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CHAPTER

1

The Context of Economic and Social Policy-Making in the ANC

Talks about the transition to democracy in South Africa began fitfully and largely in secret in the mid-1980s. But President FW de Klerk’s announcement on 2 February 1990 that the apartheid regime was unbanning the African National Congress (ANC) and other liberation movements, and the release of Nelson Mandela nine days later, took the transition onto a much higher plane and at a rapid rate. That South Africa remained the only fully capitalist economy on the continent at that time is not in doubt. While we do not subscribe to the notion of ‘South African exceptionalism’, we maintain that its capitalism was an extreme, stunted and distorted one. All of these characteristics, in different ways, had a bearing on the very nature of the transition, including on economic and social policy options and choices. Two such features are worth noting here. Firstly, South African capital represented by white-owned conglomerates such as Anglo American Corporation and Sanlam, both established around the end of the Second World War, remained powerful, globally connected and influential as the twentieth century wound to a close. Secondly, the apartheid regime’s economic institutions remained well-resourced and internationally connected, despite decades of sanctions and the crisis of the apartheid state. These state institutions included the Ministry of Finance, the South African Reserve Bank, the Central Economic Advisory Services, a number of regional, national and provincial development finance institutions, and the national statistics agency (Central Statistical Services).

The real power among the constituencies engaged in negotiations lay in the hands of white business and in the institutions of the late apartheid state, as journalist and author Martin Plaut argues: ‘The men who had run South Africa for decades also embarked on a process designed to incorporate senior members of the ANC. Radical economic policies were dropped in favour of more conventional macro-economic prescriptions’ (2012: 31). As Plaut suggests, this was no accident; it had been thought through by the old regime and it was to prove decisive in many economic policy battles, including, as we show, the crucial issue of the independence of the South African Reserve Bank (see chapter 6).

Against these factors, most components of the liberation movement, including the Tripartite Alliance consisting of the ANC, the South African Communist Party (SACP) and the Congress of South African Trade Unions (Cosatu), were fragmented, under-resourced and under-capacitated. But its moral and political standing among its own people and in the international community was never higher than it was around 1990 when formal negotiations were poised to begin. These were undoubtedly major assets that ultimately enabled the ANC to prevail at the formal negotiations for a democratic, non-racial, non-sexist and unitary South Africa. As we will attempt to show in our discussion of the economic and social policy debate inside and outside formal constitutional negotiations, it is precisely this goodwill and trust that the ANC rapidly threw away in the search to win the support of international finance capital. This perceived necessity was based on the view that foreign investors would come to support the post-apartheid economy provided that the country played by the rules of the international game.

Keith Hart and Vishnu Padayachee have characterised South African capital in the following way:

The durable features of South African capitalism since its modern inception are mining, racial domination, and an uneven relationship between the state, finance and industry. Although the national economy went through long swings between an external and internal orientation, each of the main periods we have highlighted (1870s–1914, 1914–45, 1945–79, 1980s–2008) was marked by both. South African capitalism has a markedly ‘neo-feudal’ character, distinguished by a cult of alpha-male leadership, cronyism between firms, banks and government, a relative absence of competition, weak democracy in the workplace, [an absence] of a flourishing culture of small and medium enterprises; in other words, a tendency towards absolute rather than relative surplus value … which has its roots in British colonialism, rural Afrikanerdom and a history of racial oppression by a small white minority (2013a: 80).

Hart and Padayachee question the extent to which any of this has changed since the advent of democracy. Of course, 25 years into South Africa’s democracy, few can deny that notable progress has been made in addressing some of the economic and social legacies of the apartheid regime. Yet, progress has not been as widespread, rapid or sustainable as may have been hoped for. The ‘triple challenge’ of unemployment, inequality and poverty, as the ANC government of today defines it, as well as the challenges related to economic growth itself, remain stubbornly intractable. At the time of writing, the economy has slipped into a recession, the second in ten years, the country’s investment grade has been reduced to junk by two international credit-rating agencies, and, despite attempts at their restructuring in this yet early stage of the post-Zuma era, the governance of state-owned enterprises still remains nothing short of shambolic. The much-anticipated inflows of capital, which the ANC bent over backwards to achieve have not materialised; instead both legal and illegal capital outflows have reached obscene proportions.

