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Publication Details

Reference
Bond, Patrick (2009) SA's socio-economic war will spill into 2010. Eye on Civil Society (The Mercury) : -.

Summary
ECONOMIC dislocation is a big part of the anger that ordinary people
feel about pathetic state service delivery.

And although South Africa has one of the world's highest rates of
protest, per person, nothing is being done to change matters.

So 2010 could be an explosive year, if uprisings in the past few days
are any indication - such as at Nelspruit's new stadium on Monday, where
children tried to stop construction because they still lacked a decent
school building.

Some protests eventually lead to profound socio-economic change, most
notably the Treatment Action Campaign's 1998-2003 street pressure and
legal strategy aimed at acquiring antiretroviral drugs for HIV-positive
people.

Subsequently, angry about water disconnections, Soweto activists'
protests helped drive the controversial privatiser, Suez, out of
Johannesburg. Last week's lamentable Constitutional Court ruling against
the Sowetans' water rights will probably compel them to return to
illegal connections.

Whether durable, democratic and campaign-oriented, or just momentarily
explosive in character, civil society discontent was also a contributing
factor in the 2007-08 transfer of power within the ANC.

Can community and labour activists reverse South Africa's long economic
decline? Here are some crucial markers:

# The post-apartheid rise in income inequality, slightly tempered after
2001 by increased welfare payments, but so bad that the main measure
(the Gini coefficient) soared from below 0.6 in 1994 to 0.72 by 2006.

# The official unemployment rate doubled (the realistic rate is about 40
percent) as a result of imported East Asian goods in relatively
labour-intensive sectors (clothing, textiles, footwear, appliances and
electronics) and capital-intensive production techniques elsewhere
(especially mining and metals).

# The provision of housing to several million people was marred by the
units being far smaller than apartheid matchboxes, and located further
away from jobs and community amenities.

# While tokenistic amounts of free water and electricity are now
provided, the overall price rose dramatically, leading to millions of
disconnections each year when they could not afford the second block of
water consumption (Durban is second-worst after Pietermaritzburg,
according the Centre for Applied Legal Studies).

# With respect to macro-economic stability, the value of the rand in
fact crashed (against a basket of trading currencies) by more than a
quarter in 1996, 1998, 2001, 2006 and 2008, the worst record of any
major economy.

# The problem of capital strike - large-scale firms' failure to invest
- continues, as gross fixed-capital formation is hardly enough to cover
wear-and-tear on equipment.

# Where corporate profits were reinvested, they sought returns from
speculative real estate and the Johannesburg Stock Exchange: there was a
50 percent increase in share prices during the first half of the 2000s,
and the property boom that began in 1999 had by 2008 sent house prices
up by 400 percent (US markets rose only by 60 percent over the same period).

# Businesses also invested their South African profits, but not mainly
in South Africa. Dating from the time of political and economic
liberalisation, most of the largest local corporations - Anglo American,
DeBeers, Old Mutual, SA Breweries, Investec, Liberty Life, Gencor (now
the core of BHP Billiton), Didata, Mondi and others - shifted their
funding flows and primary share listings to overseas markets.

# The outflow of profits and dividends due these firms is the main
reason that since 2001, South Africa's current account deficit soared
to among the highest in the world.

# Ecological problems have become far worse, according to the
government's own commissioned research in the 2006 Environmental Outlook
report, which, according to the leading state official, outlined a
general decline in the state of the environment.

Some did well by these disasters. By 2001, the rate of profit for large South African capital was ninth-highest among the world's major national
economies (far ahead of the US and China), according to one British government study.

Countervailing claims of a developmental state under construction
hinge upon a series of vast white elephants:

# The Coega ghost on the coast industrial complex aimed at attracting
a persistently elusive aluminium smelter.

# The Lesotho Highlands Water Project mega-dams, which permit excessive
water consumption in Johannesburg while raising prices for township
residents.

# Several new or reconstructed stadiums for the 2010 soccer World Cup
(notably Durban's unnecessary Moses Mabhida Stadium).

# The R60 billion arms deal.

# Pebble-bed nuclear reactors potentially costing tens of billions of
dollars, alongside tens of billions more on coal-fired power plants,
notwithstanding South Africa's world-leading CO2 emissions rate.

# A R25bn fast-rail network allowing wealthy travellers easy albeit
expensive access between Johannesburg, Pretoria and the OR Tambo airport.

To finance state infrastructure spending and steady tax cuts for
corporations (down from a rate of nearly 50 percent in 1994 to less than
30 percent today), the Finance Ministry engineered a growth process that
looked impressive at surface level.

But South Africa's current account deficit is so great (reaching a peak
of -9 percent of GDP in June, 2008, although declining in 2009 as profit
outflows slowed and a small trade surplus emerged) that The Economist
this year rated the country as the world's riskiest emerging market.

None of these economic processes are tenable. Extremely high price
inflation in electricity (due to rise by 200 percent in coming years),
petrol and food will fuel yet more social unrest.

The question is whether the state will ignore the protest - as Tito
Mboweni tried in May at the Reserve Bank, when several thousand
metalworkers demanded he receive their memorandum calling for lower
interest rates - or repress it, or make concessions.

If concessions are made, will that lead to capital flight and a bigger
crisis? And will the National Union of Metalworkers' calls for deeper
reforms such as exchange controls be heeded?

But if Finance Minister Pravin Gordhan's Keynesian fiscal stimulus - a
substantial budget deficit - can't restore growth, will angry protesters
compel the Zuma government to adopt a new post-capitalist economic
policy? Only very big changes can divert the society from even bigger
confrontations in coming months.


# Patrick Bond directs the UKZN Centre for Civil Society.

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