SOUTH AFRICA: Another bad year

Just over 12 months after the shooting of 34 miners at Lonmin’s Marikana mine highlighted South Africa’s social and economic schisms, mineworkers were back at the picket line: gold mines were paralyzed by strike action led by the National Union of Mineworkers. In August, 30,000 of the country’s auto industry workers also staged a walkout.

It has been another bad year for South Africa’s international image: growth has turned positive again after the recession in 2009, but the structural flaws in the country’s economy have been laid bare.

“Our current social and economic compact, which was drawn up in the mid-90s, worked for a while, when everyone in South Africa was willing to wait it out and see what the new dispensation would deliver to the previously disadvantaged,” says Vukani Mde, a political analyst at Africapractice in Johannesburg. “Increasingly, those constituencies – organized labour in particular, but also less organized but agitated poor communities – have reached the conclusion that their share of the cake isn’t growing. In fact, relatively speaking, it is in terminal decline. The dividends of democratization and freedom, while politically tangible, economically they’re not quite as impressive as they first appeared.”

Basic monthly wages for entry-level miners can be as low as R5,000 ($488) per month, although the average for the sector is around three times that. The National Union of Mineworkers demanded rises of R2,300 ($224) for miners employed in open cast excavations and R3,000 ($293) for underground workers. When they were knocked back, they began industrial action.

A union statement on the eve of the strike called proposed pay increases of R350 ($34) “slave wages”, and said: “The union is aware of the devastating impact industrial action would have on the economy, which is largely a white man’s economy with no benefits for poor black mineworkers.”

The statement encompasses the workers’ feeling about the economy, according to some analysts. “Nothing has changed in the system; the mechanics haven’t changed,” Mde says. “But the attitudes of the various actors have shifted, particularly from the sides of labour and communities. That is why, increasingly over the last couple of years, the labour relations regime has fractured.”

South Africa’s gold industry is struggling. The country’s deep mines are expensive to run, and even though demand for the metal has been solid enough in the past few years, South African miners have not benefited from this to the same extent that their Australian and Canadian rivals have.

The mining industry more broadly has suffered since the economic downturn. The platinum industry, which provided the flashpoint for the violence at Marikana, has suffered from high growth in production and a subsequent oversupply when international demand took a hit post-crisis. Mines have had to be mothballed as the industry restructures.

When the mines close, it is miners on low wages and their families who are most vulnerable. Unemployment in the resources industry seems, again, to be driving a familiar cycle of economic inequality and social schism that undermines output and confidence in the South African economy – the gold shutdown alone is estimated to have cost the country $35 million per day.

LOWER FDI

Foreign direct investment fell 24% in 2012, according to data from the United Nations Conference on Trade and Development. Growth is recovering but is slow and fragile.

Unemployment is at 25%, and many people are in insecure and temporary jobs. The first census in 10 years showed that the persistent inequality between the races has barely been dented since the dismantling of the racist apartheid system. On average, white South Africans earn six times the revenue of their black countrymen. The division is not only racial, however, and following the economic and political revolution that followed the end of apartheid, a new class enriched themselves from the proceeds of freedom. Today, Johannesburg is home to 23,400 millionaires, according to the research group New World Wealth. Cape Town has a further 9,000, and Durban and Pretoria have 2,700 and 2,000 millionaires, respectively.

A World Bank study, released in July 2012, showed the extent to which “inequality of opportunity” has remained ingrained in South African society. Individuals born into townships and poor black communities face an immense struggle just to overcome their disadvantages at birth and obtain access to education, healthcare and other basic rights. Having done so, they then struggle once again to access the workforce, the bank said. While inequality of opportunity is not unusual across the developing world, the report warned that South Africa was an outlier in global terms, worse by far than many of the countries it aspires to compete with.

“The use of the Brazilian example has entered the political discussion in South Africa quite forcefully,” Mde says. “Over the past eight years or so [Brazil] moved from a position that was pretty much similar to what South Africa is now, and made gains when it came to poverty alleviation, the elimination of income and other forms of inequality.”