Together with a serious crisis of service delivery (water, sanitation, electrification, health) in many parts of the country and a concomitant rise in service delivery protests and labour action, as well as weak performance by firms, both big and small, a double whammy of macroeconomic disequilibria and microeconomic stagnation faces the country today. Corruption, personal accumulation projects and governance challenges add to the woes of the still relatively new democracy. A serious, sober and critically reflective analysis of how South Africa has reached this point is necessary and perhaps overdue.

Part (and we stress part) of the explanation for the current malaise, we maintain, may lie in the historic neglect of economic and social policy thinking in ANC political strategy since its formation in 1912 and the relative weakness and lack of creativity of its economic capabilities and thinking in the 1990s, which impacted negatively on the quality and creativity of its policy formulation in the crucial years of the transition to democracy and beyond. In our view, the decisions taken in that period of the transition (c.1990–1996) continue to constrain the scope to rethink and reimagine an economic and social dispensation of the kind that is needed to escape the current economic and social impasse. The question of how this came to pass lies at the heart of this book.

Our title comes from the ANC’s ‘Strategy and Tactics’ document adopted at a landmark strategic conference in Morogoro, Tanzania, in 1969: ‘To allow existing economic forces to retain their interests intact, is to feed the root of racial supremacy, and does not represent even the shadow of liberation. Our drive towards national emancipation is, therefore, in a very real way bound up with economic emancipation’ (ANC 1997: 391–392, emphasis added).

The important point made here is about the imperative that political freedom is accompanied by an appropriate set of economic and social policies that would serve fundamentally to transform the lives of the people whom the liberation movement represented. Anything short of such a fundamental economic emancipation would, therefore, represent a ‘shadow of liberation’.

This book represents an attempt to critically assess the economic and social policy theorising, thinking and choices made by the ANC – in alliance with the SACP and its various trade union partners – in the transition era to democracy (c.1990–1996). However, it is consciously located in a longer historical context – a periodisation we have chosen to start with is the African Claims document produced under the leadership of ANC President AB Xuma in 1943, and which ends in the publication of the Growth, Employment and Redistribution document produced by the ANC-led government of Nelson Mandela in 1996.

In elucidating our arguments on the character of the ANC and its foundational policy orientation, we refer extensively to a fully recognisable ‘social democratic’ basis to the policies advocated by the modern ANC (from 1940 on). While we locate social democracy as a strand of socialist thought (a ‘variety of socialism’ if you will), our reference to social democracy is not meant in its strictly ideological sense of a commitment to a parliamentary road to achieving socialism on the basis of working-class participation through political parties in a constitutional democracy. Rather, what is meant by social democracy is in terms of its substantive economic and social content: the provision of universally provided public goods (such as health, education and welfare services) by the state as an entitlement of social citizenship with a commitment to achieving equity (as opposed to merely ameliorating poverty). This would be achieved through redistributive economic policies that enable social solidarity among all citizens across social strata and thereby ensure a common sharing of the social heritage by all citizens collectively. Additionally, this would be best achieved through deliberative, democratic practices in the context of a constitutional democracy.

While the reasons for a fully fledged social democratic tradition of socialist thought not flourishing are complex, it is our view that the polarisation of intellectual life in South Africa within the left performed a seminal role in preventing social democratic ideas from developing in the country, within which the various positions of the Communist Party of South Africa (CPSA) (and then the SACP after 1950) was most significant. The CPSA/SACP drew on a Stalinist interpretation of social democracy in the 1930s that bizarrely equated ‘social democracy’ to fascism in its corporatist underpinnings (described as ‘social fascism’). This interpretation prevented the dictatorship of the proletariat, which was the orthodox communist movement’s favoured political strategy to achieve class power. This hostile ideological attitude to social democracy historically informed the political approach of orthodox communist parties, including the SACP, to ‘non-communist’ varieties of socialist thought. It is worth noting that celebrated Marxist theoretician Leon Trotsky did not share this orthodox view and argued for an anti-fascist front, including social democrats who would ‘March separately, but strike together!’ against fascism (Trotsky 1931: n.p.).

