Capital, Class and Crisis in South Africa
Scott Timcke1
Just over a week has passed since South Africa went into a national lock-down. To the extent that one can assess these things in such a rapidly changing conjuncture, it appears that there is a general degree of compliance. Of course, there are the news reports about this or that person doing something foolish. Plus, existing social inequalities mean there can be no uniform experience. For most, social distancing is difficult. Due to the legacies of Segregationist and Apartheid-era urban development, life in South Africa generally requires working people taking crowded taxis, working in close proximity to others and so on. So, strategies like remote work are not really feasible for many. This is even before one considers the organization of the townships; let alone the underfunded, corrupt and poorly managed public health sector.
For these reasons, among others, adherence to the lockdown has been uneven. Elsewhere many residents of informal settlements do not have refrigeration, meaning that many people have to continue daily shopping routines. All of which increases the chances of community transmission. If we get significant community transmission in the informal settlements, the death rate will be serious(up to 250’000 people in one model) due to South African High rates of persons who are immunocompromised. Still, I take heart in the view that shelters in safety’ does not have to be perfect to reduce rates of community transmission.
The South African government has set up many services and diverted funds to provide supplementary incomes for wage earners, SMMEs, and Solidarity Response Fund. All in all, there are R15 billion (US$790 million) set aside for business relief. Access requires that tax affairs are in order. However, as they often have no business license an estimated 100’000 informal retailers cannot claim government support. Creeping commercial development of shopping malls in the townships already threatened these businesses, so it will be telling about the larger dynamics at play in the economy if this sector of the retail market becomes consolidated under corporate control by the end of the crisis. As one of the country’s leading labor organizers ZwelinzimaVavi notes, the poorest of the poor, who work in the informal sector and live hand-to-mouth, do not have access to the R15 billion provision. For this reason, Irvin Jim, another labor organizer, is correct to note that it is “the working class in general who will suffer the most.”
At the same time state security forces are being too aggressive, reportedly having killed a few people without cause. My belief is that the police and army are unprepared for pandemic duty; they are very much taking it out on the most vulnerable. The South African government is also using the crisis to install more border security, nominally meant to keep Zimbabweans and others fleeing South. More on that in a moment. So there is definitely an increase in state repression, with human rights being compromised. Indeed, advocates for state security are using these conditions to lobby for increasing the military’s share of the national budget. It does not matter that their talking points —“democracy will not defend you”— are fallow. What matters is that they have a good chance to push their agenda.
More generally, South Africa’s relatively proactive actions can be partly attributed to sections of the media, who from mid-December 2019 gave the crisis attention through carrying wire reports, or through producing human interest stories of citizens caught in the crisis. By the end of January, The National Institute for Communicable Diseases had put initial policy and mechanisms in place to detect the coronavirus in South Africa. Towards the end of February, the Parliamentary Portfolio Committee on Tourism Met with the Chinese Consul General on the coronavirus and its implications for the tourism sector. By mid-March 2020, the government prepared to go into national lockdown, doing so just after payday so people could stock up on essential goods. But as we know, there is also a gap between policy and practice, with underperforming ministries in public view.
There are those that believe the measures are too extreme. One group argues that ‘Black people can’t get Covid19.’ I wish I was joking. An NGO took the Government to court over the lockdown on the pretext that it compromised freedoms and dignity, although radio interviews with its CEO confirmed that the case was motivated by a belief that there is no evidence that any Black person has died. It was dismissed. This is not the view of a lone crank but has a noticeable footprint on South African Twitter and WhatsApp.
A slightly more sophisticated version is that due to heat and younger demographics, Africa more broadly will be spared the carnage. Relatively low reports of infections are said to evidence of this view. But this view fails to consider that in mid-March many African countries only had between 100 and 200 coronavirus testing kits. If you do not run tests, there are no verifiable figures. Besides, one must take into account that the elderly are particularly susceptible to triage practices where the young are being given equipment because they are more likely to survive intubation. Survival rates could well look very different from ICUs. There is also a counterpart. A belief that (richer) White people will survive the coronavirus because they have private medical insurance that provides access to private hospitals. When I point out that the government may well commandeer those beds, these people get angry, invoke property rights and so on. Of course, the views and positions I have sketched are not shared by all—they are nowhere near even being a majority—but it is telling about strands within everyday thought.
