difference that in this case the transfer of resources to the new bourgeoisie is mainly from the tiny white tax base and the immiserated urban poor. The consequent increase in inequality has made South Africa into one of the two most unequal societies in the world. Here, of course, white farmers still produce almost all the food in the shops — the farms redistributed by land reform to Africans have had a 90 per cent failure rate — but the trend is the same. The number of white commercial farmers has decreased dramatically and the large agricultural surpluses of the pre-liberation period have fallen back into a situation where exports merely balance imports.
Most African states chose either “African socialism” or “scientific socialism”: both were uniformly disastrous. They not only achieved little economic growth but the extension of public ownership that this involved invariably ended up with large, loss-making, overstaffed entities which were — and still are — a byword for nepotism and corruption. Indeed, it is hard to see how public ownership can work in countries where the extended family system makes it obligatory to help family members get jobs, where political elites insist on pushing their cadres into key management positions and where the general urge for primary accumulation is so strong that corruption is ubiquitous. Public ownership even in Europe and North America is a difficult business but there are sociological reasons why this can’t work in Africa now. Inevitably, the tentacles of patronage and corruption lead into the private sector as well.
Despite that, the ANC seems determined to copy all the mistakes of Nkrumah, Kaunda and Nyerere. The current water crisis in the Western Cape, for example, is directly traceable to the nationalisation of water in 1998. Water — which is precious, scarce and costs a lot to extract, store and recycle — was declared a national resource which would be freely available to all as a human right. But little effort was made to increase water resources or even to maintain the existing system. Inevitably, disaster has followed and water currently sells for high prices on the black market in Cape Town.
Ramaphosa is doubtless a great improvement on Zuma but he seems committed to much the same failed ANC policies. He talks of the need to stop corruption and stealing in the state-owned enterprises but assumes they will remain state-owned, which is a bit like saying he will stop mice from eating cheese. Under ANC rule the public hospitals have collapsed which has led the government to insist that the solution lies in abolishing the highly functional private medical sector. Ramaphosa is continuing with this crazy policy. And he has embraced the policy of expropriation without compensation. He seems to think he can invite foreign investors to a big conference and there persuade them to invest in South Africa but it is difficult to see how they will get beyond item one, the question of expropriation without compensation.
There is a post-apartheid consensus which is effectively endorsed both by the parliamentary opposition and internationally. This is best summed up as transformation plus black empowerment. Transformation is a process which is supposed to happen to every area of life from company boards to sports teams where as many black people as possible must be appointed or selected at least until demographic representivity is achieved — though no one will mind if you go beyond that to 100 per cent black. There is a particular concentration on the topmost positions in leading sectors (e.g., the directors of the 50 biggest companies) because, of course, such positions are of particular interest to the new elite.
Transformation can only be achieved by massive affirmative action, often with disastrous results, such as an Eskom board with no member with engineering or business experience. But South Africa is a middle-income country in competition with many other countries in which appointments are made on merit. And while a minority of affirmative action appointments work well, most don’t, a potent cause of South Africa’s slide in all major international rankings and its almost zero economic growth. Ironically, affirmative action, though hugely popular with the black elite (its main beneficiaries), is, according to opinion polls, unpopular with most blacks — after all a black miner or farmworker or domestic servant cannot benefit from it but will suffer from the inferior delivery of services which it results in.
Where are they now? Ajay and Atul Gupta in 2011 with Duduzane (son of Jacob) Zuma, then director of one of their companies (©Gallo Images/City Press/Muntu Vilakazi)
Black empowerment is not just about schemes to help black businessmen and black farmers. Most of all, it is about rules requiring all businesses to have at least 25 per cent black ownership (preferably 51 per cent ) and as many black directors, managers and suppliers as possible. Inevitably, this means businesses having to hand over large chunks of their equity for low prices. But the policy also requires a careful counting of every category by race — yet racial classification is supposed to have been abolished. Moreover, many black shareholders, having received their shares at sub-par prices, quickly cash them in for a quick profit. This leads to government demands that the companies now “empower” another set of black shareholders to bring them back up to the 25 per cent level, while the companies indignantly reply that they cannot keep giving away their equity.
