International Socialist Review, July–August 2001

Patrick Bond

Reflections from South Africa:
Breaking the chains of global apartheid

From International Socialist Review, Issue 19, July–August 2001.
Downloaded with thanks from the ISR Archive.
Marked up by Einde O’Callaghan for the ETOL.

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 world’s 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 Hopkins – in Marxian analysis of Zimbabwe’s “uneven development” – and nearly gave it up after relocating to Southern Africa: first to Harare for a year, then to Jo’burg.

Nearly every evening found me in mass meetings called by the militant – occasionally revolutionary – civic 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 ANC’s 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 Africa’s 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 Soros’s confession, on an international satellite transmission that linked Davos to Porto Alegre’s World Social Forum, Soweto political activist Trevor Ngwane had, face to face, accused the financier of indirectly putting a massive squeeze on Pretoria’s 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 community’s belated rejection of apartheid was economic liberalization – i.e., release of local capital from apartheid’s 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 country’s economic, social, cultural, and policy environment has been enormously influenced by global economic processes and institutions.

Yet, what is termed “globalization” brazenly contradicts society’s 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 Mandela’s 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 rand’s 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 rand’s 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 Bank’s main interest rate from 14.8 percent in April to 21.8 percent in August.

To break – or to shine – the 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 school’s 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 country’s biggest companies – Anglo American, Old Mutual, Gencor/Billiton, South African Breweries, Didata – took 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 Africa’s increased global vulnerability.

The response to these pressures from South Africa’s 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 Sullivan’s gambit as “shining the chains of apartheid” and confirmed that the democratic forces would fight until apartheid’s 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 Pretoria’s 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 apartheid’s 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 university’s R1 billion endowment offshore. Some of that money – the amount varies day by day depending upon investment trends – gets 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 Africa’s apartheid era include:

the Bank’s $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;
the Bank’s point-blank refusal to heed a United Nations General Assembly instruction in 1966 not to lend to apartheid South Africa;
IMF apartheid-supporting loans of more than $2 billion between the Soweto uprising in 1976 and 1983, when the U.S. Congress finally prohibited lending to Pretoria;
Bank loans for Lesotho dams, which were widely acknowledged to “sanctions-bust” apartheid South Africa in 1986, via a London trust; and
IMF advice to Pretoria in 1991 to impose the regressive Value Added Tax, in opposition to which 3.5 million people went on a two-day stayaway.

Subsequently, neo-apartheid lending and policy advice by the Bretton Woods twins include:

an $850 million IMF loan to South Africa in December 1993 that carried conditions of wage restraint and cuts in the budget deficit, which in turn hampered the transition to democracy;
Bank promotion of “market-oriented” land reform in 1993-94, which established such onerous conditions (similar to the failed Zimbabwe policy) that instead of 30 percent land redistribution as mandated in the RDP, less than 1 percent of good land was redistributed;
the Bank’s endorsement of bank-centered housing policy in August 1994, with recommendations for smaller housing subsidies;
Bank design of South African infrastructure policy in November 1994, which provided the rural and urban poor with only pit latrines, no electricity connections, inadequate roads, and communal taps instead of house or yard taps;
the Bank’s insistence that corrupt Lesotho Highlands Development Authority boss Masupha Sole stay in his job in December 1994 (six years after he began taking bribes from international construction companies), in a threatening letter to the Lesotho government;
the Bank’s promotion of water cutoffs for those unable to afford payments, opposition to a free “lifeline” water supply, and recommendations against irrigation subsidies for black South Africans in October 1995, within a government water-pricing policy in which the Bank claimed (in its 1999 Country Assistance Review) to play an “instrumental” role;
the Bank’s conservative role in the Lund Commission in 1996, which recommended a 44 percent cut in the monthly grant to impoverished, dependent children from R135 per month to R75;
the Bank’s participation in the failed GEAR policy in June 1996, through contributing both two staff economists and its economic model;
the Bank and IMF’s consistent message to South African workers that their wages are too high and that unemployment can only be cured through “labor flexibility”;
the Bank’s role, including research support and encouragement of municipal privatization, in Egoli 2002, the plan to privatize and commercialize most Johannesburg municipal services by next year;
the Bank’s repeated commitments to invest, through its subsidiary, the International Finance Corporation, in privatized infrastructure, housing securities for high-income families, for-profit “managed health care” schemes, and the now-bankrupt U.S.-owned Dominos Pizza franchise;
the consistent failure of Bank and IMF “structural adjustment programs” in Southern Africa since the 1980s; and
the stubborn refusal by the Bank and IMF to cancel debt owed by our impoverished neighbors since the mid-1990s, except in tiny amounts and with brutal conditionality provisions.

