Thursday, September 20, 2018

#NotesFromHavana: Healthcare in Cuba: Lessons for South Africa.

#NotesFromHavana: Healthcare in Cuba: Lessons for South Africa.

Floyd Shivambu

In a perspective titled On Revolutionary Medicine, Che Guevara, a Medical Doctor by profession and a revolutionary Internationalist par excellence, said in 1960 that “The work that today is entrusted to the Ministry of Health and similar organizations is to provide public health services for the greatest possible number of persons, institute a program of preventive medicine, and orient the public to the performance of hygienic practices”.

This principle, expressed more than 50 years ago came to underpin Cuba healthcare system. It is a globally accepted fact that one of Cuba’s greatest achievements since the victory of the Cuban revolutionary forces in 1959 is its public healthcare system. Cuba’s healthcare system is one of the best if not the best in the world.  This is reflected on the globally accepted indicators.

The World Health Organization gauges a country’s infant mortality and life expectancy rates as the most reliable indicators of a healthy nation. Of course, a country’s ability to preserve lives of newborn children and concurrent prevention of avoidable deaths are indicators that a nation state has working and impactful healthcare system.

The WHO’s latest report illustrates that Cuba’s infant mortality is 4.3 per 1000 births. This is far much better than the industrially and economically superior nations such as the US, Canada, and many Western Europe countries whose per capita income and GDP rates are miles ahead of Cuba’s meagre income and GDP per capita levels.

The other important indicator is life expectancy. The latest globally accepted reports illustrate that Cuba’s life expectancy is 79 for males and 80 for females. This is qualitatively and quantitatively higher than most developed nations in the world. When the Cuban revolutionary forces triumphed over the US controlled regime of Batista in 1959, Cuba’s life expectancy was just under 60 years. This means the socialist revolutionary healthcare reforms qualitatively and qualitatively expanded under the leadership of Fidel Castro.

Cuba expends more than 10% of its GDP on Healthcare, and about 20% of its annual budget is allocated to healthcare. It has 150 hospitals, 497 clinics, and 495 000 Health Practitioners, and of those, more than 90 000 of those are Medical Doctors. What this means is that in Cuba, there is 1 Medical Doctor for every 122 citizens. Cuba additionally has 12 Health Research and speciality institutions, whose main aim is to focus on the intricate details and specifics of each disease. These include specialized focus on Cancer, and other diseases.

Additional to this, Cuba’s 13 Medical Schools, which are evenly spread across its 15 provinces, produce 7000 Cuban doctors annually. As part of their curriculum and qualification sine qua non, Cuba Medical Trainees are obliged to provide family medical care for a minimum of 3 years before they can specialize, be sent on medical missions in any part of the country or abroad.

Cuba currently has more than 50 000 doctors practicing outside of Cuba, and in countries that understand and have internalized their modus operandi, these doctors focus on primary healthcare. Brazil has 8500 medical doctors from Cuba, and SA has 450. Cuba’s Medical Schools also train Doctors from 121 Countries including South Africa, China, US, and many African countries.

These statistics are however not the main reason why Cuba is the most healthy nation in the world. At the core of Cuba’s healthcare system is its focus on primary healthcare, which the ministry of health says is based on prevention, promotion of  and education on healthcare.

The global norm on healthcare is primarily focused on the philosophy of diagnosis, treatment and rehabilitation. Whilst Cuba excels on this front, it deliberately and emphatically focuses on the pillars of prevention, promotion of and education on healthcare. What this means is that Cuban Doctors and other health practitioners go to communities to consistently and reliably test its people, and prevent diseases before they escalate to the levels of hospitalisation.

Cuba’s focus on primary healthcare is what brings stability and excellence to its healthcare system. The essence of Cuba’s healthcare system is its emphasis on prevention of diseases, promotion and education on healthcare. Cuba’s Medical Practitioners philosophical approach to healthcare is humanist, and veritably not obsessed with profit maximisation like is the case with South Africa’a Healthcare system. This is evidenced on Doctors’ focus on family units and the medical history and complexities of each family in order to curb the root cause of the disease.

Despite its massive achievements and indicators that come as a result of maximum focus on primary healthcare, Cuba has developed excellent pharmaceutical capacity through the State Owned Centre for Genetic Engineering and Biotechnology or in Spanish, Centro de Ingeniería Genética y Biotecnología (CIGB), which the Parliamentary delegation visited and engaged with in Havana.

The CIGB works in more than 20 projects aimed at the obtainment and development of biomedical products for the prevention and treatment of infectious diseases, cardiovascular, neurodegenerative, cancer, inflammation, autoimmunity, healing and cytoprotection. It comprises the departments of Vaccines, Pharmaceuticals, Immuno-diagnosis and Genomics, Chemical Physics and System Biology, and Control of Scientific-Technical Activity and Administrative. It has 200 workers: 41% holding the degree of Doctor in Sciences and 37% Masters in Sciences.

As part of its programmes and promotion of South to South relations, CIGB has built and co-developed state of the art pharmaceutical factors in many parts of the world including in South Africa. The CIGB is part of an umbrella body called BioCubaFarma, which has 38 Enterprises and more than 22 000 qualified workers. BioCubaFarma manufactures generic drugs, therapeutic and prophylactic vaccines, biomedicines, diagostic systems, and high tech medical equipment. It also does researches in neuroscience and neuro-technology. As a matter of fact, BioCubaFarma domestically manufactures 583 of 881 generic drugs used in Cuba.

Cuba has also established an industrial Development zone which permits investors to play a role, with security of tenure and protection of investments in the pharmaceutical space. Furthermore, Cuba is willing to transfer skills and technology to the developing countries as evidenced by the partnership  with Biovac Institute South Africa. Biovac Institute  manufactures different vaccines and some of the vaccines being manufactured are awaiting approval after clinical tests and all the processes that have to be followed.

