> After studying Commanding Heights and Community Control, the natural assumption must be that Patrick Bond can’t possibly have anything valid to say about South African political economy. His misreading of reality led him to prescribe absurd quack remedies for the country, which fortunately were never adopted.

PB: Actually in some places they were, and worked fine. The policies adopted in SA have put this economy into quite a mess.

> His misreading seems to have changed little, if at all.

PB: By which you mean from 1991 to the present, problems identified in that booklet - underlying capitalist crisis and market-oriented responses - have gotten worse, yes, quite right.

> … Seen through the right lens, any transition is an elite transition, from the Smolny Institute to the Union Buildings.

PB: Not in 1917, no. That was called a revolution. There are other cases too. Try Cuba 1959, Venezuela 1998, Bolivia 2004 and Ecuador 2006, for example.

> Unless Bond could show that there was a plausible alternative to what happened in 1993, he would be indulging in silly special pleading.

PB: Hmm, from the standpoint of the economy, what was going on 15 years ago? I recall in 1993 there was the adoption of the (GEAR-like) Normative Economic Policy by finance minister Barend du Plessis; a decision to repay South Africa’s foreign debt ($25 billion or so); the gifting of control of monetary to the Reserve Bank (against the parliament and the people) in the interim Constitution; and the move to take a huge IMF loan to combat the ‘drought’ which in fact had ended eighteen months earlier. The plausible alternative to each: don’t do it!

> Moreover, whatever had happened in the 1990s was not obviously a simple move towards neoliberalism. Argentina’s neoliberals would certainly have sold off ESCOM, SASOL and TRANSNET like greased lightning.

PB: Oh come on, Alec Erwin and Trevor Manuel have been trying to sell of 30% of SA’s electricity generation capacity for more than a decade, and failed due to the low prices they guaranteed the big smelting companies, in case you hadn’t noticed… as well as plenty of other parastatals (Transnet includes SAA which had a failed 20% privatisation). In Elite Transition, 2nd edn, there is a review of the failed privatisation wave, which I’ll add below since you seem to have missed it.

> Indonesia’s neoliberals would not have passed the Labour Relations Act

PB: Did their trade unions require as strong a shop-floor disempowerment exercise as SA’s did? Have you not read Karl van Holdt on the impact of the LRA?

> … Bond begins by making a sweeping presentation of the capitalist crisis which, he claims, characterised the last decades of apartheid (whether it was actually a crisis or simply a transition from production-based to finance-based profiteering, he does not explain).

PB: Duh, Shrieker. Since you can’t continue to make profits from financial activity without stepping up production, that’s a good recipe for crisis. Just check the USA now.

> He then explains that big capital wanted to have the ANC supporting it, which is hardly surprising. Significantly, big capital did not reciprocate

PB: What?! Have you missed the emergence of crony capitalism in SA?

> …Skipping over the difficult task of proving that the ANC indeed adopted neoliberalism as a policy

PB: I’ve written more than a million words on this subject, including thousands in Elite Transition. Where exactly did I get this policy analysis wrong? Privatisation? Judge below.

> (who outside the business community takes Clem Sunter seriously?)

PB: Hey lad, in his day he was the single main market huckster in SA, you may not recall.

> …On the other hand, Bond fails to mention the impact of the global economic crises which materialised at the same time as GEAR and undoubtedly contributed to the stalling of economic growth.

PB: Gear began a year earlier than the Asian crisis and was already off the tracks within six months, you surely remember?

> … Bond also does not mention that failing to cut spending would certainly have led to a rapidly-growing budget deficit (COSATU happily anticipated a return to the 7%+ deficit of 1994).

PB: A tautology. The World Bank also advised a 12% budget deficit, so Cosatu was modest. The 1993-94 deficit was 9.3%

> This could have been more harmful to the economy than GEAR was, for if economic growth was stalled by global crisis, then swelling deficits would lead rapidly to a bloated national debt,

PB: Have you ever heard of John Maynard Keynes? Worth knowing his ideas, Shrieker.

> servicing which had cost 25% of the Budget in 1994-5.

PB: Ah, so you endorse repayment of apartheid debt?

> This would have hammered social spending

PB: No, not if the balance of forces was not so adverse.

> … Significantly, while GEAR continued subsequently, economic growth picked up, contrary to Bond’s prediction. Bond makes other predictions which were soon falsified, such as the idea that Value-Added Tax would be increased, or the privatisation of major parastatals, and thus airily discusses the harmful effects of things which did not happen. GEAR, as the Creator has pointed out, was effectively a conservative rather than a neoliberal policy intervention, and contrary to Bond’s claims it had positive effects as well as negative ones.

PB: What? I don’t know about your reading of ‘predictions’. The only valid claim of Gear’s success is that inflation went down more than anticipated (temporarily, but leaving SA hugely vulnerable to imported shocks as we now see).

> … Bond right in pointing out that the RDP was an imperfect instrument, particularly because it was not well understood or thoroughly by the community at large.

PB: (Sic)
You speak for yourself, Shrieker. Write back after you’ve sobered up.

