International Socialist Review Issue 19, July-August 2001
Reflections from South Africa: Breaking the chains of global apartheid
By Patrick Bond
Patrick Bond is an economics journalist in South Africa at the Witwatersrand Graduate School of Public and Development Management. He is the author of the forthcoming Against Global Apartheid: South Africa Meets the World Bank, IMF and International Finance (Pluto Press and University of Cape Town Press).
JOHANNESBURG IS one of the worlds most exciting sites for anticorporate activism. I moved here permanently in 1990 and am continually inspired by my comrades rapid transition from the national liberation milieu to concern with the broader damage done by world capitalism.
In 1982, I learned radical politics in Baltimore as a fellow traveler at International Socialist Organization meetings, partly as an escape from Peabody Conservatory, where I spent a semester playing guitar. Before long, I found myself investing every available moment in anti-apartheid activism, aligned mainly with the African National Congress (ANC) divestment/sanctions campaign. I began doctoral studies at Johns Hopkinsin Marxian analysis of Zimbabwes "uneven development"and nearly gave it up after relocating to Southern Africa: first to Harare for a year, then to Joburg.
Nearly every evening found me in mass meetings called by the militantoccasionally revolutionarycivic associations, whose leaders taught me as much about urban capitalism as did my Ph.D. supervisor, the great Marxist scholar David Harvey.1 And although I finally finished a thesis on Zimbabwe, the main intellectual challenge soon became how to analyze the many ways in which a "neoliberal" (free-market, finance-driven mode of) capitalism permeated the ANCs rise to power.2
A political breakthrough came, so I thought, when in late 1993, the South African National Civic Organisation was given prominence in the drafting of the Reconstruction and Development Programme (RDP), which became the ANC campaign platform during the first democratic elections a few months later. As the main technocrat in the national civic office at that time, I helped with workshops that generated the following lines:
[Southern African countries] were pressured into implementing [International Monetary Fund (IMF) and World Bank] programmes with adverse effects on employment and standards of living.
The RDP must use foreign debt financing only for those elements of the programme that can potentially increase our capacity for earning foreign exchange. Relationships with international financial institutions such as the World Bank and International Monetary Fund must be conducted in such a way as to protect the integrity of domestic policy formulation and promote the interests of the South African population and the economy.
How quickly this particular promise, amongst others in the RDP, was broken!3 Beginning in mid-1990, "reconnaissance missions" from the Washington-based financial institutions were already undermining the integrity of domestic policy formulation and ambitiously promoting the interests of international financial and corporate capital.
And that prefigured the broad story of South Africas sellout. By early 2001, George Soros confirmed during an interview at the Davos World Economic Forum that "South Africa is in the hands of international capital." But from illegitimate domination inevitably emerges resistance. A few minutes prior to Soross confession, on an international satellite transmission that linked Davos to Porto Alegres World Social Forum, Soweto political activist Trevor Ngwane had, face to face, accused the financier of indirectly putting a massive squeeze on Pretorias budget:
I come from South Africa. We still had a hope that liberation, freedom, would bring houses, would bring jobs, would bring good education for our people. But since the World Bank, and since our government got closer to people like George Soros, we have lost a million jobs. As I am talking, we had an outbreak of cholera because the government was forced by the likes of Soros to introduce privatization of basic services like water and electricity.
In turn, fiscal austerity was the most proximate national cause of water cutoffs and a resulting cholera outbreak, which had, within nine months, infected more than 80,000 people, killing nearly 200.
The larger point is, simply, that the democratic transition in South Africa hinged, to an important degree, not only upon pressures for political liberation, including sustained township/shop-floor protest plus international anti-apartheid solidarity, and the demise of the Soviet bogeyman. Just as crucial was acknowledgment by ANC deal makers that the trade-off for the big business communitys belated rejection of apartheid was economic liberalizationi.e., release of local capital from apartheids laager, whether via dramatically lower corporate taxes (from 48 percent in 1994 to 30 percent by 1999), lower tariffs on imports, or the lifting of controls that had prevented capital flight. Crudely put, "You chaps can have the state, but let us get our money out of here!"
