The existential challenge facing the ANC

Neil Coleman

---

This article was first published in the African Communist, Issue 209 September 2024. It is a substantially revised version of an article written in Daily Maverick before the GNU was formed.

---

“Men (sic) make their own history, but they do not make it just as they please; they do not make it under circumstances chosen by themselves, but under circumstances directly encountered, given and transmitted from the past.” Marx, the Eighteenth Brumaire of Louis Napoleon Bonaparte.

There is broad agreement on the left that the GNU arrangement will make economic transformation far more difficult (some would argue impossible), given the position and interests of GNU parties on economic policy issues. The question however is what should the posture of the left be on the battle for economic transformation and social justice, in view of the fact that the GNU is now a reality that we have to deal with.

In addressing the challenges of transformation arising from the GNU arrangement, progressive forces need to consider the following: What is the dialectic between mobilising against retrogressive economic policies and engaging with aspects of policy that hold the potential for shifting things in a progressive direction? In other words, what is the balance which avoids co-option into a right-wing agenda on the one hand, or reflexive oppositionism, which marginalises the influence of the left?

Under circumstances arising from the GNU, conditions for mobilisation and engagement may have shifted, but the necessity to both mobilise and engage politically remains imperative if the left is not to relinquish critical battles, for example, against austerity, or to abandon key opportunities to make progress in important areas of manoeuvre, such as basic income.

We need to bear in mind that despite new constraints in the GNU from conservative parties in government, the ANC is now under huge pressure to deliver. This creates different conditions, both negative and positive, which require greater nuance and more sophisticated political strategies to navigate intelligently.

Examples of issues which on the face of it appear to offer some prospects for advance, providing significant mobilisation and engagement takes place, include:

• The battle for basic income, particularly through improving and expanding the SRD (Social Relief of Distress) grant.
• A more active industrial strategy.
• The delivery of public health.
• Measures to bring down the prices of food and essentials.
• Expansion of public employment.

More difficult but nevertheless issues with some space for advance include:

• Pushing back against contractionary monetary policy (and lowering of inflation targets). 
• Proposing coherent alternatives for the rebuilding and strengthening of SOEs (State Owned Entities).
• Building public finance institutions.
• Using unconventional financial interventions such as prescribed assets.
• Maintaining a progressive geopolitical stance and supporting the restructuring of global financial architecture (also bearing in mind South Africa’s role in hosting the G20 in 2025).

Very difficult, but issues requiring creative alternatives include:

• Pushing back austerity, including through advancing fiscal alternatives on debt, progressive taxation, mobilising domestic resources etc. IEJ (Institute of Economic Justice) and others have made proposals on how this can be done, including through restructuring debt, use of the Public Investment Corporation, the Gold and Foreign Exchange Contingency Reserve Account (GFECRA) etc. Partial success in promoting the release of GFECRA resources shows that space does exist, see below, on this front.

Identification of policy space above is speculative to a degree, as we don’t know what commitments the ANC has given on economic policy to its coalition partners, and therefore the extent to which it is constrained. Have for example National Treasury and the DA’s proposals for new fiscal rules, such as budget and debt ceilings been agreed to? If so, this would entrench and consolidate hyper-austerity, and make much of the above unrealisable. 

There is also insufficient clarity on how the principle of “sufficient consensus” will work in the GNU (apart from the fact that on the face of it, the DA will be able to block new policies from being adopted which it opposes, at the same time as not being able to reverse existing progressive policies) and in particular how the deadlock breaking mechanism will operate in the event that sufficient consensus can’t be realised – this mechanism is only briefly mentioned in Clause 19 of the GNU Statement of Intent but has not been clarified.

As controversial as it may be, a case can be made that the GNU, with all its inherent problems, may have certain political positives, including better governance and accountability, as a more robust parliament and political contestation between GNU partners keep political parties on their toes, as they feel greater pressure to deliver. This may ironically also make the ANC more sensitive to critiques around the negative impacts of austerity.

