Sunday, September 01, 2019



Floyd Shivambu 

The Minister of Finance Tito Mboweni issued an Economic Strategy discussion document, which is evidently not a product of domestic intra-governmental and inter-governmental consultation process. The economic strategy is a product of the two colloquia convened by the Minister in December 2018 and January 2019 attended by amongst others, Harvard University’s Centre for International Development ex-Director Professor Ricardo Hausmann; World Bank Consultant, who’s former citizen of South Africa Professor Robert Lawrence, and Professor Dani Rodrik, who is associated with the Rockefeller Foundation. 

The National Treasury’s statement issued on the 18thof January 2019 announcing the 2ndcolloquium, confirms that, “discussions at both colloquia placed particular emphasis on interventions that encourage new models and paradigm shifts in support of faster and more inclusive economic growth. The outcomes of the colloquia will form the basis of an economic strategy for South Africa which will be submitted to Cabinet for its consideration”. The detached nature of the now issued economic strategy and its ignorance of recent past developments in terms of policy reveals the fact that it was drafted by external forces. TELKOM Group Chief Executive Officer excellently exposed the policy dichotomy on spectrum distribution, where the National Treasury proposals are far apart of a Cabinet approved and now gazetted policy on spectrum. 

These Professors worked with National Treasury, the South African Reserve Bank and unnamed South African Experts and Academics to produce one of the most detached, ignorant, unrealistic and orthodox economic policy proposals in South Africa. The proposals are reminiscent of the erstwhile neo-colonial Structural Adjustment Programmes (SAPs) of the International Monetary Fund and World Bank. Dismissing the nonsensical SAPs, Professor Ha Joon Chang recently remarked that, 
A lot of people -- Joseph Stiglitz, Paul Krugman, Mark Blyth and Yanis Varoufakis, to name some prominent names -- have written that austerity does not work, especially in the middle of an economic downturn (as it was practised in many developing countries under the World Bank-IMF Structural Adjustment Programs in the 1980s and the 1990s and more recently in Greece, Spain and other Eurozone countries).

Many of those who push for austerity do so because they genuinely (albeit mistakenly) believe that it works, but those who are smart enough to know that it doesn't still would use it because it is a very good way of shrinking the state (and thus giving more power to the corporate sector, including the foreign one) and changing the nature of state activities into a pro-corporate one (e.g., it is almost always welfare spending that goes first)”.

Despite the almost scientific convergence of many honest Academics and professors all over the world that SAPs have failed, these Professors from Harvard University are proposing adjustment programmes, which will inevitably lead to socio-economic disaster for the people of South Africa. The SAP will lead to further job losses through privatisation, shrinking revenue due to complex tax avoidance schemes associated with almost all private corporations in South Africa, and reduced State capacity to provide social services such as education, healthcare and social assistance programmes. 

The National Treasury’s economic strategy proposes a variety of outdated and detached models to boost economic growth and base these on flawed and sometimes totally false suppositions. One of the totally false suppositions is that Independent Power Producers are a huge success in South Africa, and that this model should be applied to sanitation, water provision and roll out of irrigation systems. Contrary to the deliberate falsehood, IPPs are not a huge success in South Africa, and they are one of the major reasons ESKOM is making huge losses. In its own admission, ESKOM pays more for electricity generated by IPPs than it retails the electricity to users, and this is at the centre of the ESKOM Financial crisis. Of course, the private producers of electricity, who almost exclusively use foreign technology and systems, make a lot of money from the power purchasing agreements entered between Eskom and IPPs.

Now, despite openly available evidence that IPPs are at the centre of South Africa’s energy insecurity, the Economic Recovery Plan suggests that water provision, sanitation and irrigation should be privatized. What this effectively means is that Municipalities will be turned into nothing but overstaffed Supply Management Chains issuing out tenders to the private sector to deliver services that would otherwise be provided by the local state. History of South Africa illustrates that whenever privatization happens, ordinary people are excluded from benefits. 

Tito Mboweni Economic Strategy also recommends a solution previously contained in INVESTEC internal documents that ESKOM should be unbundled into three inter-related components. The nuance in the approach is that the Recovery Plan says the private sector should play a significant and possibly central role in the generation of energy, not only from renewable sources, but also from coal statins which would have auctioned off. This will rise electricity costs as private sector is not interested in electricity access for all, but profits. It is also foolish to want to commence the unbundling of a crisis ridden ESKOM. 