> … Bond does not clearly explain that the political failure of the RDP was partly a product of left-wing incompetence — the belief, which Bond fosters, that there was plenty of money somewhere to fund whatever projects you wanted.

PB: There would have been plenty more had the apartheid debt not been repaid, had corporate taxes not been cut so much, and had all manner of silly expenditures - e.g. the arms deal - not proceeded.

> … Nothing that Bond says suggests how anything better than this could have been done — and by ignoring this, he lets the left off the hook entirely, despite their apparent political and economic bungling.

PB: What left? It wasn’t in power!

> … The RDP was a series of production targets, many of which were in fact met (as Bond rather shyly acknowledges).

PB: Shyly? In 1999 I co-edited a whole book on this, An RDP Audit, available from HSRC Press.

> … If, however, Bond can blame all this on the bad ANC and the evil GEAR, he can exempt the left, including himself, from all responsibility for the failure.

PB: What left? It wasn’t in power!

> … Meanwhile, Bond proceeds to denounce the housing policy of the post-apartheid state. Interestingly, Bond challenges the ANC claim that late apartheid failed to provide housing, by saying that 200 000 houses for middle-class blacks were built over 5 years between 1986 and 1990.

PB: Ahem, by the private sector. You need to read more closely.

> This is a rate of 40 000 a year, not exactly the “roaring” rate which Bond ascribes to it, and such houses were inaccessible to most people, so it is hard to see why Bond raises this, unless he wishes to delude his audience into seeing apartheid-era housing as better than it actually was.

PB: Sadly, late apartheid urban housing was far better than post-apartheid housing, in terms of size, location, quality of materials, service standards, etc.

> Bond blithely concludes that the housing production of the first five years of government was only 100 000 houses

PB: What? Write again when you’re sober, lad.

> … Bond could rightly complain that houses could have been built better, and more of them built and in more appropriate places, if more capital had been available

PB: It *was* available by all accounts, even the Housing White Paper’s, which called for a 5% target for housing spending as a percentage of the state budget. Do reread that chapter carefully, it will prevent mistakes of this type.

> He follows this by waving the World Bank as a scarecrow, pretending, that a vast crisis arose from the ANC’s surrender to this institution — that is, borrowing money from it.

PB: I wrote the opposite, in fact: the WB doesn’t have to lend to have enormously destructive impact. That’s the “Knowledge Bank” section you missed, Shrieker.

> Bond seeks hope in “new social movements” and in a mystified “Left” against which the ANC was allegedly mobilising repression.

PB: Alleged? Have you not been in SA the past few years?

> He also hopes that the SACP and COSATU would break with the ANC — the familiar dream of white capital for so many decades.

PB: And of the left - black and white - you might also have noticed?

> He makes dire predictions of what an Mbeki government would do (invariably falsified)

PB: Such as?

> … Unfortunately Bond is embedded in the academic political fantasies of American Trotskyism.

PB: Huh? That ‘Trotskyism’ explains my excessive support for community and social movements, I guess.

Shrieker, you haven’t been educated in any sense politically, nor can you read or digest information properly. Do you really want to continue this?

Cheerio,
Patrick

PRIVATISATION FAILS TO DELIVER
Excerpt from Elite Transition, 2005 edn

The canard arguments of ‘insufficient state capacity’ to solve social and environmental problems and ‘impotence’ to create jobs were undermined in the first decade of liberation by the ANC’s willingness to turn state resources over to the private sector. If outsourcing, corporatisation and privatisation can work anywhere in Africa, they should in South Africa, with its large, wealthy markets, relatively competent firms and advanced infrastructure. However, contrary evidence emerges from the four major cases of commodification of state services: telecommunications, transport, electricity and water.
Before considering these, it is useful to review two aspects of the post-apartheid privatisation strategy’s failure. One was the very low revenue inflows that were achieved through Pretoria’s botched sales in a buyer’s market. By the time of the February 2004 budget, the problems were sufficiently obvious that Manuel conceded to his parliamentary colleagues, ‘We have never said that we would have a bargain basement sale of parastatals.’ He conceded that there was ‘a big rethink about this issue around the world’, although for justification, he cited the ‘mess’ associated with electricity privatisation in California instead of the many homegrown South African problems caused by the drive to commodify. Manuel also recommitted to making parastatals more ‘efficient’ and ‘self-reliant’ - codewords for the commodification and commercialisation that typically precedes privatisation.i
The second feature of failed privatisation was the failure to build a genuinely patriotic black bourgeoisie in the process. To be sure, a new class emerged to massage the process of crony capitalism. But as Ashwin Desai argued, this group was so bound up in get-rich-quick schemes that a longer-term transfer of assets in a sustainable manner appeared impossible:

