Compelling need for African innovation

Summary - Under apartheid, most Africans were poor and didn’t expect their lives to improve because the government was indifferent to their socio-economic needs. Is it surprising that they believe the new democratically elected government will alleviate their poverty by providing them with free housing, water and electricity? Democratic governments in developing economies can find themselves in a precarious position, trying to provide for the basic needs of the poor while at the same time keeping their more opulent citizens happy, without compromising the well-being of the economy. They need to resolve the question of whether they will allow market forces largely to determine how the national wealth is distributed or whether they will pursue interventionist policies in an attempt to regulate redistribution. A turning point in the African National Congress (ANC) government’s thinking came in 1995, when Nelson Mandela returned from Europe and spoke in favour of privatisation. However, it is becoming increasingly difficult for the ANC to follow a free-market path, which has yet to bring about visible improvement in the lives of the poor majority. Since 1994 the annual average GDP growth has been a relatively healthy 3 per cent, but there are concerns that it is not filtering through to the poor and unemployed. Surely, since South Africa is not creating enough wealth to substantially alleviate the plight of the poor, more innovative state interventions must be made? The government is seeking to redistribute wealth via an expanded social grants system, and has set itself the ambitious target of halving unemployment and poverty by 2014. However, this may not be enough. Can it consume more capital without putting the economy at risk? Should it borrow more and risk being trapped in debt? Finance minister Trevor Manuel warned recently that the economy may become overstretched in the face of ever-increasing demand for social security grants. Cynics fear that a culture of entitlement is growing. But the left finds such statements insulting and dehumanising, and argues that it is crass to suggest that people are unwilling to pay for services when unemployment exceeds 40 per cent. When the ANC was fighting for a just and equitable society, many of its guerrillas on the frontline were drawn from the poor strata of the black community. It came into power in 1994 on the promise that it was going to serve the needs of the poor. But now its opponents on the left are asking whose voices the ANC heeds: those of big business, or those of the old grannies in the townships? Is it right for former activists to drive luxurious cars and dine in posh restaurants when the money they spend on these indulgences could be used to feed poor communities? Neither capitalism nor socialism has produced convincing answers to the economic woes of the poor. We must act on the assumption that there is a distinctive African way and invent a new paradigm that suits our culture. For many years, in the spirit of ubuntu, African people have initiated financial group schemes that have helped individual efforts. Perhaps the government should try to discover how it can expand on this idea so that entire communities can benefit from the schemes. The ANC is poised on a knife-edge that requires a fine balancing act. Future economic policies will have to be more sensitive to the needs of formerly disadvantaged communities.

A significant distinction can be drawn between the concept of luxuries and the notion of necessities. While the former refers to life’s dispensable comforts, the latter, which encompasses all that is indispensable to human existence, has come to figure prominently in post-apartheid South Africa.

The meaning of these words are powerfully evoked by the emotional suffering and stark poverty many people face. Under apartheid, the African majority never expected anything better from life, because of the state’s indifferent attitude towards their socio-economic needs and development.

They were badly remunerated and therefore their first priority was to put food on the table. They were not allowed to own property in most of South Africa and, until the late eighties, most of South Africa’s townships were not yet electrified.

Is it surprising that the previously disadvantaged majority believes that the new democratically-elected government will alleviate their adverse economic and social conditions by providing free housing, free water and electricity and by returning land to them?

To the poor, the distinction between luxuries and necessities may be largely academic. But it is that difference that draws attention to the role a democratic government has in a developing economy. Vacillating between providing for the basic needs of citizens, still mired in poverty, and those of their more opulent brethren without compromising the well-being of the economy, can place a government in a precarious position.

It has become commonplace for political analysts to examine the socio-economic conditions of some societies within the broad and over-used paradigms of socialism and capitalism. It is between these two poles that states need to resolve the question of whether they will allow “market forces” to largely determine how the national wealth is distributed or whether they will pursue interventions and policies which attempt to regulate wealth re-distribution.