THE ANC AND THE POST-APARTHEID ALTERNATIVE

Most accounts suggest that the ANC paid little or no attention to economic (or social) policy during much of its history, including in the exile years. Its overall approach to politics could be described as ‘liberal reformist’. This is best captured in its 1923 African Bill of Rights document, which demanded civil liberties for blacks equal to those enjoyed by whites under the 1910 Union Constitution. As Pallo Jordan has observed, ‘as for the idea of radically restructuring the economy, that was not even a part of their political vocabulary’ (1988: 149). Even though, under the presidency of Josiah Gumede, the ANC’s political strategy was briefly radicalised, democratised and internationalised, Gumede’s radicalism cost him the presidency. An old-guard leadership under Pixley ka Isaka Seme and Zacharias Richard Mahabane not only ousted Gumede, but drove out his working-class supporters in what Jordan (1988: 149) has described as a kind of McCarthy-style witch-hunt.

Attention to economic and social policy remained absent until Xuma’s African Claims in South Africa was adopted (ANC 1943). African Claims was a document with a recognisably social democratic impetus in the proposals it put forward for a post-segregation society. It argued for state intervention to secure social rights to systems of health, education and welfare for all on the basis of universal political and social citizenship. While this social democratic impetus was sustained in the Freedom Charter of 1955, the banning of the ANC in 1961 led to the subsuming, if not near abandonment, of economic and social policy theorising in favour of a primary imperative to secure a unitary, non-racial, democratic state established on the basis of a universal franchise (Van Niekerk 2013; 2017).

But it is also undeniable, as Laurence Hamilton puts it, that

if not always completely worked out, its focus on freedom from alien rule, colonialism and apartheid consistently involved a sense of what might be necessary for the real, concrete, everyday freedom of all South Africans within a democratic South Africa. This is evident in nearly every strategy and policy document or publication ever since its founding in 1912 and in particular: the 1943 African Claims in South Africa document: the 1955 Freedom Charter … and the Reconstruction and Development Programme (2014: 17, emphasis added).

Though African Claims was lacking in specific substance and detail, we would agree that the ANC was therefore the carrier of important values and principles about the kind of post-apartheid society that was needed. We describe those values as being broadly ‘social democratic’ even though the movement rarely used this concept, which was traditionally associated with European left politics.

What needs to be borne in mind was that the ANC since its formation was faced with a well-resourced, Western-backed and brutally repressive regime, which consumed its attention and resources, in particular in establishing the conditions for a democratic society through revolutionary armed struggle. As late as 1987, the venerated leader of the ANC, Oliver Tambo, declared in a speech to international business that ‘the African National Congress is committed to bringing about fundamental change to the entire socio-economic and political formation which constitutes the South Africa of today’ (Tambo 1987: n.p.).

Tambo went further to say that on questions of relevance to economic policy the ANC ‘has its perspectives, deriving from the people, which are embodied in the Freedom Charter adopted in 1955 … In the context of its parameters, we believe that the issues as to how the wealth of our country is redistributed for the benefit of all our people, how the economy of our country is remoulded in order that all South Africans may thrive and prosper, are of prime importance and should find their solutions in the context of democracy’ (1987: n.p., emphasis added).

He then concluded his speech by saying that the primacy of establishing a non-racial democracy meant that ‘the preoccupation of the African National Congress is, and should be, the relentless prosecution of the all-round struggle to achieve freedom and democracy in our country’ (Tambo 1987: n.p., emphasis added).

In such a context, in which the ANC was fully preoccupied with establishing a non-racial democracy under severe conditions of political repression, the postponement of developing economic policy alternatives until democracy was achieved is understandable. Yet, from Tambo, it is also clear that when that time for economic and social policy development arrived, those policies had to be determined under the ideological umbrella of the Freedom Charter. Laurence Harris, the left-wing British economist and one of the ANC’s foremost thinkers on economic matters in the 1980s and 1990s, concedes the point about the ANC’s underdeveloped thinking on economic policy: ‘[T]he ANC did not give a high priority to research on economic policy’ (1990: 25).¹ At the same time, this void in economic and social policy thinking was to impact negatively on the organisation’s ability to think about economic and social policy at the time negotiations for democracy and freedom arrived in 1990.