Added to these realities, access to healthcare in Cuba is free, and this right is enshrined in the constitution. In 1976, Cuba's healthcare program was enshrined in Article 50 of the revised Cuban Constitution  which states "Everyone has the right to health protection and care. The state guarantees this right by providing free medical and hospital care by means of the installations of the rural medical service network, polyclinics hospitals, preventative and specialized treatment centers; by providing free dental care; by promoting the health publicity campaigns, health education, regular medical examinations, general vaccinations and other measures to prevent the outbreak of disease. All the population cooperates in these activities and plans through the social and mass organizations."

In the dominant capitalist narratives, quality healthcare is a by product of an efficient free market and economic superiority. Cuba has illustrated without any sensible doubt that a quality healthcare system that takes care of its children and elderly can be built even without huge economic resources and certainly without capitalism.

South Africa.

South Africa has one of the most devastating health burdens in the world. This is reflected on the number of South Africans with HIV, at 7 million. Infant mortality rate in South Africa is at 32 per 1000 births, compared to Cuba’s 4.3 per 1000 births. South Africa’s life expectancy is about 64 years, and this is below the global average and far below Cuba’s average whose economy is not as big as that of South Africa.

The South African Medical Research Council’s National Disease Burden points to the fact that, “that non-communicable diseases have now become the leading group of causes resulting in death in South Africa accounting for almost 40% of total deaths and 1 in 3 deaths before the age of 60 years”. Furthermore the MRC says, “Our communities need to be empowered to adopt healthy lifestyles and our primary health care services need to better manage these conditions and their risk factors“.

Primary Healthcare is the future:

The World Health Organisation says Primary Healthcare, “is about caring for people, rather than simply treating specific diseases or conditions.

PHC is usually the first point of contact people have with the health care system. It provides comprehensive, accessible, community-based care that meets the health needs of individuals throughout their life.

This includes a spectrum of services from prevention (i.e. vaccinations and family planning) to management of chronic health conditions and palliative care”.

The emphasis is obviously on primary healthcare, and that is what South Africa should direct its focus to. The National Department of Health should set a target on Doctor to patient ratio and roll out a plan on training of those doctors. Furthermore, Medical training institutions should be empowered to produce as many health practitioners as possible and the entire healthcare system should shift into prioritizing primary healthcare.

The immediate focus should be on establishment of one clinic or polycyclic per Ward, and the focus will vary according to population size in each Ward. All Clinics should have permanent doctors and health practitioners such who will not just wait for patients to come to the clinic but should consistently visit households and individuals in their work places to develop a Ward based healthcare profile. In this way, the healthcare system will be able to detect the common diseases per Ward and thereafter develop mechanisms to prevent their spread before they reach crisis levels.

The overall target in South Africa should be that there should never be a citizen who finishes more than 3 months without undergoing medical checkup. Additional to this, health education and promotion should be encouraged through campaigns and different communications and mass media platforms. Citizens should be aware of basic healthcare practices and needs so that they get to the extent of self help and assistance when they detect early instances of diseases.

Currently, majority of South Africans have not had any form of interaction with formal medical checkup because medical checkup are a commodity. This therefore calls for the complete de commodification of healthcare, and it be Constitutionally declared an essential human right. This should be distinguished from the lax rights in the Constitution that come with a disclaimer that the State can guarantee access to healthcare only if it had available resources to do so.

South Africa should escalate its relationship with Cuba and establish a State Owned Pharmaceutical Company. This is certainly one of the component Cardinal pillars in the EFF Founding Manifesto, which states under building state capacity, that South Africa should establish a pharmaceutical company. The State Owned pharmaceutical Company should be competent and professionally run and produce generic drugs, vaccines and all the necessary medications needed for the phase of healthcare that deals with diagnosis, treatment and rehabilitation.

Due to massive South African intra-migration for economic and educational purposes, it is long overdue that the entire healthcare fraternity should establish an electronic healthcare data system which will keep the health history of each and every citizen. Once checked or diagnosed in one health facility, there should not be a need to repeat the same exercise if a patient migrates from one province/region to another. Of course this should be subjected to the standing quality controls and Doctor/Patient Laws that govern healthcare in South Africa.

It is reality that South Africa does not maximally utilize the spaces provided in Cuba’s civilian and military Medical Training institutions, whilst there are massive shortages of doctors in our rural communities. This should immediately change, and all the spaces that Cuba avails for the training of medical practitioners should be filled. A consideration should additionally be given to opening campuses of Cuba’s Medical Schools in South Africa, similar to the Escuela Latinoamericana de Medicina(ELAM), the Latin American School of Medicine. ELAM trains Medical Doctors from more than 100 countries and considered one do the best Medical Schools in the world whose philosophical approach is primary healthcare.

The reality is that at this stage, South Africa’s medical schools largely produce doctors who are ready for commercial healthcare, which is a preserve of the few. Additionally, South Africa’s medical schools tuition fees and admission criteria are prohibiteve to new black entrants, and those who get admitted struggle with finishing their medical degrees. South Africa needs to move to a new trajectory in terms of medical practice, medical doctors’ training and healthcare in general.

The essence of healthcare in South Africa has to be primary healthcare. The National Health Insurance should be located within the context of a comprehensive, implementable and cogent National Health System, whose philosophy should be prevention of diseases, promotion of and education in healthcare. The people of South Africa are dying due to preventable and curable diseases. The move towards primary healthcare is long overdue, and requires decisive and willing revolutionary political leadership which will define the philosophical approach and monitor its roll out.

As Che Guevara said, “Some day, therefore, medicine will have to convert itself into a science that serves to prevent disease and orients the public toward carrying out its medical duties. Medicine should only intervene in cases of extreme urgency, to perform surgery or something else which lies outside the skills of the people of the new society we are creating“. Salute•

Floyd Shivambu is EFF Deputy President. 

