“This reality of two nations, underwritten by the perpetuation of the racial, gender and spatial disparities born of a very long period of colonial and apartheid white minority domination, constitutes the material base which reinforces the notion that, indeed, we are not one nation, but two nations.” President Thabo Mbeki, “Reconciliation and Nation Building, National Assembly Cape Town, 29 May 1998.
As explained by the former President of the Republic Thabo Mbeki, the South African reality on economic terms derives from the prolonged systematic dual economy, which has its embryo from the landing of the employees of the Dutch East India Company at the Cape of Good Hope about 366 years ago, in 1652. It is clear that the year of 1652 represents the brutal period characterised as the birth of the capitalist class in our land, marked by the epoch of primitive accumulation of capital with the utility that got its value through all the minerals in and underneath the land, the magnificent thinker of all times, Karl Marx makes it clear that, “The discovery of gold and silver in America, the extirpation, enslavement and entombment in the mines of the aboriginal’ population, the beginning of the conquest and looting of the East Indies, the turning of Africa into a warren for the commercial hunting of black skins, signalled the rosy dawn of the era of capitalist production. These idyllic proceedings are the chief momenta of primitive accumulation.” (Karl Marx: Capital, Vol.1, 1867).
The capitalist socialisation marked the beginning of many problems in our land, meaningful resources which played a huge role in defining the political, economic and social relations amongst the colonized, were converted into commodities with a pure market utility that focuses on the accumulation and ownership of resources that made up capital and focused on the capacity of the individual to have access to them. Such utility, therefore, became one of the biggest catalysts in dividing society into those that own the land and its resources, and those that work the land, of course, distinguished based on racial and gender basis.
Some have argued that the capitalist orientation ended with the colonial order, they argue that the 1994 political breakthrough represents an embryo of a new society, but Frederick Engels is relevant to remind such people about the conception of the state in the capitalist society, he said that, “is a product of society at a certain stage of development; it is the admission that this society has become entangled in an insoluble contradiction with itself, that it has split into irreconcilable antagonisms which it is powerless to dispel. But in order that these antagonisms,
these classes with conflicting economic interests, might not consume themselves and society in fruitless struggle, it became necessary to have a power, seemingly standing above society, that would alleviate the conflict and keep it within the bounds of ‘order’; and this power, arisen out of society but placing itself above it, and alienating itself more and more from it, is the state” (The Origin of the Family, Private Property and the State, 1884).
Engels was reminding us that the state is a product of class struggles and an expression of class dynamics in society! But it is important not to just end the conversation of class struggles, by stating that they exist, a further conversation needs to take place taking the South African context into consideration. For instance, the motive forces in the South African ongoing revolution, consists of different classes, gender/sexes and strata made up of; the indigenous bourgeoisie, the working class, the peasantry, and the middle strata which include the intelligentsia perched among these classes and strata.
Even though at the centre of the liberation movement lies multiclass orientation, it is important to state that the capitalist mode of production remains unchanged, Joe Slovo in “A Critical Appraisal of the Non-Capitalist Path and the National Democratic State in Africa” Marxism Today in 1974 said that “It is one thing to demonstrate that even pre-capitalist sectors have a link with the market economy, and quite another to characterise the economy as essentially capitalist.” This goes to the reality that, the working class and the poor are more dependent on government expenditure and protection than in the markets.
The South African reality also makes it clear that in many ways, economic policies that are market orientated, have resulted in two existing economies, and has been able to interrogate the two economies, for instance, the minister in his speech increases the social grants on 6.6% while the Value Added Tax increases at 15%, this shows that an increase towards government expenditure on the second economy dependents is lower than the actual increase on the expected expenditure in both the private and public sector by the second economy. This then means that any possibilities of enjoying surplus in terms of products purchased and even in financial opportunities will remain a dream for the second economy dependants, this also means that they will continue to depend primarily on the state for economic opportunities, in many ways it means that they will continue to be trapped in linear economic modes, without any possibilities of being actively involved in economic activities.
Some will argue that the basic food rate, remains unchanged due to zero tax rate on the actual products, but reality is that, the poor do not only participate in economic activities on consumption basis, the working class and the poor, purchase other products that will be affected by the 15% VAT increase, and in most cases some have small businesses that have not yet been integrated into the main economic activities, therefore on the basis of other essential economic activities they continue being deprived participation. On the 11th of November 2003, speaking at the National Council of Provinces, President Thabo Mbeki warned the nation on its market-orientated economic paradigm when he said that “It is sometimes argued that the higher rates of economic growth of 6% and above would, on their own lead to the reduction of levels of unemployment in our country. This part of a proposition about an automatic so-called “Trickle down” effect would allegedly impact on the “Third World economy” as a result of a stronger “first world economy”. None of this is true.” The President was making it clear that economic growth solely derived from figures, does not solve the problems of development because growth and development are not the same.