All these proposals on privatisation amount to the deepest level of imperialist and white monopoly State capture because in the ultimate end, it will be white minority owners of capital who will buy the State capacity to distribute water, electricity, sanitation, irrigation and still be in charge of transport infrastructure such as railways and harbours. The Economic Strategy basically intends to hand over all key economic roles of the State to the private sector. 

The Economic Recovery Plan does not provide any cogent plan on how to link nascent industries with shelve spaces. There will never be a successful industrial policy plan without guaranteed long term access to shelve space. Nascent Industrialists under a highly competitive capitalist system should be guaranteed access to shelve spaces and long term off take agreements. South Africa’s industrial and trade policy fails to acknowledge this reality, hence domestic production of goods and services continues to shrink or migrate to other places.

The United Nations Conference on Trade and Development (UNCTAD) estimates that more than 800 million jobs will be lost globally due the Fourth Industrial Revolution. In that scheme, most countries in the developing world will lose up to two thirds of their jobs. The Economic Recovery Plan does not say anything about the so called Fourth Industrial Revolution despite the fact that when in full steam, it is will replace physical Labourers with machines and will also affect State revenue streams. 

Importantly, the Economic Recovery Plan does not emphatically deal with redress of South Africa’s historical injustices. There is no sensible Economic Strategy in South Africa that ignores the fact that wealth is concentrated in few white people’s hands. The land, banks, factories, chain retail stores and all means of production are predominantly owned and controlled by white people and that is due to apartheid. So any Economic Recovery Plan should decidedly respond to the fact that South Africa still has economic apartheid, which excludes an absolute majority of black people from economic ownership and control. 

Instead of orthodox economic proposals that are imported through Tito Mboweni to South Africa, our country should pursue inward industrialization with export capacity. South Africa should produce its own consumable goods, services and products and depend on Africa’s economic integration for growth. It is not cast on stone that South Africa cannot produce its own cars, trains, cell phones, solar panels, televisions, confectionary, plastic products and thousands of many other daily consumables. These should be linked to domestic, regional, Continental and global shelve spaces. The State should use its procurement capacity to boost local inward industrialization.

An Economic Recovery Plan should necessarily speak to space and respond to the fact that real economic activity in South Africa is concentrated in less than 10% of space. Spatially decentralized economic expansion programme is long overdue in South Africa and will redefine intra economic migration which causes a lot of strife to social stability. 

All these rather obvious economic solutions are ignored in favour of ideas that are not organic and will not address our country’s economic crisis. So, the entire Economic Recovery Plan of Tito Mboweni must be rejected and treated as part of the Neo liberal hogwash that it is. Tito Mboweni must allow for a domestic development of an economic policy plan, and the plan issued out cannot be the basis. 

It should be noted that some of the funders for the Centre for International Development (CID), which Professor Hausmann is associated with include Standard Bank Group, George Soros’ Open Society Foundation, and INVESTEC Asset Management. A striking coincidence mentioned below is that some of the proposals contained in the economic strategy on ESKOM and energy plans are also contained in INVESTEC’s documents and proposals. The Professors and the unnamed Experts and Academics seem to agree with the private views of Donors—it is a coincidence. 

Progressive working-class forces must work together to fight privatisation and State capture by the imperialist and white minority capitalists. Government must not be allowed to trade off the key sectors of the economy because such will condemn the black majority and Africans in particular to permanent economic servitude. 

Floyd Shivambu EFF Deputy President.


Unknown said...

Cogent and incisive as always Floyd! Thank you for continously swiping for heterodox thinkers! Besides the detached nature of the document it has no account for the current material conditions of the country in the immediate, hence its incoherence

Unknown said...

Cogent and coherent input DP, the left forces must unite across political spectrum to fight this imperialism. State enterprises must never be in the hands of Capital whose sole mandate is maximizing profit at all costs.

Unknown said...

ANC must step aside, they clearly have run out of ideas. Which part of we want the economy of this country to reflect the demographics of this country don't they understand. It can't be right that 25 years into democracy right that this economy is still Lilly white and we are really sick and tired.

Pastor Pule Mofokeng said...

Solid. Solid contributions Floyd.

Unknown said...

Lovely DP sadly ANC thugs r swindling whatever is left of this country

Anonymous said...

Very informative, hopefully you will write more articles like this on economic development. Tito must make you his economic advisor

Unknown said...

very informative, indeed the document have ignored the south african historical fact which is apartheid era and there are those who are still benefiting from apartheid regime policies, south african wealth is still owned by these racist whites, and on the document Tito Mboweni failed to go and do deep research on intra socio-economic problems that south africans are subjected too on daily basis, the working class is at danger here.

Unknown said...

Thanks for an informed contribution Mr. Shivhambu