South Africa in the shadow of junk Nicolas Pons-Vignon SEBS, Wits University

1. South Africain the shadow of junkNicolas Pons-VignonSEBS, Wits University International Conference “Financial Instability and Inequality in an Economically Integrated World” School of Marxism, Sanya University, PR of China February 22-24, 2016

2. The farce • Nene – Van Rooyen – Gordhan 2.0: 3 ministers of finance in 3 days • The (very real) threat of rating downgrade to junk status • SONA 2016: ‘Zupta must fall’ • Ramaphosa as saviour? Ex-NUM GS, then BEE billionaire, then Deputy President. But remember…

3. “The terrible events that have unfolded cannot be described as a labour dispute. They are plainly dastardly criminal and must be characterised as such . . . there needs to be concomitant action to address this situation.”

4. The upheaval • Ongoing ‘rebellion of the poor’ (Alexander 2010): violent contestation over service delivery in townships & informal settlements • Strikes in mining – the longest ever, for good reason (Bowman & Isaacs 2016) • Strike in agriculture & doubling of sectoral minimum wage: the bitter taste of structural without associational power • #Feesmustfall – student protests and victories; 2016 repression But an atomised political alternative

5. The mask • ANC political discourse: the National Democratic Revolution / the two-stage transition • Hirsch (2005) and the three pillars of ANC policy • East Asian-style developmental state (= export) • Northern European-style welfare state (= grants) • within rigorous macro-economic parameters

6. ‘The art of neoliberalism’ The basic political dilemma for any oligarchy determined to hold on to such degrees of inequality (or even to increase it) is how to construct a winning strategy that is sustainable when in a democracy – given the fact that the oligarchy forms such a tiny minority, and that the distributional outcome that it seeks is so remarkably unequal . . . ‘Strategy 3’ consisted of trying to stabilize the distributional outcome at a level at which the elite could sustain most of the gains achieved during the dictatorship. Despite being a political minority, it succeeded in doing so . . . The capitalist elite succeeded during this period in building a hegemonic consensus of the supposed advantages of ‘free-market’ distributional policies. The key question is why it was that a centre-left coalition, with clear majority support, could do so little in distributional terms. In other words, why was ‘Strategy 3’ so successful for an oligarchy operating within a democracy, even though it was a political minority? (Palma 2011, 133 and 136)

7. Share of total income earned by the top 1% in selected countries Source: UNCTAD 2012

8. Share ofcompensation of employees in GVA Source: Burger 2015

9. A developmental state? • Sluggish growth since the late 1960s • Brief exception in early 2000s but driven by middle-class debt-fuelled consumption (Mohamed 2010) • Low investment/GDP ratio, well below other middle income countries (around 15% on average) • IP (except for autos & arms deal) only from late 2000s • But even for autos and arms deal: no RCMs – hence no IP! • Significant premature deindustrialisation (Tregenna 2012 & 2015) • The art: export promotion via trade liberalisation

10. A welfare state? • World’s highest GINI • Unemployment+ hovering around 35% • Extensive casualisation of labour, reproducing prevalence of working poverty • Poor healthcare & education & transport provision for the majority • Rising maternal mortality rates in many areas • The art: grants (child/old age/disability)

11. The ‘onion’ • Working age population • (15 – 64 years): 33.2 million • Absorption rate (employed / population): 41% 13.6 million 9.5 million Source: Adapted from Von Holdt and Webster (2005)

12. Composition of household income by income deciles

13. Dependency ratios for earners in poor households

14. The centrality of intra-HH transfers • Scully (2014) has shown that survival / reproduction for the majority of South Africans hinges on intra – HH transfers • Top-down: wage transfers • Bottom-up: childcare; old-age care; sick care (see Marais 2005 on HIV ‘carers’) • This explains the very low LF participation rate and reflects the weakness of the social wage in SA

15. Austere macro-economic policy: Neoliberalism & financialisation • Shift to NL policies from the late 1970s • Continuity with apartheid exemplified by shared model NEM – GEAR • Financialisation takes off from the mid-1980s, when 85% of JSE controlled by 5 conglomerates (Chabane, Goldstein & Roberts 2005) • Share of finance/GDP rises to 23% - with >40% of the population excluded from banking services • Finance accounts for growth in within-wage inequality and largely supports consumption & speculation (eg SAFEX) • No FDI but massive capital flight (21% of GDP in 2007) which has drained SA of K

16. Accounting for NL deepening: a political economy of state capacity • Initial NL shift has been much discussed (Freund 2013 for a review) • But why persist, esp post stabilisation & in light of challenges? Segatti & Pons-Vignon (2013): • NT consolidated and reinforced at time of the transition • While the rest of government loses capacity rapidly as it becomes a site of rapid class formation cum NPM • Strategic shift of state capacity towards cost control rather than spending • Self-reinforcing mechanism: ‘we need to control those incompetent rent-seekers’ – and why the farce is a tragedy

17. A political economy of the SA transition • Neoliberal deepening has secured the gains of the previous dominant elite (large-scale K formed under the MEC system of accumulation) • While incorporating a very narrow new elite in mining and finance (cappuccino) • Increasing contestation by black middle-class / ‘born free’ – EFF, university protest, etc. – to have a share of the pie

18. The failure of IP – a PE perspective • State procurement for large infrastructure projects: the triangle of impossibility • Class formation for Blacks dominated by state and finance capital, incltenders • Typical BEE de-linked from production or productive posts • As a result, rise of Black importers that outcompete local producers • Yet growing realisation that re-industrialisation is necessary