Monday, September 14, 2009

Dividing the spoils

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South Africa claimed its independence 100 years ago this month, when Britain signed the South Africa Act into law, passing political authority over the country to the parliament of the Union of South Africa.

During the last 100 years South Africans made their own history. This history can be summed up as the history of nationalist rule since 1909.

The first period of nationalist rule started in 1910 and ended 84 years later in 1994. During this period South Africa was ruled by the two main factions of Afrikaner nationalism, the accommodationists faction of Anglo-Boer War Generals Louis Botha and Jan Smuts and by the more anti-British faction spanning the era from General Hertzog to FW de Klerk.

The second period of nationalist rule commenced in 1994. This was the era of rule by black nationalism. Interestingly black nationalists did not have the strong factional divisions found among Afrikaner nationalists. Black nationalism was, and is, predominantly accomodationist both to the British who remain major investors in the country and to South Africa's economic oligarchy, the mineral energy complex who, with finance capital, control the commanding heights of the economy.

The two main nationalist movements had one thing in common; they were both movements of elites that sought to be included in the social, economic, cultural and political systems created by British colonialism. The Afrikaner nationalist model was clearly built on a defective foundation. However, it surprised many by lasting for 84 years before it was obliged to hand power to black nationalists. What accounted for Afrikaner nationalist's staying power? This can be answered with one word - industrialisation.

The main agenda for Afrikaner nationalism was firstly to improve their agricultural expertise and to get their products to markets in the mining towns that sprang up with the discovery of diamonds and gold in the late 19th century.

Secondly it was to ensure that Afrikaner people caught up with English-speaking South Africans. Thirdly, it was to reduce the influence of the British government over South Africa. These objectives were reinforced by a massive education drive to raise the technical skills of the Afrikaner population.

In order to achieve these objectives, Afrikaner nationalists used the state to develop transportation and communication infrastructure as well as to establish a vast network of state-owned enterprises in broadcasting, armaments, power generation, development finance, iron and steel and chemicals.

Some of these parastatals became internationally renowned. Afrikaner nationalists also facilitated the growth of Afrikaner entrepreneurs several of whom developed international brands.

While consolidating the cohesion of the Afrikaner population under their leadership, Afrikaner nationalists embarked on a massive drive to disrupt the cohesion of the black community. It therefore, took blacks many years before they could recover sufficient cohesion to mount meaningful opposition.

The rule of Afrikaner nationalism however had a built-in contradiction that ultimately led to its undoing: the political and economic disempowerment of blacks which eventually resulted in the conflicts which, reinforced by interventions by the international community, ultimately led to the birth of democracy in 1994.

South Africa's black nationalists were an elite that did not own property - a crucial factor in determining the characteristics of democracy post-1994.

The new black elite was therefore faced with several questions when it gained control of state power in 1994: Should it use the new found power to enrich itself, or to enrich the masses who had been exploited for the best part of 100 years, or should it do a bit of both?

What about the wealth of South Africa's rich whites, should they be allowed to keep it, or should it be nationalised? Should it be taxed and to what extent?

South Africa's big business had anticipated all these questions and came up with its own solution. It offered to transfer a small part of its assets to individual leaders of the black resistance movement in return for their leaving the country's business environment essentially as they found it. The leaders found this offer of instant wealth hard to resist. The co-option of black nationalist elite by big business came to be known as Black Economic Empowerment or BEE.

South Africa's largest companies, notwithstanding their deal with the black nationalists, realised that conflict between the black nationalists and the masses was inevitable and would probably be even more fierce then the struggle between disenfranchised blacks and Afrikaner nationalism. Thus within five years of black nationalists taking control of the state in 1994, South Africa's largest companies moved their head offices and their primary listings from Johannesburg to London.

Anglo American, which once accounted for more than 50 percent of the Johannesburg Stock Exchange market capitalisation and which had had a major presence in almost every sector of the SA economy, disinvested from South Africa. It was left with only four mining interests - platinum, diamonds, coal and iron-ore.

Where the Afrikaner nationalist elite advanced its interests as land owners by driving South Africa's industrialisation, the black nationalist elite are not property owners, and their primary interests are not so much to drive further industrialisation - as they have nothing to gain from increasing investment - but to drive its own private consumption.

This poses two major threats to the stability of South Africa. Private consumption will be at the expense of investment, especially of investment in South Africa's physical infrastructure. Secondly, growing elite private consumption will be in competition with consumption by poor blacks and public servants.

All these contradictions are already manifesting themselves. In 2008 South Africa ran out of electricity because despite many warnings that state-owned power company Eskom needed to build more power plants, the government turned a deaf ear.

It did not want to make the necessary investment in power generation or open up power generation to independent power producers: parastatals have become a cash cow for black nationalist elite.

With the wealth of the whites thus protected through BEE, the only source of enrichment for the new black elite - besides old-fashioned hard work that is - is state revenue.

This has proven to be the central internal contradiction of the era of black nationalist rule. It can be summed up as follows: who gets what share of state revenues between the elite's private consumption, the poor people's welfare consumption, investment in social and physical infrastructure, as well as payments to other claimants such as workers in the public sector.

South Africa is therefore now entering a new phase of conflict, the conflict between the black nationalist elite and the black masses over how to distribute state revenues between them. This struggle is commonly referred to as a struggle over service delivery, which, in a limited way, it is.

ANC president Jacob Zuma once predicted that the ANC's rule would last until the second coming of Jesus Christ. At the rate at which conflict is growing Jesus may find South Africa a burnt-out shell when he returns.

Moeletsi Mbeki is deputy chairman of the South African Institute of International Affairs.

This is an edited version of his speech to the Royal Institute of International Affairs at Chatham House in London, at the launch of his book Architects of Poverty: Why African capitalism needs changing.

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