The jury is still out on whether these potential positives will materialise, and whether the initial honeymoon of contestation and collaboration will hold or fracture, as the inherent contradictions come to the fore, and possibly explode. If the latter, then we will enter a new terrain of struggle, including the possibility of a minority government, or even early elections.

Balance of forces after the May 2024 elections

What are the “circumstances directly encountered, given and transmitted from the past” under which we are attempting to make our own history?

Key elements of the post-May 2024 environment include:

• A multipronged social and economic crisis in the country, arising directly from failed economic policies, combined with a hollowed-out and dysfunctional state.
• The lack of coherent progressive options, or left political alternatives, in the face of reactionary, right-wing populist agendas increasingly taking root in response to these crises.
• A demobilised and alienated population with large-scale withdrawal from the political process, including by the ANC’s traditional support base, many of whom decided not to vote (over 60% of the voting age population failed to vote, and 4-5 million people who had previously voted for the ANC didn’t vote for them, many of whom abstained totally).
• The weakness of left elements in the Alliance, including COSATU and the SACP, and the further splintering of the ANC into populist, and predatory formations – nearly two-thirds of the vote went either to the ANC, or parties historically born from the ANC, including the MK party and the EFF.

Thus the South African left confronts a hostile environment coming out of the elections, with multiple risks and dangers. 

But it is also true that this situation creates new possibilities: 

• The notion that neoliberal economic policies can provide an answer to the crisis has been comprehensively discredited; 
• The severity of the economic crisis, and its translation into an existential threat to the liberation movement, challenges previous complacency in the political elite. This could force a focus on the need for urgent action to address crises such as rising hunger and poverty;
• Left forces are being confronted with the need to provide coherent alternatives to navigate a way out of this morass, with some calling for a popular front along the lines of the French left alternative; and 
• Increased political competition could provide focus and urgency to introduce immediate measures that have a material and tangible impact on people’s lives, and address the need for structural economic transformation.

But the opposite is also true: we could see a doubling down on austerity economics, and the dogma of “structural reforms” as the panacea to the crisis, as well as other measures to please the markets, including large-scale privatisation and commercialisation of public services. 

Which of these two trajectories dominate will in significant part be determined by how progressive forces organise themselves in society, particularly in the labour and social movements, inside the alliance, and inside the state. It remains an open question whether the left has the will and capacity to do this, as well as on the strength of the right-wing project, in all its forms (such as its neoliberal, right-populist, and predatory varieties).

I now turn to the question of the ANC’s economic legacy, the political consequences of economic policy choices, and the challenge of shifting course.

Political outcome of the ANC’s economic legacy?

The shock election results are fundamentally about the failure of the last three decades of economic policies, which have not succeeded in structurally transforming the economy. These policies have instead deepened inequality, worsened unemployment, and failed to address poverty and hunger in society. The election results should thus be seen as the political expression of underlying economic realities.

Periods of modest economic improvement (for example, the mid-2000s, which were however extremely limited in scope) were achieved despite these policies, and indeed because of their partial relaxation. Although successive ANC governments have conscientiously implemented the economic policies advised by financial institutions and markets, particularly on macroeconomic policies, these policies have failed on all significant social and economic metrics, and plunged us into a low growth, and stalled development, trap.

The devastating social legacy which has resulted is reflected not only in the collapse of the ANC’s electoral support but also in the mass stay away of the ANC’s traditional constituency from the elections. This is not surprising given crises facing potential voters, such as persistent, structural youth unemployment, the GBV “epidemic” facing women and girls, collapsing infrastructure and public services, and growing hunger and poverty. The crises in society have affected all strata, particularly working-class and middle-class black voters, amongst whom the stayaway figures were highest.

According to an article in Daily Maverick a 2023 HSRC survey of voters found that political discontent and disillusionment “emerged as the main reason for electoral abstention”. When asked what their main reason would be for not voting if the national elections were held tomorrow, 81% of people responded, “disillusionment”. Trust in political parties was at 17%.