Tuesday, September 18, 2018

#NotesFromHavana: Reflections on Cuba’s Revolutionary History and Present.

NOTES FROM HAVANA: CUBA’s REVOLUTIONARY GAINS SHOULD BE SUSTAINED AND PROTECTED

Floyd Shivambu

From the 15th to the 22nd of September 2018, a Parliamentary delegation led by the Speaker of the National Assembly will be in Havana, Cuba to meet with the National Assembly of Cuba, the Ministry of Foreign Affairs, and the more than 700 Medical Students from South Afric who are being trained as Doctors in Cuba.

The visit to Cuba is possibly one of the most important Parliamentary visits undertaken by the 5th Democratic Parliament because it recognizes the role Cuba played in the anti-colonial struggles in Africa, which culminated in the liberation of South Africa. 

To the Economic Freedom Fighters (EFF), Cuba is a very important political territory, one which we draw inspirationand important lessons. It is also a political territory which we also learn from dedication, steadfastness and revolutionary internationalism. The EFF Founding Manifesto says, “The EFF is guided by revolutionary internationalism and solidarity that defined the politics of the July 26 Movement, which led the Cuban Revolutionary struggles. We will partake in international struggles that seek to emancipate the economically unliberated people of Africa and the world. We will form part of the progressive movements in the world that stand against continued imperialist domination “

It is perhaps important that we take this opportunity to remind the people of South Africa that despite the many textual messages of support from other quarters, Cuba played an active and decisive role in the political liberation of South Africa. Cuba should be the most important country to South Africa for historical and present reasons and these notes will illustrate how and why.


The battle of Cuito Cunavale

The battle of Cuito Cunavale refers to the military confrontation between then apartheid South African Defence Force (SADF) and the Cuban Military Forces in the village of Cuito Cunavale in Angola in 1987/88, (Adam, Heribert, and Kogila Moodley, 1993). While less spoken about in South Africa’s transitional politics, this battle played a decisive role in pushing the apartheid regime to the negotiation table because the battle made them realise that the apartheid military is not unconquerable as they thought. Addressing the 20th Anniversary to commemorate the battle of Cuito Cunavale, Ronnie Kasrils says, “[w]hilst the generals and pundits of the former South African Defence Force (SADF) are at pains to claim victory the acid test is to consider the outcome. The SADF which had carried out continuous invasions and incursions into Angola since that country’s hard-won independence in 1975 (which was the reason for the Cuban military presence in the first place) had been forced to totally withdraw; the independence of Namibia was soon to be agreed; the prospect for South African freedom had never been more promising” (Kasrils, 1998).


Discussing factors that precipitated negotiated transition, Van Zyl Slabbert acknowledges the role of the battle of Cuito Cunavale, which he generally refers to as the ‘war in Angola’. About this, he says “the South African regime engaged in this war (the war in Angola) with arrogant myopic vision and lack of insight. More than anything else it epitomised that which was part of the total strategy, name, the waste of lives, time, energy, and resources. The escalating costs of the war, the unanticipated resistance of the Cubans, as well as the increasing unpopularity of the war at home speeded up its end” (Lee & Schlemmer, 1991: 4). The Cubans formidable military confrontation, strategy and offensive against the SADF resulted on the independence of Namibia, (Gleijeses, 2007). 

It is important to note though that despite the intentions of the Cubans to sustain the military offensive until the liberation of South Africa, the ANC and its military wing, Umkhonto WeSizwe were not necessarily involved in the real battle. This is noted because if the ANC and MK were in pursuit of an alternative route to South Africa’s liberation, the route of intensified military offensive aided by a formidable army and armaments from Cuba could have been buttressed by intensified mass protests in South Africa until the total capitulation of the apartheid regime. Attempts to find the ANC or MK’s involvement in the planning, intensification of Cuito Cunavale at high level command return with nothing because they were not involved.   

What can be recognised from these observations is that faced with growing unpopularity amongst the white South Africans, in particular business that was bleeding billions and faced with formidable military challenge in the form of the Cubans, the apartheid regime realised in more practical terms that negotiation was the only way out of the political conundrum. Due to these factors without prioritizing one over the other, negotiations were inevitable, because that was also the original view of the liberation forces. Comandante Jorge Risquet who was the Commander of the Cuban African Missions in Cuito Cunavale attributes the concessions by the apartheid regime and granting of Namibian independence to the post Cuito Cunavale battle Quadripartite talks between Angola, Cuba, apartheid South Africa and the United States (Hedelberto Lopez Blanch, 2008: 78. He says these talks guaranteed the independence of Namibia and commitment by the apartheid regime to talk to the ANC for a negotiated settlement, (Hedelberto Lopez Blanch, 2008: 78).  

It is quite evident from these developments that the ANC-led liberation forces were not in pursuit of an alternate solution to political transition, because even with formidable military aid and commitment from the Cubans, the liberation forces did not escalate this to a people’s war to seize political and economic power. Military seizure of political power was going to have its own consequences yet was not attempted as a way to take political power in South Africa, because the liberation forces needed a negotiated settlement. 

There was obviously going to be tremendous difference between a transition that could have happened due to the military strength of the liberation movement, and a transition that happened though negotiations because the contending forces could not defeat each other. The ANC’s pursuit of negotiations even when there was possibility of military onslaught aided by the Cubans, led to the many capitulations that defined the negotiations and transition process.

One thing that should be categorically stated is that in 1988, Cuba, Angola and South Africa signed the New York Accords in terms of which Cuba withdrew its troops from Angola in exchange for South Africa granting independence to Namibia. What the accords do not say but are part of the classified information is that the South African apartheid government capitulated to a negotiated settlement as a basis of Cuba’s military withdrawal from Southern Africa. 