Some progressive groups are advocating a “Lula Moment” in South Africa – a reference to the left-leaning former Brazilian president Luiz Inácio Lula da Silva, who made poverty alleviation and the redistribution of wealth to the poor the centre of his economic policies.

“The problem for South Africa is that we are no longer in a growth cycle in the economy. Quite the opposite in fact,” Mde says. “We find ourselves having to do the things that Brazil did with absolutely none of the political space allowed by a booming economy. You could say we missed that boat.”

TRAPPED?

With low growth and very low job creation outside the public sector, fears that South Africa could be trapped in a self-reinforcing spiral of weakness are mounting. Where the leadership that can change things for the better will come from is unclear.

The African National Congress (ANC) has performed miracles in the past, managing to corral the country’s communists, capitalists, trade unionists and pragmatists into a multi-racial coalition that has kept the Rainbow Nation together against all the odds.

Now, President Jacob Zuma faces an uphill struggle to maintain the ANC’s image as the legitimate representative of the polis, the labour force and of a business community in a country that continues to generate wealth for a few, to the exclusion of the many. That image is not helped by allegations of graft within the party, or by ostentatious displays of wealth in the executive. The $28 million in state funds allegedly spent on upgrading Zuma’s private compound is the latest revelation of what many see as excess in a political class that has benefited from the Broad-Based Black Economic Empowerment (B-BBEE) scheme that was supposed to hand over white-owned businesses to disempowered communities in the country. Zuma has said the upgrades were required for security reasons and were done at the request of the government. One in four South Africans remains jobless.

Speaking recently, one of the architects of the B-BBEE, who is now in the private sector and asked to remain anonymous, lamented its failure, saying that it was founded on noble principles but undermined by the practices that surrounded its implementation. Far from being broad-based, he said, it became a system of patronage that created an upper-middle class whose wealth and power did not come from their ability as business leaders or from their ambition to re-orient the country’s economy to create a more inclusive, balanced society.

Instead, in many cases, they came from inside established networks. The process handed money and stakes in companies as rewards for those who struggled against the apartheid regime, adding a new strata to South African society, but not breaking the more fundamental divisions between classes. It de-incentivized entrepreneurship and social advocacy in politics in favour of “legitimized” graft, the former politician said.

The difficulties of making and implementing policy in the system dominated by the ANC have driven many to question whether the current form of Mandela’s party, which won South Africa’s political freedoms, needs to change.

ANC SPLIT?

“The ANC is an extraordinarily broad church: it goes from Stalinists to Thatcherites,” Mungo Soggot, managing director of K2 Consulting, says. “That kind of fundamental, ideological tension within the ANC is behind the problems with the institutions and their policies,” he says. “That kind of bifocal, ideological split, over central control versus flexibility, has been a hindrance. There probably needs to be a political gear change before you get a leadership that is confident enough to do what needs to be done.”

Whether that means, finally, a split in the ANC and more direct competition between political and economic ideologies in the country, is something that could weigh on sentiment into the next electoral term.

“For the last 12 years it’s been on the cards... and we’re getting closer, but that divorce will be a seismic event, and it won’t immediately result in a clear political direction, because the fallout will be significant,” Soggot says. “There will be a realignment, and during that transition, policy is likely to be neglected.”

At Africapractice, Mde agrees, although he believes that the split is unlikely to be sudden. But there are, he says, ways out of the spiral.

“What remains to be seen is whether South Africa’s leaders, particularly South Africa’s political and business elites, have the courage and the vision to find ways out of the spiralling political and social crisis,” he says. Mde is optimistic that there are ways out of the current situation in which unemployment, poverty and inequality are high and, as a result, social relations are more and more frayed.

“We aren’t destined to be on that path,” he says. “We just need the political courage to take a different path to what we have now, particularly when it comes to some of the policy choices we are making.”