The rich minority, with its conspicuous consumption and taste for mansions, limousines, designer clothes and expensive restaurants, will defend capitalism as a system that creates wealth. Their defence follows a line of argument that the poor either deserve or accept their penury. They fail to recognise that in South Africa many are still poor because of the discriminatory policies of the previous government.

In 1990 Nelson Mandela addressed a conference of business leaders to try and assuage their fears that the African National Congress (ANC) was not planning to nationalise the means of production. Explaining the ANC’s position he said: “The view that the only words in the economic vocabulary that the ANC knows are nationalisation and redistribution is mistaken.” He added: “While we look at economic models and study the experiences of other countries, we should not forget that we are dealing with South Africa, with its own history, its own reality and its own imperatives.”

Though there had been several earlier signs that the ANC was shifting away from nationalism towards the pursuit of a mixed economy with a substantial degree of privatisation, a turning point in the ANC government’s thinking came a year after the first democratic election. Mandela had been on a European tour and on his return he made a definitive statement in support of privatisation.

It is becoming difficult for the ANC government to follow a free market economic path, whose theoretical advantages have yet to manifest themselves in a visible improvement in the lives of the poor majority. The chief proponent of free market economics, Leon Louw, of the Free Market Foundation, argues that there is an imperative need to rescind the restrictions on the market if the needs of the poor are to be met. Louw adds a corollary: the more the government seeks to regulate market structures to cater for specific needs, the more it reduces the capacity of the market to generate wealth and — as a further adverse consequence — the more it creates a culture of dependency.

The socialist riposte is that the idea of a free market is an esoteric academic fiction invented by Adam Smith. It has never existed and never will, dedicated socialists assert. To deal with reality governments must deal with economic structures as they are now, they contend. All governments intervene in markets, the question is how and on whose behalf, they add.

The ANC government is faced with a particularly difficult problem: how to develop what president Thabo Mbeki calls a two-tier economy, an economy that is starkly differentiated along racial lines and also punctuated by the vast economic disparities between the middle class and the poor.

The South African government has been navigating between the two economies. By most international standards the economy is doing far better than it was under apartheid governments. Poverty alleviation is being addressed and progress is being made.

Since 1994, when the ANC came to power, the average annual GDP growth has been a relatively healthy 3 per cent. But there are concerns that it is not filtering through to the poor by reducing the high unemployment rate and rampant poverty that burdens their lives.

Surely, since South Africa is not creating enough wealth to substantially alleviate the plight of the poor, more innovative state interventions must be made? Government has made it quite clear that it will not sit back. How far should its interventions go? It is seeking to redistribute wealth via an expanded social grants system and has set itself the ambitious objective of halving unemployment and poverty by 2014. That may not be enough to address the socio-economic problems of the poor. Tough questions lie ahead. Can the government continue to consume more capital without risking serious economic repercussions? Is it sensible to borrow more money and get trapped in debt? Unlike the apartheid government, which was restricted in what it could borrow, the ANC government can borrow much more freely.

Zambia took the borrowing route after it realised that the revenue obtained from taxation was insufficient to fund poverty relief programmes. So it borrowed to finance the expansion of mining but much of that money went into the pockets of politicians infected by kleptomania instead of the coffers set aside for development.

The ANC government refused to repudiate the apartheid-incurred debts as illegitimate, mainly because most of the money is owed to South African citizens and South African corporations, not foreign governments or foreign banks. As finance minister Trevor Manuel puts it: “It is money that we owe to our citizens.” But perhaps the small foreign proportion of the debt (about five per cent of the total apartheid debt) could be scrapped or reduced. The money saved could then be used for reconstruction and development in formerly disadvantaged communities.

Manuel warned recently that the economy might become overstretched if government continued to dish out social security grants against the ever-increasing demand for them. Cynics are not only questioning the provision of the grants. They fear that the demand for them is growing insatiably and that a culture of entitlement is proliferating in South Africa. The social movements say the language cynics use to present the argument is often accusatory, as exemplified by the following statement: “African people don’t want to pay for services. They believe that they have an inalienable right to them.”