This also suggests that an increasingly large number of people feel that none of the parties represent their interests, and there is therefore a vacuum in political representation, particularly by parties of the left and working class.

This simply means that our political system is progressively losing legitimacy. It doesn’t take an expert to work out that the vast majority of people did not participate in elections, because they see no prospect of improvement in their lives with stagnant wages, rising cost of living, rising unemployment, rising hunger and rising poverty, and without a viable political alternative which they trust in.

These trends raise critical questions about the future of our democracy, as well as social cohesion and development. The underlying crises giving rise to these trends mean that without a change in direction, particularly on economic policy, this trajectory will deepen. We therefore need a decisive shift, not only to address socio-economic conditions but also to build and deepen our democracy.

The multiple socio-economic crises in South Africa are also giving rise to pathologies such as ethnic chauvinism and quasi-feudalism, xenophobia, and misogyny. These mirror trends in other societies facing deep economic and social stress. South Africa, which has a strong tradition of progressive left-working-class activism, is now seeing the alarming emergence of right-wing populist elements. Historically concentrated in largely white parties, such trends are now also reflected in majority black political parties, such as the MKP, Action SA and the PA; as well as within parties, including the ANC, which is experiencing a rise in xenophobia. 

The answer to such developments is not to condemn the “backwardness” of ordinary people supporting such views, but to advance coherent alternatives, on issues such as employment, immigration and other questions which lie at the root of people’s attraction to such ideas. Secondly, to implement economic policies which combat the social stress which people are experiencing, and which offer real improvements in their lives, in employment, income, living standards and so forth.

What are the key dynamics driving the ANC’s economic legacy?

Fear of the power of international markets in an era of hyper globalisation, and the rolling back of the state’s role in the economy, led in significant part to the displacement of the ANC’s social democratic economic development programme (the RDP – Reconstruction and Development Plan), and the introduction of a conservative, World Bank – inspired macroeconomic programme (GEAR – Growth, Employment and Redistribution) in 1996. Without going into the history of economic policy-making in South Africa, this programme essentially with minor modifications, laid the basis for government’s economic policy stance over the last thirty years.

Treasury has since then doggedly and dogmatically pursued this policy paradigm with total commitment, irrespective of changes in international economic thinking, or South African realities. Stripped to its essence this paradigm entailed reducing the economic role of the state and the public service, liberalisation and deregulation, and the achievement of arbitrarily determined macroeconomic targets, such as deficit and debt ratios and the associated spending cuts. 

Largely driven by financial sector interests, contractionary fiscal policies (stagnation or cutting of spending and investment in real per capita terms) were combined with contractionary monetary policies (involving the use of high real interest rates) leading to the choking of economic activity, deindustrialisation, and the suppression of growth. This has led to the pursuit of what economists call procyclical economic policies which deepen economic contractions. This has been the general trend, but of course, there have been some periods of limited deviation from the strict application of this economic paradigm, often as a result of resistance (for example, from organised labour) and as a result of contestation within the governing party and the state.

There was a period in the early 2000s, after the formal ending of the GEAR programme, of mildly expansionary macroeconomic policies – the relaxation of monetary policy combined with a moderately expansionary fiscal policy – which allowed for greater growth and employment, although at too low a level, and insufficiently inclusive, to address our structural crises, or reduce inequality. 

Over the last fifteen years, this conservative fiscal stance has progressively morphed into full-blown austerity, despite denials of its existence by the economic establishment. Even the cautious Public Economy Project at Wits, led by the former head of Treasury’s budget office, has argued that there have been three phases of austerity, and characterises the latest phase as “permanent”.

This fiscal stance driven by Treasury has been compounded by an equally contractionary stance driven by the South African Reserve Bank. The use of high real interest rates, while beneficial to the financial sector and financial speculators, has been devastating for the real economy, making it too expensive for businesses and individuals to borrow and invest in productive capacity or small businesses. This has had an extremely negative effect on investment, economic development and employment. 

The result of this economic policy is the highest unemployment rate globally. 