It should also be highlighted that the Cuban revolutionary forces under the leadership of Che Guevara and Fidel Castro had been in the African continent since the assassination of Patrice Lumumba by US Government’s sponsored violence and destabilization of the Congo. The Cuban forces were central to the defeat of colonial forces in Guinea Bissau of Amilcar Carbral, who was a protégé of el Comandante Fidel Castro, Angola, Namibia, Mozambique and certainly South Africa.  

It is also important to highlight that one of the outstanding soldiers and fighters in the quest for Africa’s decolonization is one Comandante Moya, who was deployed as a commander of the first battalion in the Congo. He’s a humble freedom fighter who, when we visited the site to commemorate African Freedom Fighters in Cuba, took us through the narrative. 

Cuba and South Africa post 1994: 

When he was released from Prison, the 1st democratically elected country president Nelson Mandela visit outside Africa was to Cuba, which was a way of showing gratitude towards the relentless and decisive work of Cubans in the liberation of South Africa and the continent as a whole. In that visit, El Comandante Fidel Castro committed to immediate bilateral assistance of the democratizing South Africa and committed to help South Africa with the training of medical doctors. 

The 1st intake of student doctors from South Africa was in 1998, and different government departments at national and provincial levels have been sending student doctors to be trained in Cuba. Cuba has mastered the science of healthcare and that is illustrated in its infant mortality rates and life expectancy. Cuba has infant mortality rates that are far below the rates of economically developed nations and life expectancy is far ahead of many countries. Cuba has the world’s highest doctor to population ratio. There is 1 doctor for every 175 people in Cuba, whilst in South Africa, it is 1 doctor for every 4000 people.


South Africa has been given the opportunity to send some average of 1000 medical students every year from poor and rural backgrounds. These are students who would not be accepted to South African Medical Schools because of the exclusionary nature and form of medical training including exorbitant cost in South Africa.  The Cuban medical trainingsphere produces the best holistic doctors, and yet in the recent past, South African medical fraternity and the Health Professionals Council of South Africa(HPCSA) have placed a mechanism that says all the Cuban trained doctors should finish their studies in a South African medical school, despite the fact that there are no spaces available and the manner in which the concluding curriculum is presented is different. 
More concerning is the fact that, the difference does not in any way suggest in any way that the South African medicalcurriculum is of superior quality, but because it’s based on different philosophical underpinnings. In fact, the corruption, maladministration and continued ignorance of the Minister of Health to deal with deteriorating state of affairs at HPCSA brings into questions such misguided decisions. 

With massive degeneration of South Africa’s healthcare, our country should and can massively derive maximum benefits from Cuba and should maximally use the opportunity granted. South Africa should use its strategic relationship with Cuba to invest in the training of medical practitioners in Cuba. Whilst quantitatively and qualitatively expanding South Africa’s capacity to train doctors, out Government should maximally support the training of doctors and health practitioners in Cuba.

The EFF Founding Manifesto says, “The South African government, at various levels, is already contributing to the education and training of medical doctors and other health professionals in Cuba. This should be radically expanded to a minimum of 10 000 students sent annually to various countries to attain skills, education and expertise on different, but critical, and fields. The number of students sent to the best universities around the world should be reflective of South Africa's demographics in terms of race, gender and class. Emphasis should be placed on the fact that the students sent to the best universities should have shown capacity to make progress because they should, indeed, make progress. These students will later contribute to the country's socioeconomic development, economy and knowledge development”.

At formative stage, the EFF had already recognized and appreciated the importance and vitality of leveraging on Cuba’s progressive internationalism. Training doctors is not just a numbers game, but a real act of humanity which changes the lives of all including the poorest

South Africa has since the Mandela/Castro accord on training of doctors sent more than 3000 students to different universities in Cuba to be trained as Medical Doctors from the length and breadth of South Africa. Currently, there are 1951 students in different Medical Schools. Cuba has produced 657 Doctors for South Africa and 712 Doctors are doing their final year in different Medical Schools in South Africa.

What this means is that within the next year, South Africa will have not less than 1500 Doctors produced in Cuba and when considering the number of Cuban Doctors in South Africa, the number is almost 2000. To be gifted with closer to 2000 Medical Doctors is one of the most decisive acts of revolutionary solidarity South Africa has ever gained from any of the countries all over the world. There’s not even a single country or nation state in the whole world which can claim to have made such a substantial contribution to the well-being of South Africa.

Despite their promises of economic prosperity, the Western Capitalist World has abused the gullibility of the post 1994 Governments and forced it to adopt Neo liberal policies, which resulted in capital flight due to liberal exchange controls and employment terminative tariff reduction in a manner that has trapped South Africa in perennial and crisis levels of unemployment. Without imposing its will on South Africa and without expecting anything in return, Cuba has been a true revolutionary friend of the people of South Africa in immeasurable ways.

The other strategic partnership between South Africa and Cuba has been the Defence partnership wherein South Africa is expected to send 120 Officers and Cadets for training in Cuba, more especially on areas of patriotism and work ethic. Additional to that, South Africans are given mechanical engineering training and the Cubans send some of their engineers to the South African National Defence Force(SANDF). The Defende attaché in Cuba illustrated during the briefing that part of the benefits for South Africa is that some of the Fighter vehicles which the army was about to disposedwith 30 000 kilometres on the clock were revived by the Cubans, who instructively indicated that these vehicles have a lifespan of up to 500 000 kilometresDespite the agreements, SANDF has not been sending the allocated number, and in many instances sent poorly prepared officers and cadets. 

Now, all of these positive developments from and courageous actions of the Cuban people happen against an economic blockage and sanctions from the United States and consequently most part of the economic world. The US, has since 1960 imposed sanctions against Cuba, restricting its trade and economic relations with many countries all over the world. The humanitarian impacts of the blockade have been documented, and it is on record that in 2017 only, Cuba lost US$4 billion (R60 billion) worth of trade due to US economic blockade and sanctions.