They have much to gain from the policies that compound the poverty of the majority. They are not the vanguard of a process of popular empowerment. They are parasites. New parasites lining up to form lucrative alliances with the old. The late Joe Modise [the first ANC government’s defence minister] was a Director of Conlog Holdings, the company that manufactures the prepaid water meters that are currently being installed at gun-point in Phiri, Soweto. And the Directors of Dynamic Cables, the company that supplies the cabling for prepaid electricity meters, include Keith Mokoape, former Deputy Head of ANC intelligence; Diliza Mji, former ANC treasurer general in KwaZulu-Natal; Ian Deetlefs and Ron Haywood who both held senior management positions in the apartheid state’s arms industry and Richard Seabrooke, who was involved in smuggling to UNITA in violation of UN sanctions. So it goes. When water and electricity are finally privatised, local elites stand to become very rich, as the ANC demands that multinationals partner with aspirant black capitalists.ii

It is not obvious, however, that Desai’s fears will be realised, given the massive grassroots/labour opposition and the ubiquitous poverty that have dogged privatisation to date. The contrast is especially clear when considering the much more successful Keynesian-style strategies deployed by Afrikaans Economic Empowerment advocates a half-century earlier. Many present-day Black Economic Empowerment advocates went bankrupt buying into privatisation deals, such as those attempting to get a privatised second landline telephone system up and running.
Indeed, the lucrative telecommunications sector is a good place to start a review of the record of commercialisation and privatisation. Since 1997, when a 30% share in the state-owned Telkom was sold to a Houston/Kuala Lumpur alliance, numerous problems soon arose:

- for fixed-line telecommunications, the cost of local calls skyrocketed as cross-subsidisation from long-distance (especially international) calls was phased out;
- as a result, out of 2.6 million new lines installed, at least 2.1 million disconnections occurred, due to unaffordability;
- 20,000 Telkom workers were fired, leading to ongoing labour strife;
- a second fixed-line operator was first discouraged then encouraged under pressure from competing commercial interests, and a regulator (with integrity) was ultimately dropped from the selection process;
- attempts to cap fixed-line monopoly pricing by the regulator were rejected by the Texan/Malaysian equity partners via both a court challenge and a serious threat to sell their Telkom shares in 2002;
- Telkom’s 2003 Initial Public Offering on the New York Stock Exchange raised only $500 million, with an estimated $5 billion of Pretoria’s own funding of Telkom’s late 1990s capital expansion lost in the process;
- a collusion pact on pricing and services exists between the two main private cellular operators; and
- persistent allegations of corruption stymied the introduction of a third cellular operator.

Secondly, in the field of transport there were various dilemmas associated with partial-privatisations:

- commercialised toll roads are unaffordable for the poor, especially those living in the immediate vicinity;
- private ‘kombi-taxi’ minivans remain extremely dangerous - and ungovernable - due to profitability pressures;
- air transport privatisation included a) the collapse of the first regional state-owned airline following privatisation, b) South African Airways’ disastrous corporatisation mismanagement by a chief executive imported from the US and subsequent renationalisation of the 30% share owned by (bankrupted) SwissAir, and c) major security glitches and labour unrest at the privatised airports company;iii
- constant strife with the ANC-aligned trade union threw ports privatisation into question; and
- the increasingly corporatised rail service shut down many feeder routes that, although unprofitable, were crucial to rural economies.

Thirdly, the electricity sector commercialised rapidly, with 30% of the Eskom parastatal (the world’s fourth largest electricity producer) to be sold. Already by 2004, problems included:

- potentially unnecessary creation of new generation capacity (by private suppliers), given that since the early 1980s, South Africa had enormous (at least 1/3) overcapacity and, from 1994, should have switched to energy conservation, hence making unnecessary the future expansion of dirty coal-fired plants, damaging new hydroelectricity schemes in Mozambique or dangerous nuclear generation;
- the commercialisation of Eskom left 30,000 unemployed during the 1990s, and much higher tariffs for residential customers as cross-subsidies came under attack;
- the slowing of the rural electricity grid’s expansion by Eskom, as a result of increasingly unaffordable tariffs; and
- disconnections of millions of people who fell into arrears on inflated bills - leading to massive (often successful) resistance such as illegal reconnections.

Fourthly, water and sanitation outsourcing applies to 5% of all municipalities, but virtually all local governments adopted a 100% cost recovery policy during the late 1990s, at the urging of central government and the World Bank. The results were quite revealing, insofar as substantial problems arose at all the South African pilot projects run by world’s biggest water companies:

- the small town of Nkonkobe sued to cancel its long-term contract with Suez (Paris) due to overpricing and underservicing, including the ongoing use of the hated ‘bucket system’ of sanitation, with many similar protests in nearby Queenstown and Stutterheim (also Suez);
- at Dolphin Coast, Saur (Paris) demanded - and won - a controversial contract renegotiation to raise tariffs because its profits were insufficient;
- at Nelspruit, Biwater (London) is on the verge of departing, after not extending services to most poor people, and disconnecting many other low-income residents;
- in Johannesburg, Suez is under attack by communities for installation of pre-paid water meters, substandard sanitation and refusal to disclose basic information about the utility; and
- across South Africa, 100% cost-recovery dogma led to mass disconnections of water, and the continent’s worst-ever cholera outbreak.