But it is far from being simply a question of downright refusal to pay for the services. In most cases it comes down to the level of literally counting cents and wondering whether there will be enough to take one through the day, week or month. Offer a perspective to the left of the ANC government and the emerging social movements vehemently denounce statements associating the poor with a “culture of entitlement”. They argue that the statements are insulting and dehumanising.

Trevor Ngwane, political activist and former ANC councillor, argues that the poor lost their case for a decent standard of living long before the ANC took power. He says the debate on the issue of privatisation versus nationalisation, and the ANC’s subsequent adoption of the pro-market policy of Growth Employment and Redistribution (Gear) was the defining moment when the ANC abandoned the poor.

The various social movements argue that to suggest that people are unwilling to pay for services when statistics show that unemployment is more than 40 per cent (taking account of the despairing unemployed who have stopped looking for work) is downright crass. “I am not saying the ANC are evil (but that) they unfortunately followed the less resistant route,” Ngwane declares. “The children that died in ‘76 are not Mandela’s or Mbeki’s but of the working class. Whatever they did in those times they thought the new leaders would deliver on their needs. The job of the ANC is to reverse all past injustices. Instead the ANC uses economic arguments to further oppress the poor. They forgot that they got into power using the strengths of the working people.”

When the ANC was fighting for a just and equitable society many of its guerrillas on the frontline were drawn from the poor strata of the black community. More than anything, they epitomise that heroic struggle. Ngwane, who speaks for the Anti-Privatisation Forum, defines the poor as people who “want to go back to sleep every morning because of their numerous problems... The demanding landlord, the uncle who can’t give them an extra room, the child who does not have a school uniform, the never-ending quest for food and transport.”

The question has to be posed, though, whether it is right for former activists to drive luxurious cars, and dine in posh restaurants when the money they use on these indulgences could be used to feed communities.

When the ANC government came to power in 1994, it did so on the promise that it was going to serve the needs of the poor and those that had been neglected by its predecessor. But now its opponents on the left are asking whose voices the ANC heeds: those of big business whose social profile is motivated by greed or those of the old grannies in the townships, whose youthful years were spent helping grow the economy that is shunning them now.

The world has been dominated for more than 200 years by two economic theories, neither of which has produced convincing answers to the economic woes of the poor and, to borrow a phrase from the Russian novelist Fyodor Dostoevsky, “the insulted and the injured”.

There must be another model out there to try out. We must modify the current economic paradigms and invent ones that suit our culture.

The radical theorist Frantz Fanon exhorted the Third World to fashion new models instead of replicating those of the West and Europe, even though they have been around for centuries. We have been theoretically defining Africanism for too long. It is time we acted on the underlying assumption that there is a distinctive African way.

Throughout the twentieth century African people have initiated financial group schemes that have helped individual efforts. In the idiom of ubuntu, communities helping each other, maybe the government should try and find out how it can expand on this idea and instead of individuals benefiting, ensure that entire communities profit from the schemes. Instead of encouraging individuals to be entrepreneurs, a concept that is fraught with structural and implementation problems, the government can redirect finances to communal pools, allowing people to initiate their own ways to encourage development.

There will be a lot of uncertainty in the beginning. Mbeki, however, has set the tone by asking what is wrong with what the government is doing when he exchanges ideas with ordinary people at informal meetings or imbizos. We know of the Japanese miracle. Against conventional economic rules at the time they were economically innovative and sought successfully to increase worker productivity. There is nothing in the conversation of township folk that suggests they desire more than a decent salary and the ability to conduct their lives in a manner that fulfills their fundamental needs.

Nelson Mandela once declared that the state is not an employment agency. Against that, Mbeki has warned: “If the poor rise, they rise against all of us.” His observation recalls Anton Rupert’s counsel to whites during the heydey of apartheid: “If the poor don’t eat, we won’t sleep.” The ANC government, with its constituency drawn largely from formerly disadvantaged communities is poised on a knife-edge that requires a fine balancing act. Future economic policies will have to be more sensitive to the needs of these communities.