South African unemployment (narrow definition) 1994-2022 www.macrotrends.net

Budget cutbacks have had multiple impacts, contributing to deteriorating public services in critical areas including education, health, social security and policing. Austerity simply means that while historic spending levels are already inadequate, cutbacks result in even less money being spent on every child, every patient, and every community member, leading to a crisis in key public services.

The graph below shows that because government aims to decrease real spending on basic education and healthcare by R16 and R14 billion respectively in the medium term- spending per enrolled learner will fall, in real terms, from R25 387 in 2022/23 to R23 363 in 2026/27; and while an average of R5 326 was spent on each public healthcare recipient in 2022/23, this will fall to R4 525 in real terms by 2026/27 .

The impact of these cutbacks is also clearly evident in the undermining of key public institutions, most recently in the elections with an under-resourced IEC which battled to execute its mandate; and the understaffing and resultant under-capacity in the NPA to fight crime and corruption, amongst many others. This is in stark contrast to the strong performance of SARS, which is relatively better resourced, and thus better able to exercise its mandate. These “savings” therefore come at a huge cost. 

It is clear that state capture over the last decade has massively worsened the impact of these misguided policies, but it would be a mistake to think that the hollowing out of state capacity is only the result of corruption and state capture. The dysfunctionality of SOEs, while accelerated by state capture, was in part the result of a lack of investment in these companies, flowing directly from the macro-economic stance of government. The now infamous example of the (since retracted) apology by President Mbeki for failing to invest in expanding Eskom’s capacity, and the failed strategy of corporatisation, severely undermined an enterprise then rated as the top electricity utility in the world.

Crucially, progressive developmental policies adopted by government, particularly since the early 2000s, including expansion of social security, activist industrial policy, worker-friendly labour market interventions etc, have been heavily constrained, and sometimes completely frustrated by the impact of contractionary macro policies. Without these developmental policies being properly resourced, their impact has inevitably been severely limited. A backward macro-economic policy logic has therefore led to deep contradictions within government and ANC policy, whose inconsistencies have become so notorious. 

Narratives attempting to justify conservative macro-economic policy

Attempts to justify austerity economics have been taken to extremes. Some even deny, in the face of all evidence, that austerity exists. Others (SARB, Treasury and their associated economists) claim that public spending doesn’t work because it has negative multipliers, meaning in crude terms that it adds less to the economy than the amount spent. This is contradicted both by the evidence, and common sense. 

Research by the IMF and Sao Paulo University show for example that investment in social protection has particularly high economic multipliers in unequal societies such as ours; and recent research on public employment in South Africa also indicates positive impacts.  Treasury opposition to public investment strangely contradicts their emphasis on the importance of developing economic infrastructure but supports their privatisation agenda.

In the face of the damaging effects of these misguided economic policies, Treasury and the economic establishment regularly trot out various mantras in an attempt to justify their stance. Statements about so-called fiscal prudence, lowering or capping debt, reducing consumption, achieving a budget surplus, and so on, often seem to the ordinary person to be attractive and common sense, when compared to the economic pressures on households. But the state is not a household.

The self-defeating character of Treasury’s approach came into sharp focus with their decision in the budget to release R150 billion from the Reserve Bank GFECRA fund owed to the fiscus, following the IEJ’s advocacy for these funds to be used for development. Treasury instead decided to deploy all the funds to retire debt, without any concomitant expansion in social expenditure. The net effect was to pump resources into the financial markets, with zero benefit to critical social needs. This is a dramatic demonstration of Treasury’s skewed priorities and the interests they serve.

In reality, conservative economic strategies achieve the opposite of what is claimed by their proponents, resulting in reckless cutting of public services; increasing the risk profile of the country because of unsustainable social distress; reducing growth, and making it more difficult to contain debt to GDP levels; unnecessarily wasting resources on the financial markets, and hollowing out the real economy; the list goes on. These policies are a recipe for a downward economic spiral and social instability. This is the reality we have witnessed over the last three decades!