The basis of US’ sanctions and economic blockade on Cuba are senseless ideological constructs of successive neo-liberal governments in the US, whose nearest port for entry from Cuba is less than 400 kilometres away. Former President Obama attempted to lessen the trade embargo, and when madness assumed the office of president in the US through election of Donald Trump, the economic blockade, trade embargoes and sanctions were reinstated. 

The trade embargo, economic blockades and sanctions bring tremendous difficulty to Cuba’s economy, which lead to perennial shortage of machinery and other products that cannot be produced in Cuba. The economic blockade also causes strain to the country’s financial system, which cannot be seamlessly integrated into the otherwise complex global financial architecture, which relies on the US dollar for global monetary exchanges. 

Despite all these, the people of Cuba and its leadership are resilient and steadfast in maintaining a socialist path to human development because socialism represents the most superior manifestation of humanity. The progressive peoples of the world have recurrently called for an end to the trade embargo and the United Nations passed several resolutions calling for an end to the trade embargo and sanctions. The resistance always come from the US and Israel, who for senseless ideological reasons, continue to isolate Cuba. 

Cuba continues to be one of the most lucrative holiday destinations in the world with recorded 5 million visitors in the past year. Many governments visit Cuba to learn about its healthcare and education systems, which are universal and given for free to all its citizens. Cuba has one of the lowest infant mortality rates in the world and Cubans live longer due to its quality healthcare systems. Cuba has one of the lowest illiteracy rates because education is free and accessible to all, and this includes university education. 

Cuba is currently undergoing constitutional reforms which will allow for same sex marriages, institutionalize Presidential term limits, are decentralize political power to provinces, and extend be scope for ownership of personal non-exploitativeproperty. When we met with the Ministry of Foreign Affairs, they assured us and all the progressive forces of the world that the constitutional reforms underway will never sacrifice the socialist reconstruction of society that begun with the victory of the July 26 Movement. 

Amidst all of these, we as the people who gained independence from the racist colonial and apartheid oppression owe our revolutionary progressive internationalism and solidarity to the people of Cuba. Our solidarity with the people of Cuba therefore becomes a humanly and revolutionary obligation. The Cubans sacrificed their lives so that we can gain freedom from the nonsensical colonial, apartheid oppression and repression. 

Despite the rhetorical commitments to solidarity with the people of Cuba, there are practical interventions which the South African government, overseen by Parliament should engage in for the benefit of the people of Cuba and South Africa. 

The immediate intervention should be upgrading of the South African President embassy in Cuba to a Grade 5 embassy. Perhaps parliament should even pass a special resolution or motion to place Cuba in a special category of embassies, for historical and present reasons. There is no other country in the world that has committed to produce medical doctors for South Africa and transfer critical skills in the manner in which Cuba is doing despite trade and economic sanctions.

The South African government should scale up the many bilateral relationships established with Cuba since 1994 andshould dedicate resources to harnessing and enhancing such relationships. South Africa’s resource commitment to Cuba’s medical training fraternity and the pharmaceutical sphere will be one of the greatest contributions to humanity.

The Health and Defence attaches in Cuba should be appropriately resourced and capable and skilled guardians should be deployed to look after all the students and cadets in different Cuban training institutions on a ratio of 1 guardian per 10 students. Those deployed to Cuba should carry the necessary political consciousness that Cuba is a country under economic sanctions and will lack some of the luxuries associated with many meaningless foreign missions South Africa finances. 

Cuba’s dedication to saving lives deserves honour, not through rhetorical commitments, but through resource allocation and oversight on how such resources bring about maximum benefit to the people of Cuba and South Africa. When they conquered against Batista, the revolutionary July 26 Movement proclaimed “Hasta La Victoria Siempre”, May Cuba’s Victories Last Forever! Viva Cuba! Viva Socialist Reconstruction of society.

Tuesday, May 15, 2018

Towards the creation of State Banks: From rhetoric to practice!

Towards the creation of State Banks: From rhetoric to practice

Floyd Shivambu

On 25 April 2018, the South African State gazetted a notice which officially commences a process that seeks to amend the Banks Act. The Government Gazette Number 211 of 2018 aptly illustrates that, “The Banks Act, 1990 (Act No. 94 of 1990) (‘Banks Act’), among other things, imposes certain requirements which an institution must comply with before it may carry on the business of a bank or in the lawful carrying on of the business of a bank. In terms of the Banks Act, no person may conduct the business of a bank unless such person is a public company and is registered as a bank in terms of the Banks Act. A public company is defined in the Companies Act, 2008 (Act No 71 of 2008) (‘Companies Act’), as a profit company that is not a state-owned company, a private company or a personal liability company.”

What the Banks Act effectively does is exclude all state-owned companies and the state from owning banks registered as per Banks Act and regulated as such under all legislation that regulate Banks. The EFF’s Amendment Bill, which is permissibly tabled as a private members’ bill, will culminate in creating an environment where the State can own banks as per the Banks Act. In practice, this will mean that the institutions existing through a temporary permission of the Minister of Finance as Banks will be granted full banking licences. These include the Postbank owned by the South African Post Office and iThala Bank owned by the KwaZulu-Natal Provincial Government.

Furthermore, the amended legislation will create an enabling environment for the establishment of all other State banks at national, provincial and local levels. The State has to own banks, which will exist in the current regulatory framework, yet with clear developmental, financial inclusion and redress mandate. Banks in South Africa have largely been used as instruments and mechanism of financial exclusion and reproduction of apartheid economic activities. If the banking space is not fundamentally transformed through, among others, the establishment of state-owned banks with clear developmental mandates, the economic apartheid that defines South Africa will persist for a longer period.