Short of overt prejudice, there are lots of well-intentioned universalist views that “corona knows no skin color.” But at best this is a partial truth because health care systems do discriminate. So does capitalism. Inequalities facilitate the spread of coronavirus. With some of the most extreme inequalities in the world, South Africa is at high risk. This crisis well illustrates how rentiers, professionals, wage earners and the precariat share space, whose fates are so deeply entwined with one another, yet each may well need different strategies to come out on the other side. Middle-Class moralizing will not help provide the working class the material goods they need in order to practice ‘social distancing’ and ‘shelter in safety.’ Indeed, social distancing is an apt turn of phrase, for it reveals that the distance between the outcomes for the rich and poor are vast.
Time will tell if South Africa skirts a public health crisis. Yesterday I thought there was a good chance. Today: less so.
Parallel to this global crisis, it seems likely that South Africa is in for a spirit of austerity. With a debt of 68% of GDP, the country had entered a recession before coronavirus, with economic growth forecast to be 0.6% against a global forecast of 3.3%. Already the budget was deemed “the toughest since democracy.” Now ABSA, one of the leading banks in South Africa projects “GDP could be set for a record contraction of about 23.5% q/q saar in Q2, equivalent to a year-on-year decline of 7.4%, assuming the full lockdown is not extended beyond three weeks.” They add “a GDP fall of this magnitude would raise exceptional challenges for South Africa, with its high unemployment, pressing socio-political challenges and ballooning fiscal deficits. Tax receipts are likely to collapse in 2020/21 as the economy grinds to a halt and existential spending pressures will surge. The National Treasury’s forecast in February of the main budget deficit of 6.8% of GDP now looks unreachable.” Government economists project 1 million more people to be unemployed. Much like the reported figures for coronavirus are less than the number infected, the same is true for unemployment. So social problems will become more acute. This is stark.
While the government, big business, and unions are cooperating in NEDLAC (our institutional means for grand bargaining and pacts) around the COVID-19 crisis, there is a deeper struggle going on in that venue. In addition to the items I have mentioned, a recent downgrade of South Africa’s sovereign rating by Moody’s means that there will be a shift in our political economy. From press reports, I get the sense that capital is planning an economic coup.
One site of the contest is the public wage bill. It is 35% of the budget, employing more than 1.2 million people. The 2018 public sector wage agreement is up for re-negotiation. The government has offered 4.4% for the lower half tier, and no increase for the upper half. The unions point out that as poorer provinces “disproportionately on public service employment” these cuts would increase the geography of social inequality. It is anticipated that these talks will collapse. With a fairly narrow tax base, there is a degree of resentment from the middle class, especially as they perceive that they do not receive value from the civil service. More generally, the middle class, both Black and White, tend to the market before the state, using private schools, medical insurance, security and on so. The other site is State-Owned Enterprises, about 700 in total, which for the most part has been so grossly mismanaged in the Post-Apartheid era that it seems that each year they receive bailout after bailout. ‘State-capture’ (presidential directed institutionalized corruption through strategically placed cronies channeling rents to one network) in the Zuma decade shattered many of these entities. President of the Black Business Council, Sandile Zungu believes that “The downgrade together with COVID-19 means we are now facing an existential crisis from a nation-state point of view. It is not just a health and economic crisis.”
Given this ‘existential moment,’ Tito Mboweni, the Finance Minister, will likely have to re-orientate the budget. The result is, to put it plainly, that there just are not enough funds to both save the working class who have been furloughed now or the working class who staff the SOEs later. And given the downgrade and existing debt, borrowing to cover the shortfalls will likely cause cascading problems elsewhere. As Mboweni has said he’s ”prepared to make difficult choices even if people burn me on the stage…The situation has to change drastically, and we have to speed up structural reforms, which include things like the release of the spectrum; pending finalization of public-private partnerships at the harbors; and the creation of a new airline. We must move with more speed. We have to speed up the structural reform program. We have to move full steam.”