Not only, as a result, did the financial looting of South Africa follow apace; too, the countrys economic, social, cultural, and policy environment has been enormously influenced by global economic processes and institutions.
Yet, what is termed "globalization" brazenly contradicts societys strong motivation for more equitable development to redress the massive residual disparities of apartheid.
The detrimental influence of international economic integration is most firmly felt through new financial, trade, and investment vulnerabilities, but also in social policy that follows international norms and, to a certain extent, in political-cultural subordination to the global markets. As South African president Thabo Mbeki himself put it during a talk to ANC leaders last year, "The globalization of the economy resulting among other things in rapid movements of huge volumes of capital across the globe, objectively also has the effect of limiting the possibility of states to take unilateral decisions."4
The narrowing of national sovereignty is most evident when a country falls foul of the likes of George Soros. What happens, exactly?
"In the hands of international capital"
South Africans are repeatedly told that since 1994, "sound macroeconomic management," including rapid financial and trade liberalization, has ensured "stability" and the highest international regard. It is as if by repeating the mantra often enough, the harsh underlying reality can be disregarded.
Yet many of us who served the ANC and South African government will never forget at least two moments during Nelson Mandelas 1994-99 presidency. These moments of terrible panic reflected both unique local frailties and the more general brittleness of "emerging market" economies thanks to the vagaries of international finance.
As the first example, in February 1996, a decision to drop capital controls 11 months earlier suddenly proved disastrous. The two main macroeconomic managers, Chris Stals (Reserve Bank governor) and Chris Liebenberg (finance minister), abolished the "financial rand" exchange-control mechanism in March 1995. As a result of its 1995 demise in the immediate wake of a run on Mexico by speculators, sufficient "hot money" flowed into South African shares that year to fund half of the trades on the Johannesburg Stock Exchange (JSE). But in early 1996, the hot money flooded back out, leading to a currency crash of more than a quarter of the rands value over several months.
In order to stem the outflow and stabilize the rand, interest rates were hiked dramatically over a few weeks. In real (after-inflation) terms, the prime interest rate paid by leading firms rose from 12 percent to nearly 15 percent in May 1996, a level only once surpassed in modern South African history (in mid-1998).
The adoption of the homegrown structural adjustment program Growth, Employment and Redistribution (GEAR) followed soon after, as a direct response to international investor demands. "Just call me a Thatcherite," whimpered Mbeki at the GEAR press conference on June 14, 1996, begging the markets to stabilize. But self-humiliation was not enough, as the currency slide continued for several more months.
The second post-apartheid rand crash occurred over a few weeks beginning in April 1998. Global investors fled the "emerging markets" following the East Asian and Russian collapses, and South Africa again faced financial crisis. Most spectacularly, Stals wasted more than R30 billion (approximately $5 billion) in hard currency reserves one weekend in June, when he unsuccessfully tried to defend the rand from attack by local and foreign sellers.
The rands crash continued, from R5.1/$ in May to R6.7/$ at its low point in July, before it stabilized at R6.2/$ in subsequent months. More so than in 1996, this badly affected the JSE, whose all-share index dropped nearly 40 percent from its April peak of 8,200 to a low of less than 5,000 in August 1998. To attract funds back to South Africa, Stals raised the Reserve Banks main interest rate from 14.8 percent in April to 21.8 percent in August.
To breakor to shinethe chains of global apartheid?
These incidents were merely the two most important surface manifestations of South African decline. There were many other economically suicidal exposures to global processes in the years immediately following democracy in 1994, leaving South Africa with an international competitiveness ranking of 42nd out of 49 major countries in the main Swiss business schools 2001 competitiveness survey.5
There was a net outflow of international direct investment from South Africa during the first five years after apartheid, while the uneven dribs and drabs of incoming foreign investment were largely of the merger/acquisition variety rather than greenfield projects. Most of the countrys biggest companiesAnglo American, Old Mutual, Gencor/Billiton, South African Breweries, Didatatook the gap, relisting to conduct their primary stock market trading in London, or in the case of DeBeers, delisting entirely in 2001. Simultaneously, economic advice from international financiers boiled down to persistent demands for macroeconomic policies conducive to South Africas increased global vulnerability.