Despite government’s clear track record of economic conservatism, and despite all evidence to the contrary, much of the financial media has claimed that the ANC government has taken radical economic positions. However prominent journalist Carol Paton recently praised the economic conservatism of the ANC in government, stating: “The hallmark of ANC rule for three decades has been pragmatic and orthodox fiscal policy…The ANC has a history of taking radical resolutions at its conferences, which the government has repeatedly failed to implement… the ANC has for 30 years fielded smart, pragmatic, and authoritative finance ministers (sic). They have been key to steering the ship based on economic orthodoxy.” 

We need to oppose all forms of anti-constitutionalism

Claims by parties of the right to be constitutionalists, including the DA, don’t stand scrutiny. As Professor Thuli Madonsela has suggested recently, these parties are in effect economic anti-constitutionalists: They oppose key aspects of the Constitution, including action to redress historical injustices and support economic policies, and imposition of fiscal rules, which make it impossible to give effect to the constitutional requirements on socio-economic rights. 

The DA’s economic paradigm would prevent the realisation of sections 26-29 of the Constitution requiring government to progressively realise everybody’s right to housing, health, food, water, social security and education. Nor can these rights be realised within Treasury’s economic policies, which government has pursued for the last 30 years. The DA and other parties of the right, if given the power, would double down on these policies which go against the spirit of the Constitution.

Indeed the key adversary of any progressive developmental project is the DA-Treasury axis.

The DA’s proposals to impose arbitrary macro-economic targets; to impose a debt ceiling; and to cut back current expenditure, which they advanced as preconditions for participating in the GNU, would plunge SA into a Greek-type economic crisis, if implemented. It would destroy growth, deepen poverty, slash public services, and increase inequality and unemployment.

What are the alternatives?

If successful, the concerted push to shift the ANC even further rightwards on economic policy will only deepen its crisis, and destroy any prospect of recovering its historic position as a leading political force in society. More importantly, in the absence of a viable alternative, it would threaten to destabilise society and give way to chaotic and unpredictable forces which would not be in the interests of ordinary working class or poor people. 

The ANC is faced with a choice: double down on failed economic policies, or boldly shift direction to embrace developmental economic policies which have a proven track record. The ANC can try to make this progressive shift within the tight parameters of the GNU; or if that fails, find a different governance arrangement which makes this possible. 

A progressive shift must address both elements of our current economic crisis and the associated political economy. Developmental interventions are needed which:

• Unleash inclusive economic growth, economic diversification and employment; and
• Open avenues for economic activity, currently closed off, that are not dependent on the state for illegitimate economic accumulation 

What could such an alternative economic package look like? In brief, I have argued elsewhere that we need a package of economic measures which Stabilise, Stimulate, and Structurally Transform the economy in a carefully sequenced manner.

Fiscal resources should be mobilised to introduce high-impact interventions, such as basic income which stimulate economic activity in depressed communities and generate broader economic demand and production; critical interventions to fix strategic areas of state capacity; mobilising capacity to repair and defend infrastructure; and so on. This needs to be coupled with a shift in monetary policy to spur investment in the real economy.

These interventions would aim to get the wheels of the economy moving and restore confidence, while structural economic transformation is taken forward. Some policies will take longer to roll out, including new infrastructure projects and diversification of the economy, and would need to be undertaken in parallel. 

Much is made of the economic limitations we face, with some even making the ludicrous claim that “we have run out of money”. There are no doubt serious challenges, but bold and creative thinking will enable us to mobilise resources and make high-impact interventions, with the necessary political will and imagination. The IEJ and others have outlined proposals to mobilise domestic resources, and have shown that there are many examples of untapped funds, including the GFECRA fund which Treasury had previously claimed to be unavailable.

There is a strong “business case” for these economic alternatives, including the fact that such an approach would create a large demand stimulus across the economy; build important infrastructure and state capacity; stabilise society; and generate opportunities to invest in a broader range of productive activities. Could this constitute a basis for the proposed national dialogue?