The architecture of South Africa’s ownership and control of banks, which largely defines who gains access to finance, is responsible for the reproduction of economic apartheid. The black majority are on the margins of mainstream financial participation mainly due to the fact that existing financial institutions are driven by narrow commercial mandates, not a redress and developmental mandate. Enabling South Africa’s laws to permit the State to own banks is therefore an important milestone in South Africa’s pursuit of economic justice, redress and equality.

The EFF’s position

The Economic Freedom Fighters is one of the few political parties to call for the establishment of a State bank in South Africa. The EFF’s Founding Manifesto specifically elaborates on this cardinal pillar in this way:

“The creation of a State Bank and the nationalisation of the Reserve Bank constitute an immediate task and essential to the development of the South African economy, as it can be progressively positioned to improve the existence of state-owned development finance institutions, in order to finance new industries. The State Bank will also provide enterprise finance, housing finance and vehicle finance for all South Africans in a manner that promotes development, not the narrow pursuit of profits.

“The EFF-led government will establish a State Bank, which should be accompanied by the transformation of the financial sector as a whole, particularly banking and insurance industry practices and norms. Finance capital dominates the world economy and carries with it the potential to undermine all efforts to build a better life for all people. Vigilance and greater state participation in the financial sector is therefore a vital component of efforts to build a sustainable and better life for all the people of South Africa. India and China were firmly insulated from the global financial crisis because their state-owned and controlled financial sectors did not venture into the practices of private banks in the West that led to the collapse of the world economy.”

This enunciation is derived from the EFF’s non-negotiable cardinal pillar which calls for nationalisation of mines, banks, and other strategic sectors of the economy, without compensation. As will be lucidly explained in this perspective, the creation of an environment to create State banks is an important step towards discontinuation of total private ownership and control of the banks in South Africa.

In November 2017, the President and Commander in Chief of the EFF tabled a motion in the National Assembly to call for nationalisation of banks without compensation. The EFF made the call for nationalisation of banks without compensation fully aware that the financial services sector is currently the largest sector in the South African economy. The South Africa’s financial sector controls an estimated over R12-trillion worth of assets, which is four times the Gross Domestic Product (GDP) at market price, contributes just about 22.2% of the country’s GDP. Financial sector i.e. financing, insurance, real estate and business services contributed over R72.8-billion in the 2016/17 financial year, effectively 36% to corporate income tax. The financial services sector had grown from contributing seven per cent of the GDP in 1994 to the present 22.2%, just under the contribution of manufacturing, mining and agriculture combined at 24.5% of the GDP in 2017.

Role of banks in economic transformation and industrialisation

Political economic historians have documented and demonstrated that at the core of the first industrial revolution in the 1700s, emanating from the Atlantic Triangle economy – Britain imperialism, slave trade in Africa and the Western periphery – bankers and the banking system were at the forefront of industrialisation. It is almost impossible to imagine the largest empire building project by Western countries, which ultimately gave birth to the commercial capitalism in the 17th century, without the development of financial, banking and fiscal institutions. Monopolies that were created through the blend of banking capital with industrial capital created financial oligarchies that changed the nature of global capitalism and the emergence of a transnational capitalist class. Banks and banking systems have been and remain extremely important instruments and vehicles in driving industrial and socio-economic transformation throughout the world.

Any honest assessment and theoretical work of industrial development trends in the last 500 years will come to the conclusion that deliberate attitudes on the part of banks shaped our world and continue to do so. And South Africa is a microcosm of this global trend. South Africa’s economy is dominated by and depends largely on a mineral-energy complex with strong links to banks and this can be traced back to the origins of the backbone of the economy. It is therefore non-negotiable that any development in the world including in South Africa must be centred on banks and banking systems, which in itself will transform the financial sector and the overall economy, hence expropriation and State control of banks is a non-negotiable.

State ownership of banks internationally

State-owned banks continue to play a pivotal role in early stages of economic development in the case of infant industry development and serve the majority of poor people whom commercial banks consider unbankable. The orthodox financial measures used by champions of neoliberal policies are quick to point to poor performance of state-owned banks compared to privately-owned banks. However, what they fail to account for is that unlike private-owned banks, state-owned banks contribute positively to the overall economy and do not appropriate the GDP. Even the International Monetary Finance (IMF) has now started to recognise that privately owned banks as champions of financialising the economy is in fact a negative contribution to the economy in their current form.

The world came out of the 1970s’ financial and oil price crisis through dispossession of workers’ wage increases which led to wage stagflation. What became apparent soon after was that with low and declining wages, especially in new manufacturing zones, a problem of effective demand emerged. Workers could not afford to buy the very same goods that they were producing. This led to a problem of overproduction and is the core of the internal contradictions of capitalism. It is in this period that banks became more powerful and sought new markets. The outcome was financialising of economies all over the world without being grounded in production of tangible goods.

As a result, privately owned banks started making more profits from fictitious products, credit, stocks and through hedge funds. In doing so, there is no incentive for the financial sector and banks to invest in development of the productive sector because it is long-term, requires patience and takes long to realise a return on investment. It was a matter of why wait when you can make quick returns through financial products, fictitious products. In essence, private banks have starved the world of investment into productive economies, and while this servesdeveloped western countries, it has resulted in catastrophic consequences for countries at infancy of development. It is state-owned bank, through a government mandate, in a sustainable and responsible manner, that can focus on the long-term development and allocate resources accordingly.

China and Asia

China has the biggest publicly-traded bank in the world by market capitalisation, the Industrial and Commercial Bank of China (ICBC), and arguably the reason why China is the second biggest economy in the world, and may soon become the biggest economy if the world development continues it its current trajectory. The government of China, through the Minister of Finance, is the most important shareholder in the bank with significant influence, in direct ownership of approximately 34.6% of the issued share capital. The Central HuijinInvestment, another state-owned investment company, owns 34.7% of the issued share capital of the bank, which brings the state control of the bank to well over 65%. At the core of the bank operations, is operations in an economic environment predominated by state-owned entities, creating a conducive developmental environment for China and the region.