According to Stuart Theobald, Mboweni is an unenviable position. “He must cut back government spending while assuring unions that job and wage cuts are not in the offing; he must convince a skeptical public that the government really is pushing ahead with the structural reforms his department has highlighted while sidestepping vociferous opposition from some in his own party; he must somehow raise taxes from an economy in decline. Since these remarks, Mboweni has tweeted out his broad agenda for change. These include the creation of a new unit in the ministry to identify places for structural reform. Notwithstanding the reasoning behind this agenda, it is doubtful whether the government has the political support for this policy course; at most it could get away with increasing value-added taxes.
In the typically understated fashion of the business press, Hilary Joffe Conveys that this is the “moment that the government will seize to drive long-promised economic reforms, as well as – crucially – to work more closely with business, which has swiftly organized to respond collectively to the crisis and offer its resources to help.” Joffe adds that “under a new Business for SA banner, the organized business has set up a project management office of 40-50 people, working full time and for free, seconded from the big consulting, accountancy, law, and communications firms as well as the banks and multinationals. It’s interfacing with government ministers and co-ordinating resources and responses in health care, labor, and economy.” Martin Kingston, vice-president of Business Unity SA, has said “a different type of dialogue” is emerging. Kingston, as a representative of capital, has said that business has put together 20 working groups to support the efforts to realign the economy. Indeed, business is currently boasting of how its CEOs have led the response to coronavirus.
As it has such a determining influence on outcomes, it would be remiss to not talk about the global political economy. There are certainly macro-economic implications of coronavirus for developing countries and international institutions. Goldman Sachs estimates -25% in the United States’ GDP in the second quarter 2020; The Federal Reserve Bank of St. Louis estimates -50%. During the Great Depression, their GDP dropped by about 30% over four years. This acceleration and compression of the economic crisis may likely catch many legislators, governors, and even activists flat-footed. As the United States is a core node in the global economy, like in 2008, the effects will be far-reaching.
There is a terrible myth that circulates in orthodox development studies that globalization reduced the gap between the North and South. It has always been an ideology. But it will become that much more visible. Within Southern Africa, even before the crisis, Zimbabwe was in a drought. The current crisis may very well push the country to the brink of national starvation. Co-currently remittances by Zimbabwean migrants in South Africa totaling around US$ 600 million annually have previously alleviated the social problems there, but with the South African labor market and economy stalling due to the lockdown, migrants and their families abroad will be even more vulnerable.
The prospects for Africa more broadly are not great. The United Nations Economic Commission for Africa reports that there are 1.8 hospital beds per 1’000 people, in health systems that are already strained by Malaria, HIV/Aids and TB. Elsewhere, due to lockdowns and their effect on resource extraction and the associated exporting oriented supply chains, about half of the jobs in Africa are vulnerable to loss. And so emerging markets should consider capital controls to avert financial catastrophe. Countries without fiscal means may well mean mass death, according to Ricardo Hausman. It is for these reasons that the UNECA recommends a stimulus package of US$100 billion to stave the impact of the coronavirus in Africa, 44% of which UNECA believes could come from debt relief like waiving interest payments to creditors. The disaster capitalists will fight this and similar initiatives, in doing so further entrenching the coercive power of the state. Still, politics is a terrain of struggle and one cannot capitulate, especially so in trying times it is important to advocate for greater economic inclusion.
All in all, the state, capital, and labor are now the salient issues in South Africa. In a way, it is refreshing, because the terrain is clear for all to see.
1- Lecturer in Communication Theory Department of Literary, Cultural, and Communication Studies University of the West Indies, St. Augustine. This article was produced especially for CLACSO and sent by the Grupo de Trabajo «Crisis, respuestas y alternativas en el Gran Caribe».
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