The response to these pressures from South Africas political leaders, especially Mandela, Mbeki, Finance Minister Trevor Manuel, Trade and Industry Minister Alec Erwin, and approximately a dozen others with key ideological and functionary responsibilities, was a regular declaration of "impotence." (Manuel actually used the word in an interview in relation to state job creation possibilities.6)
Was it necessary for Pretoria to take the strategic turn toward neoliberalism chosen by key economic managers when confronted by the ever-tightening chains of "global apartheid"? I borrow here the metaphor that then-Archbishop Desmond Tutu taught me and fellow anti-apartheid activists at Johns Hopkins in early 1986, when he encouraged us to ratchet up the pressure for "divestment" by universities (and other aspiring socially responsible shareholders) against companies with active South African operations. At the same time, a few miles up the I-95 highway in Philadelphia, an inner-city preacher, Reverend Leon Sullivan, was conducting an entirely different crusade: to help multinational corporations continue operating within South Africa, but under a half-hearted code of conduct committing them to conduct their own operations in a somewhat less explicitly racist manner. Tutu referred to Sullivans gambit as "shining the chains of apartheid" and confirmed that the democratic forces would fight until apartheids chains were broken.
Mbeki unabashedly terms the international political-economic system "global apartheid." The next logical question: Are Mbeki, Manuel, Erwin, and their colleagues aiming to break the chains of 21st-century global apartheid or merely to provide a glossy, New South Africa shine?!
Nixing not fixing global apartheid
According to Pretorias critics, instead of fundamentally challenging global apartheid, the South African government has been lubricating the financial, trade, and investment processes that are amongst the most damaging.
Evidence is found not only in the enthusiastic local application of the Washington Consensus through the GEAR strategy. In addition, key South African officials are lending legitimacy to the World Bank, IMF, World Trade Organization, and like-minded institutions. At home, the same officials persist in denying the need to roll back free-market processes, even in areas such as patent protection on HIV/AIDS drugs and exchange controls, where there is an overwhelming case for breaking global apartheids chains.
However, even if the post-1994 period offers us a profoundly pessimistic account of South African and international macroeconomic management, this by no means implies that pandering to international elites is a permanent affliction. There is evidence to suggest, on the contrary, that the free-market Washington Consensus ideology began to ebb during the late 1990s, and that popular resistance is already affecting not just state policies, but also the international balance of forces.
Can the damage done be reversed? I think so, if popular pressure exerted from below aims to end, not to perpetuate, global apartheid. We can consider this by reflecting on a single case of concrete activism, which is indicative of broader potentials.
The university at which I teach, Witwatersrand in central Johannesburg, is presently the site of a "World Bank Bonds Boycott" campaign by students, staff, and faculty (www.worldbankboycott.org). The short-run demand is simple: that university finance officials commit never to buy bonds issued by the World Bank. Currently, Wits officials can take 15 percent of the universitys R1 billion endowment offshore. Some of that moneythe amount varies day by day depending upon investment trendsgets channeled into bonds issued by the World Bank and sold to Wits via international fund managers. The same is true of most major South African institutions, and, indeed, virtually all funds that have access to international capital markets buy at least a small share of internationally rated, top-grade World Bank securities.
The strategy of closing"nixing"the World Bank and IMF is a good one.7 And to that end, the World Bank Bonds Boycott is an inspired tactic, since it allows activists and ordinary people to get involved in fighting global apartheid every day in their own communities (not just at major demonstrations in Seattle, Prague, Washington, Quebec City, and so on).
There are many reasons specific to South and Southern Africa why getting the World Bank to pack up shop would be beneficial to local peoples. Borrowing the Wits activists rhetoric, here are some of those reasons for bond boycotting the World Bank:
Specific crimes committed by the World Bank and IMF during South Africas apartheid era include:
- the Banks $100 million in loans to Eskom from 1951-67 that gave only white people electric power, but for which all South Africans paid the bill;