The 15% VAT will surely play a significant role in sustaining an economic growth, but this does not mean that development will be enhanced. This means that the daily lives of the working class, the poor and large percentage of the middle strata will not reap positive outcomes from the envisioned economic growth because the possibility of them enjoying investments in various economic opportunities are slim. The working class and the poor struggles to afford basic needs and services, such as good health care meaning that their life expectancy is lower, while the middle strata are largely indebted. This cannot even be solved through the proposed black industrialization and small corporation budget because land reform is stagnant and technological advancements are also stagnant. Money can be spent on small businesses, but the question to be asked is, are those businesses playing a significant role in diversifying the economy? Or they just monostich business activities?
Black industrialization does not only just need land, but it also speaks to the capacity of light industries found in the area of residents of the second economy, such industries require both the secondary and tertiary economic skills and this is the real infrastructure development that can create multiple economic activities in the second economy. In many ways, this will also enable the integration of emerging markets in the second economy and build a stronger bargaining power. This process requires the state, the orientation of the budget speech seems to create a social responsibility outside of the state and solely into the hands of the private sector, which is mostly made up of the beneficiaries of the first economy.
Maybe it is important to note that, when President Cyril Ramaphosa mentioned that, South Africans must have the spirit to serve, Thuma Mina he needed to make it clear that, the spirit should be rather, “Thuma Thina” which is a phrase that values collective efforts more than just an individual’s capacity to serve, because monopoly capital will now use the genuine call to rather make more effort in a disguise to “serve”. This means that monopoly capital will firstly dictate the conditions in which will be conducive for them to “serve” meaning that the on behalf of South Africans, the state will be required to make some concessions. This is evident with the call to invest in about 100 million internships in the next three years for young people as announced by the president during the state of the nation address. It is clear that monopoly capital made a concession to increase the number of internships and job opportunities if the corporate tax is not increased at a larger percentage, instead the minister mostly focused on the income tax.
It is clear that National Treasury believes that economic development is purely based on consumption, this is why taxes are easily increased, and some will argue that, this happens due to the high rates of free education. But this is not true, because free education, requires the standardization of tuition fees in various institutions, for as long as institutions enjoy institutional autonomy, the state will continue to pay more on education in former white liberal institutions than in the Technical and Vocational Education and Training sector (TVETs) and in “bush institutions”. This means that inequalities in the higher education sector prevail, while consumption is a big variable for economic growth.
The reality of our problem is that the minister should have looked at the means of practising good governance, money spent on wasteful expenditure and the state capture. Joel Hellman and Daniel Kaufman argue that “Firms seek to shape decisions taken by the state to gain specific advantages, often through the imposition of anticompetitive barriers that generate highly concentrated gains to selected powerful firms at a significant social cost. Because such firms use their influence to block any policy reforms that might eliminate these advantages, state capture has become not merely a symptom but also a fundamental cause of poor governance. In this view, the capture economy is trapped in a vicious circle in which the policy and institutional reforms necessary to improve governance are undermined by collusion between powerful firms and state officials who reap substantial private gains from the continuation of weak governance.” (Confronting the Challenges of State Capture in Transition Economies, in Finance & Development: A Quarterly Magazine of the IMF, September 2001, Volume 38, Number 3). Therefore fighting state capture, other than increasing VAT is a solution here!
With challenges such as illicit financial flows a reality, depending on foreign investments for economic stability means that the measures that are put in place to protect domestic markets will not reap positive outcomes, because the financial flow will only be regulated and controlled in the domestic level, while foreign corporations can easily manipulate the currency, enjoy illicit trading and continue to dump their products in the local markets without any regulations and punishment.
With the current status quo, it is important to remember the words of Karl Marx and Frederick Engels when they said that, “The Communists disdain to conceal their views and aims. They openly declare that their ends can be attained only by the forcible overthrow of all existing social conditions. Let the ruling classes tremble at a Communistic revolution. The proletarians have nothing to lose but their chains. They have a world to win. Working men of all countries, unite!” (Manifesto of the Communist Party, 1848).
By Comrade Bhekithemba Mbatha