In 2017, ICBC recorded R50-trillion group total assets of R50.1-trillion, increased from R36.7-trillion recorded in 2013. According to ICBC 2017 annual report, the bank also achieved R287-billion in net profit for the year, the best in the global banking industry. The bank saw its market capitalisation going up by over 40% in 2017, distributing the largest amount of cash dividends including to the national revenue fund for 10 conservative years and boasting the highest brand value in the global financial industry. ICBC strategy has been closely centred on development of the real economy, improving the investment and financing integration services, and propelled China into a global economic giant. This state-owned bank has been ranked the 1st place among the top 1,000 banks by the banker and 1st place in the Global 2000 listed by Forbes, among many other accolades.

In addition to the ICBI, China owns and controls three other big state-owned banks i.e. Agricultural Bank, China Construction bank and Bank of China who continue to play a pivotal role in Asia. Japan has more than 200 banks. Banks such as Japan Post Bank, owned by the state through Japan Post Holdings, considered among the top 10 best banks in the country. Japan Post Bank recorded a total asset of $714-billion and total average income over $25-billion in the last three years. Top two banks in Singapore i.e. Development Bank of Singapore and Post Office Savings Bank, are state-owned. The Development Bank of Singapore is the largest bank in South-east Asia, with branches across the world. In India, the State Bank of India, owned by the government, is one of the oldest and largest banks in the country, with total assets of R5.6-trillion, more than South African banks’ total assets.

Germany and Europe

KFW Bank, a German state-owned bank formed 70 years ago as part of the Marsh Plan to rebuild western economies after World War II, is today considered the safest bank in the world with commercial transition across various markets. The German government takes direct and full control over running of the bank, and its bonds are backed by government. In terms of article 2 of the law that established KFW, it clearly stipulates that the bank has a function, pursuant to a state mandate, to finance small and medium-sized enterprises’ start-up, risk capital, housing, infrastructure and development co-operation. The bank is under the chairman and deputy chairmanship of the Minister of Finance and Minister of Economic and Technologies respectively.

When the bank came under fire as a developmental bank which prioritises small businesses and lending at low interests, the German Chancellor Angela Merkel who was at the forefront of pushing neoliberal policies during the Great Depression of 2008 and was the first to come to the bank’s defence, calling it a federal government economic, development and climate change policy instrument. The bank has a total value of R472.3-billion, and its growth in Europe has been seen as a rejection of the notion that banking services are something that only the private sector does.

In addition, Germany has a large network of public banks run and managed by federal government, states and districts as central banks but also offering wholesale banking. The Norwegian banking system comprises mostly of large commercial privately owned banks and savings banks. However, the country has a considerable number of state-owned banks in the real estate, education and post banking segment. The Norwegian Ministry of Trade and Industry is one of the two largest owners of the largest financial services group in the country, DNB Bank. Due to privatisation of state-owned entities post the 1970 crisis, a handful of banks were state-owned and sold when they were in a relatively good financial position. When banks face crisis, it is government through taxpayers’ money that come to their rescue and this is common in Europe and the US given that systematic risk and vitality is now a permanent feature of these economies. The United Kingdom government has recently sold the last of its shares at Lloyd’s nearly a decade after government rescued the bank with a cash injection of R348.5-billion.

Brazil and Latin America

Banco do Brazil, a state-owned Brazilian and assets management company through the National Treasury with 51.8% shares, is the oldest and second largest bank in Brazil and all of Latin America. The bank recorded a total asset of R5-trillion in 2017. When Banco Do Brazil was introduced, it ushered in a period of stability and increasing responsiveness of the banking system to the economic growth of the country. The government of Brazil effectively used the monetary policy to distribute financial services significantly, through a government-funded large expansion of money and credit through the Banco do Brazil. The government has and continues to successfully use the bank to meet its short- and long-term monetary and fiscal policy goals, despite counter-revolutionary political developments.

Banks’ ownership and transformation in South Africa

Banking services and bank institutions are at the core of the financial services sector, and account for most of its growth. There is a total number of 19 registered banks, three mutual banks, three co-operative banks, 15 local branches of foreign banks and 31 foreign banks with approved local representative offices. Banks total assets increased from R4.9-trillion in 2017 to R5.1-trillion, a strong 5.1% year on year growth in a sluggish economy that grew only at 1.3% in 2017. Banking in South Africa is dominated by the big six largest banks i.e. Absa, FirstRand (FNB and Wesbank), Nedbank, Standard Bank, Investec and Capitec which constitute more than 90% of the total banking market share.

Banks in South Africa own and control the houses, cars and properties of so many people. Banks influence people’s access to food, clothing, education and other essential services. And they do so in a predatory manner where they exploit workers and poor people with loan sharks’ practices. People’s houses are sold for a penny after owners have paid hundreds of thousands of rand in repayments. This is made possible because South Africa’s financial sector, in particular banks, have placed almost all black people in severe debt and have designed a cartel-like system that makes it impossible for black people to escape indebtedness. Banks own vast sections of land and huge commercial properties, such as malls and industrial parks. Despite the fact that banks control and run the lives of so many people in South Africa, with little or no proper supervision by government, the sector has done all it could possibly do to refuse transformation. Banks do not even comply with the less courageous targets set by government together with the sector.

In the past we have demonstrated that the level and extent of black ownership in the banking industry continues to collapse, now estimated at around 1% from 10% in the last four years. This is due to sell-off of black economic empowerment stakes in major banks by black investors if we put aside institutional investors such as the Public Investment Corporation (PIC). In the absence of any credible and detailed research in the patterns of sell-off of black economic empowerment stakes, fronting and poor reporting in major banks, as it is the case across the financial sector and the whole of the economy, it is possible that the 1% black ownership is at best artificial and non-existent.