Jeremy Cronin, then SACP deputy general secretary, has conceded that ‘we were not well positioned, intellectually, theoretically in terms of policy formation, in terms of socio-economic transformation. It was understandable. We had been very focused on the political tasks, democratisation, mobilisation, fighting a guerrilla struggle’ (in Gumede 2007: 84). Cronin makes a series of insightful observations on the ideological character of the SACP and the ANC on the eve of negotiations:

The 1990s for the SACP was a paradoxical moment. The ‘Soviet’ legacy we were part of collapsed. The Party was unbanned in 1990 and half of the Party Central Committee resigns … So the ANC does not [undertake] a profound reflection on the collapse of the Soviet Union and so forth, it just soldiers on … does not reflect on new global realities. And the new democracy is emerging with all kinds of economic policy mistakes and miscalculations and so forth (Cronin interview, 14 March 2016, emphasis added).

We partially share Cronin’s position that what happened was ‘understandable’, arguably a function of the balance of forces and the messy outcome characteristic of most negotiated settlements (see also chapter 4). Yet, after 1990, the ANC, seen through a balance-of-power lens, had some not inconsiderable moral and political power. At the international level, the ANC, and Mandela in particular, had virtually unqualified support from some Western governments. Bill Clinton, who was very close to Mandela, became president of the United States (US) in 1992. There was also significant support from Western civil society solidarity organisations, such as the Anti-Apartheid Movement based in the United Kingdom (UK) and the Black Caucus in the US. Locally, the ANC was unchallenged in its support through organisations such as the United Democratic Front, Cosatu and the South African National Civic Organisation, as well as the churches and other social movements. Never were South Africans more united in their stand to bring about a non-racial, non-sexist and unitary democratic South Africa. That this power was not used effectively to secure the left social democratic trajectory, which was historically embedded in the ANC, is something akin to a tragedy. This is a point that Ronnie Kasrils, too, makes powerfully (Interview, 30 March 2017).

At the same time, we do not, on the basis of our research, share the views of those who claim that the ANC leadership sold out in one form or other; we do not accept that those in positions of leadership in the ANC’s economics team set out deliberately and solely for personal benefit or glory to sell out the ANC’s historical commitment to social and economic justice; and we do not accept that the ‘sell-out’ occurred as a result of some kind of conspiracy and secret late-night meetings that involved international financial institutions and local capital.

Our research reveals many weaknesses in the ANC economics team, in its capabilities and experience, and in the processes and practices involved in the debate and negotiations around forging a post-apartheid economic strategy. It is also clear that some important progressive economic policy alternatives were ignored and then unceremoniously discarded. There are many complex and overlapping explanations for this, as we suggest in chapters 4 and 5.

We accept the existence of multiple influences – both economic and political, and both internal and external – on ANC economic thinking in the 1990s. While we point to such multiple influences and stress some that may have been underestimated or downplayed to date, we would like to emphasise upfront that it is not our intention in this book to offer any kind of mathematical or sociological ‘weighting’ of these multiple influences or indeed to ‘finger’ anyone or any group within or outside the ANC for what happened. We plan to provide the narrative of economic and social policy debates and thinking within the ANC Alliance in the 1990s as we saw it, warts and all,² as trained social science and economic researchers, admittedly with the benefit of hindsight, but also from our own perspectives as participants in some of these events.

It must also be stressed at the outset that we do not claim that we have mastered the whole story in every respect. This exercise has proven to be extremely difficult to research. Some participants in the drama of the 1990s with whom we were keen to speak were reluctant to grant us interviews; records, even those at some official archives, are still not complete or easy to access systematically; and there are likely to be records and personal recollections scattered across the nation and internationally that we were not even aware of. So all in all, if there are gaps and some misinterpretations, as there undoubtedly will be, we hope that this is understandable. Our aspiration is that we have begun to pave the way for later researchers to pick up and develop these threads more fully, until one day a more robust and sustainable record of these globally celebrated, yet complex, times is achieved.