MBUYISENI NDLOZI: SA may very well be beyond a technical recession, and this is why
You cannot ask for market-friendly policies, promising growth and jobs and, when they do not happen, refuse to take the blame
On Tuesday, the EFF released a statement following Statistics SA’s announcement that SA had entered a technical recession. In that statement, the EFF made the correct critique that this recession, alongside SA’s other economic woes — unemployment, poverty and underdevelopment — must be blamed squarely on white monopoly capital. In this piece, we shall expand on this view.
It is generally acknowledged that recession is a period of negative growth in economic activity, particularly if such occurs in two consecutive quarters in a country’s GDP. To be specific, it is technical because it does not consider a comprehensive set of measures such as employment and income. Therefore, the second quarter negative growth of 0.7% after the 2.6% negative growth in the first quarter led us into a recession.
According to the 2018 second quarter labour survey, unemployment was recorded at 27.7%, an increase from 26.7% in the first quarter. Also, the Poverty Trends in SA report by Statistics SA, which looked at poverty between 2006 and 2015, shows that one out of every two South Africans (30.4-million) was poor in 2015.
Therefore, if we consider these set of measures in addition to the negative growth over two conservative quarters, SA may very well be beyond a technical recession.
White monopoly capital to blame
In our view, the blame must be placed squarely on white monopoly capital, because since 1994, the government of the day has ruled in favour of market-led development. It is a basic neoliberal principle that the burden of economic development, job creation and poverty elimination is the responsibility of markets and captains of industry.
In our country, without a doubt, these are mainly, if not all, white monopoly capitalists. Government stayed out of the economy, providing only bulk services such as electricity, infrastructure, education and social protection programmes in the form of social grants, free housing and healthcare. The majority of SA’s sectors, the ones recording "negative growth", are in the hands of private, mainly white monopoly capital.
You cannot ask for market-friendly policies with a promise that you will get growth and jobs, and when these do not happen refuse to take the blame.
Addressing the Socialist Internationalist gathering of social democrats in Sao Paolo, former president Thabo Mbeki once said: "The critically important task to end the poverty and underdevelopment in which millions of Africans are trapped, inside and outside our country, cannot be accomplished by the market.
"If we were to follow the prescriptions of neoliberal market ideology, we would abandon the masses of our people to permanent poverty…".
Despite this comprehension of international political economy, the ANC, which Mbeki led, continued follow the prescriptions of neoliberal market ideology before and after his presidency.
It was also the Treasury’s deregulatory approach in the mid 1990s that allowed transnational companies to expatriate profits when exchange controls were first relaxed. Billions of rand in capital went to overseas financial headquarters to benefit mainly international shareholders. These are profits paid to shareholders instead of some being redistributed as direct local investment to productive, jobs-generating sectors of the economy.
In addition, white monopoly capital robs the state revenue coffers through illicit financial flows, base erosion and profit shifting. When Mbeki led the High-Level Panel on Illicit Financial Flows, commissioned by the African Union, the SA Revenue Service told them about a case in which a transnational company was found to have avoided R30.8bn in taxes.
This is why the EFF intends to introduce a general anti-tax avoidance private-member bill in Parliament: to combat these criminal illicit financial flows by white monopoly capital.
The ANC began to cut corporate taxes in 1995, from 55% to 39% in 1999 and now 28%. As a result, the International Monetary Fund (IMF) considers SA’s corporate profits to be the third highest among emerging markets. The idea was that these cuts in corporate taxes would incentivise white monopoly capital to invest domestically. This is in addition to the department of trade & industry’s various incentive schemes.
But it is common knowledge that this never materialised. Instead, the JSE’s largest 50 companies used all their profits from a reduced corporate tax rate to build cash reserves of well over R1.4-trillion and did not invest in the development of local industry.
While in some instances we can associate recession with sharp changes in the price of the inputs in producing goods and services, such as oil prices, monetary or fiscal policies, it can also be a problem of being heavily indebted and unable to service debt. This tends to have a wider trail and overlap with international events. Indeed, SA has experienced a budget deficit, an ill-conceived VAT increase and fuel price hikes, but still these are not the main cause of economy stagnating over time.
The truth is that all the strategic concessions on economic issues the ANC made in the last 20 years with the hope that white monopoly capital would invest, never materialised. Trade & indusrtry minister Rob Davies and President Cyril Ramaphosa have acknowledged time and again that the instruments needed for industrial development in our country are outside the controls of the government, specifically banking.
It is not they who are failing to create jobs, it is their captains in the white monopoly capital empires.
Nowhere in the capitalist economic history of development has any economy managed to pull itself out of underdevelopment through market fundamentalism. It is only a corruption-free, reliable and decisive state, with a bank under its control, that can lead a sustainable break-through out of the cycle of poverty, inequality and unemployment — challenges that continue to exclusively affect black people.
• Ndlozi is the national spokesperson for the EFF