Even the position of mutual banks, whose assets value and significance in the overall banking sector is inconsequential, has now come under fire. Even though mutual banks such as Venda Building Society (VBS) and some of the mutual banks owned by the Government Employees Pension Fund (GEPF) are not systematically important financial institutions, and their discontinuation will not affect South Africa’s economy. Mutual banks in their current form and position based on assets and client base are possibly the best launchpad for transformation at a small experimental scale. However, after the VBS liquidity challenges over the last 18 months, unwarranted attacks by the Reserve Bank and lack of support by government for the bank to manage its growth, the position of mutual banks is even more threatened.

Towards the creation of South Africa’s first State bank

The South African government owns and controls financial development institutions such as the National Empowerment Fund (NEF), Land Bank, Industrial Development Corporation (IDC), National Housing Finance Corporation (NHFC), KhulaEnterprise Finance (KEF) and others. Unlike in other countries, these are not fully licensed banking institutions and are sector specific with a narrow mandate, client base and assets base. However, the South African Post Office Bank (Postbank) is the closest that the South African government has come to owning a fully-fledged bank.

The Postbank is not yet a registered bank in terms of the Banks Act No. 94 of 1990 (“Banks Act” as amended) but it is already operating as a bank. It is a full member of the Payment Association of South Africa and participates in the National Payments Systems (NPS) directly in the clearing of transactions. However, the Postbank cannot perform settlement directly in the NPS because it is not registered as a bank. The Postbank could not be appointed as a social grant paying bank without the support of Standard Bank. And the Postbank does not offer lending products, yet it has always been profitable.

The main reason why the Postbank is now a fully-fledged commercial bank with a licence is because the Banks Act, among other things, imposes a certain requirement which an institution must comply with before it may operate as a bank and offer people banking products such as credit, deposits, investments, etc. In terms of the Banks Act, no person may conduct the business of a bank unless such person is a public company and is registered as a bank in terms of the Banks Act. A public company is defined in the Companies Act, 2008 (Act No. 71 of 2008) (“Companies Act”), as a profit company that is not a state-owned company, a private company or a personal liability company. Further, in the Companies Act a state-owned company is defined as an enterprise that is registered in terms of that Act as a company, and either is listed as a public entity in Schedule 2 or 3 of the Public Finance Management Act, 1999 (Act No. 1 of 1999) (“PFMA”), or is owned by a municipality, as contemplated in the Local Government: Municipal Systems Act, 2000 (Act No 32 of 2000), and is otherwise similar to an enterprise listed in the PFMA.

As a result, the legislative requirements imposed by the Banks Act before a person may conduct the business of a bank, and register as such, makes it impossible for a state-owned company registered in terms of the Companies Act to conduct the business of a bank and for government to own a bank. The EFF intend to introduce a private members’ bill in the name of the Deputy President Nyiko Floyd Shivambu to amend the Banks Act. The Bill seeks to amend the Banks Act to make it possible for state-owned companies to register in terms of that Act and to conduct the business of a bank. The bill will provide for a state-owned company to be able to register and conduct the business of a bank in terms of the Banks Act, register with the commissioner, appointed in terms of section 189 of the Companies Act, a memorandum of incorporation of a state-owned company formed for the purpose of conducting the business of a bank and all other requirements.

A notice of intention to introduce a private member’s bill and invitation for comment on the draft Banks Amendment Bill of 2018 in accordance with section 73(2) of the Constitution of the Republic of South Africa was submitted to the Speaker of Parliament. An explanatory summary of the Bill in accordance with Rule 276(1)(c) of the Rules of the National Assembly will be published in due course as it has already been submitted to the Government Gazette. The bill once adopted by the Parliament and enacted by the President will create the necessary legislative environment for the Postbank to become a full bank with a commercial licence like Absa, Standard Bank and etc.

However, the implications of such legislative changes, while they serve the immediate need to allow for the Postbank to be granted a banking licence now, provide a much neededlegislative environment for diversification of South Africa’s banking system. The Postbank must provide efficient and affordable banking for the State i.e. all three spheres of government, legislatures and judiciary, including banking services for other state-owned entities. The Postbank must also facilitate all state transactions, a cost-efficient move that will ultimately reduce the cost of banking and ensure banking services to the poor and workers at a minimum bank charges. Postbank must also make available loans to allow people who do not qualify for loans to build homes and start businesses within reasonable terms and cost of borrowing.

In addition to the Postbank, the State must own other banks to support infant industries with developmental finance and support to play an active role in various economic spheres of our society. The Land Bank must become a commercial bank that focuses on agriculture, fisheries and forestry businesses since all land will be under the custody of the state and no one will need to pay for land. Furthermore, the Banks Amendment Act we are tabling will lead to creation of many other State-owned banks in the same way China’s national and sub-national state owns and controls some of the world’s largest banks. IThala Development Finance Corporation Limited must also become a full bank mandated to lead regional economic development in the Kwazulu-Natal, Mpumalanga and Eastern Cape regions.

All state-owned banks must be democratically administered and governed, fight illicit financial flows and corruption, and its employees must be paid decent salaries. To ensure proper governance, state banks must not account to one minister as is the case with state-owned entities such as Eskom, Denel, Prasa, and South African Airways (SAA). Instead, the state must own and control majority shares, and minority shareholders must be invited to diversify governance. We make this contribution to legislative amendments towards nationalisation of all private banks through taking a minimum of 60% ownership and control of all existing private banks.

The legislative intervention is an illustration that the EFF does not just scream meaningless rhetoric but engages in thorough legislative processes which will culminate in progressive Laws. It is our intention within the fifth democratic Parliament to introduce other legislation which will nationalise the South African Reserve Bank, ensure that all clinics open 24 hours, guarantee economic inclusion of historically disadvantaged individuals, and insource all State employees.

FLOYD'S PERSPECTIVES

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