There are, to be sure, people of good conscience who dispute “nix it” strategies and tactics. Some have made valiant efforts since the early 1980s to “fix” the IMF, World Bank, international financial markets, and other manifestations of global apartheid. In fields like environmental regulation, gender sensitivity, community participation, institutional transparency, corporate accountability, and even the highlighting of poverty, the fixers can claim a few victories. [8]

But, simultaneously, broader social, environmental, and economic conditions worsened dramatically. Reformers can claim less and less legitimacy for their efforts, which often appear as merely shifting deck chairs on a Titanic-esque global economy.

No doubt, in the wake of intense confrontation at Quebec City and Genoa in April and July 2001, there is a great deal of concern over proper tactics, especially how to assure that both nonviolent civil disobedience and symbolic property destruction against globalizer targets remain within the “diversity” repertoire without risking internecine conflict, provocateurs, and an arms race that the state security apparatus inevitably wins. South Africa has witnessed such debates many times, over the ANC’s use of “armed propaganda” – a phrase that hints at the impossibility of defeating the apartheid regime in head-to-head or even guerrilla military confrontations.

Regardless of how well, in future, well-conceptualized symbolic property destruction is fused with civil disobedience, it is on the global justice movements that activists in South Africa will be relying, not to shine, but to break the chains of global apartheid. Our comrades here will be throwing out a threadbare but explicitly red carpet to readers in September 2002, when the World Summit on Sustainable Development will be held.

Perhaps this coming World Bank/IMF meeting in Washington, D.C. (September 28–October 4, 2001), will be the last ever. And Porto Alegre next January will give us more momentum and vision for a post-capitalist society.

Johannesburg next September can then serve as the symbolic site where the ideology of corporate/banking power, known here as “neoliberalism” – whether emanating from Bretton Woods Institutions, the United Nations, donor agencies, co-opted nongovernmental organizations, labor-aristocratic unions, university departments of economics, the corporate-dominated media, or the South African government – will be finally defeated.

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Notes

1. Patrick Bond, Cities of Gold, Townships of Coal: Essays on South Africa’s New Urban Crisis (Trenton: Africa World Press, 2000); M. Mayekiso, Township Politics: Civic Struggles for a New South Africa (New York: Monthly Review, 1996).

2. Patrick Bond, Uneven Zimbabwe: A Study of Finance, Development and Underdevelopment (Trenton: Africa World Press, 1998); Patrick Bond, Elite Transition: From Apartheid to Neoliberalism in South Africa (London: Pluto, 2001).

3. Patrick Bond and M. Khosa, An RDP Policy Audit (Pretoria: Human Sciences Research Council, 1999).

4. Thabo Mbeki, keynote address to the National General Council, Port Elizabeth, South Africa, July 12, 2000.

5. SA’s competitiveness ranking rises, Business Day, April 25, 2001.

6. Sunday Independent, front-page interview, January 19, 2000.

7. Patrick Bond, Defunding the Fund, Running on the Bank, Monthly Review, July–August 2000.

8. Personally, I was party to several such campaigns to reform the World Bank, beginning in 1985 when I joined the national executive of the U.S. Debt Crisis Network. Finally, in 1998, I gave up on this approach. The straw that broke the camel’s back was the World Bank Inspection Panel’s rejection of an appeal to investigate the Lesotho Highlands Water Project mega-dam scheme, leaving Johannesburg township activists stunned at the Bank’s lack of accountability. (See the background research documentation at www.queensu.ca/msp under Publications/Background Papers.) The last gasp for reform was probably the effort by chief economist Joseph Stiglitz to introduce a “post-Washington Consensus” economic paradigm – but Stiglitz was fired in late 1999.