Black empowerment is so politically correct that few want to stick their heads above the parapet. Yet business universally sees black empowerment as a tax on investment and it is a powerful disincentive for foreign investors. Additionally, of course, most of the black empowerment bonanza has gone to a few politically well-connected members of the elite, the most successful of them all being Cyril Ramaphosa who has amassed a fortune of $425 million from a standing start 20 years ago. Yet no new product or services or even any particular company is associated with him, and nor does he possess any special entrepreneurial skills. Instead, he has had multiple directorships and has benefited from many favourable share deals in other people’s companies.
The post-apartheid dispensation works well for the new black elite but offers no advantages to most blacks and is directly harmful to South African society as a whole. What it means is that South Africa, like most other African countries, is really run for the benefit of the small black bourgeoisie — perhaps a quarter of a million people in a population of 57 million. This perspective informs almost everything about the country. For example, South Africa gains high marks from UN agencies for equality of women because it has many women MPs (mainly just voting fodder on the ANC list), yet this tiny elite is absurdly unrepresentative. South Africa has one of the world’s highest rates of rape and violence against women, three-quarters of black families are headed by a single woman and they seldom receive any support from their ex-husbands. In real terms the plight of black women is abysmal. They are the true heroines of modern South Africa, holding together whatever is left of the black family.
For the whites South Africa remains a beautiful, sunny and exciting country in which to live — and the country still depends heavily upon them. Their numbers may be down by 20 per cent in the last 20 years but they still pay an overwhelming share of taxes, grow virtually all the food, manage almost all the big companies and run the country’s top schools and universities. They are, in African terms, South Africa’s great competitive advantage — yet they are also reviled, endlessly reminded of their past sins and have learnt to keep their heads down. Instead of confronting their accusers most of them busy themselves with private life, making money, sport, philanthropy and, often, a passionate concern with the country’s environment and threatened wildlife.
This last is a great drama, for African nationalism seems incompatible with wildlife. Already African wildlife has been exterminated throughout north and west Africa and most of what remains is in the formerly white-ruled states — Kenya, Zimbabwe, South Africa and Namibia. Yet everywhere those remaining animals are under threat from poaching and explosive demographic growth. Although black politicians recognise in principle that wildlife preservation is vital to the tourist industry, it is noticeable that all the passionate wildlife activists — like the former South African cricketer, Mark Boucher — are white. For many whites the richness of Africa’s flora and fauna constitutes a principal reason for continuing to live there, though one cannot but suspect that some of this activism is a displacement activity.
It has, though, its larger significance. As Asia and Latin America (and some parts of the Middle East) climb out of poverty, Africa will soon no longer be able to console itself that it is part of the Third World: it will be the Third World. This is not just about being poor but about the persistence of pre-modern political structures and behaviour, with countries ravaged by war and tribalism, by terrorism and ruthless elites, often still imbued with antique ideologies as well as relentless cynicism. This is a continent where for every dollar of aid received, 63 cents finds its way back into (private) foreign bank accounts, and which holds the all-time record for the number of UN peace-keeping missions, all of which have to be funded from outside Africa. The great hope of Mandela’s South Africa was that it would be able to provide the continent with a model of humane politics and successful development. This promise has been almost completely squandered. The rest of the world could be forgiven if it simply walked away — as witness Barclays’ decision to exit Africa to concentrate better on the US.
But there is a sense in which the world can’t walk away. For a start, Africa is just so big — its area could encompass Western Europe, Britain, the US, China, Japan and New Zealand. This is also the continent which gave birth to the human race and where the world’s oldest people, the San, still live. All our DNA is traceable to here. This is, too, where all human language began. It is also the fastest-growing continent. Much of Europe, Russia and Japan are in steep demographic decline but Africa will add another billion people to its population by 2050 — making it the world’s fastest-growing market. Africa contains most of the world’s uncultivated arable land — which will all have to be cultivated by the time the world population peaks in 2055 at around 11 billion. It also contains a large proportion of all the Earth’s key raw materials. And, finally, it is Earth’s last remaining repository of some of the largest, most important and utterly magnificent life-forms: lions and a large number of other wild cats, elephants, rhinos, hippos, large gorillas and apes, giraffes, zebra, enormous numbers of buck and a huge variety of insect and reptile life. Humans everywhere tend to see these life-forms as connecting us back to a far earlier age when men lived as simple hunter-gatherers.
So, despite all the frustrations and false starts, the world’s engagement with Africa will continue. And while it does, South Africa will, inescapably, continue to play a key role as the continent’s most developed state. And it is this, finally, which gives Ramaphosa’s election its significance. South Africa’s early promise has certainly failed — but the worst has been avoided.