The best and worst of times: South Africa's government at half-term

"Things have never been as good as they are now, but could also been seen as sliding towards catastrophe."

South Africa's first democratic government is now at the mid-way stage of its first term, providing an obvious point at which to assess how the transition is working. It is not an easy judgement; indeed one is continually reminded of the famous first line of A Tale of Two Cities: "It was the best of times, it was the worst of times.." for it is possible to argue that things have never been as good as they are now and also that they are sliding towards catastrophe.


The best of times? Well, yes. After a decade [1982-1992] in which falls in GDP were more frequent than rises, the economy grew by 1.3% in 1993, 2.7% in 1994, 3.3% in 1995 and will probably equal that figure again in 1996. Between July 1994 and December 1995 more than R30 billion of foreign capital flowed into the country, ending a 10 year period when capital outflows averaged around R5 billion a year. Moreover, this economic recovery has occurred in the context of falling inflation [now around 7%] and has seen the successful abolition of the Finrand. At the same time, apartheid has gone, race relations are more relaxed, there is no more detention without trial, house arrest or bannings and the press is freer than for a generation. The country is led by a gentle and enormously popular President who enjoys the confidence of majorities of all races - the first time in South African history that this has been achieved.


The far right has all but disappeared, political violence has fallen and we have rejoiced in a series of unprecedented sporting triumphs. The government has not yet emulated the standards of corruption reached under the previous regime, with the result that we probably still have one of the least corrupt governments in Africa. In the international corruption index compiled by Transparency International, South Africa came a respectable 23rd, ahead of such Asian tigers as Malaysia [26], South Korea [27], Taiwan [29], a G7 member, Italy [34] and such fast growing giants as Brazil [40] and China [50].


Sliding towards catastrophe? Well, maybe. The currency has collapsed by more than 20%, foreign reserves are almost gone, crime has soared and brought vigilantism in its wake. The justice system, public hospitals and significant parts of both the education and welfare systems are in a state of collapse. There is strong and ominous pressure upon the two key liberal institutions of the press and the universities, and the rule of law is unevenly observed. The government's instinctive urge to shovel dirt under the carpet-as in the Boesak, Shell House, Sarafina II and Holomisa affairs-means that there is an open door for the growth of corruption. The loss of professional manpower together with sometimes rash affirmative action policies threatens to undermine the viability of many public sector institutions.


An Aids epidemic is inexorably advancing and, meanwhile, unemployment is still growing hugely: last year saw another 280 000 jobless. Unless this tidal wave of unemployment can be turned back it is difficult to see how not just minimal welfare standards but public order and democracy itself can be maintained.

Nation building: an uneven success

The transition began on a note of understandable euphoria and national self-celebration. This faded fairly quickly at popular level, with occasional transient revivals during major sporting events (particularly if we won]. But it was far more protracted at elite level where, indeed, it still continues: government ministers have enjoyed nothing better than travelling abroad to be feted as symbols of transformation. This produced a considerable rhetoric about "nation building", an extremely ambitious project when one considers that no previous regime has managed to build a single South African nation. Nation building had three principal aspects: first, there was to be a huge push towards national development; second there was to be a heavily increased delivery of welfare towards the disadvantaged majority, thus fully incorporating them within the nation for the first time; and there was to be a multi-faceted effort to "build one nation" through a process of racial reconciliation [which the President himself took as his main task] and through the transformation of institutions [schools, the media, universities, the army etc] to help mould a single, common South Africanism.


It is already clear that this has been a very uneven success. It has been impossible to fault the President's efforts at racial reconciliation unless one is to argue that they have occasionally gone almost too far, embracing even such unlikely figures as Percy Yutar who had, without doubt, done his best to have Mandela hanged. If so, it was a fault on the right side. The sight of the President sitting down to tea with Betsy Verwoerd dramatised the fact that Mandela wanted to preside over a country in which no one felt excluded, not even the self-exclusionists of Orania. At this symbolic level nation building has known its greatest success. The transformation of institutions has made a far more qualified start: it has been a success in the Army, has resulted in the loss of almost all the SAAF's pilots, and is creating great difficulties in schools, universities and the media, triggering a flight of the haves towards private alternatives - and towards other countries altogether, with the emigration rate rising 27% on a year-on-year basis in the first quarter of 1996. Most significant of all, the mixture of welfare-plus-development promised by the RDP has not been delivered and, with the abolition of the RDP Office, even looks as if it has slipped from the agenda. The unabated rise in unemployment and homelessness means that the numbers of the socially excluded has continued to mount. Accordingly, "nation building" up till now has largely been a matter of rhetoric and gesture, without enough real meat in the sandwich.

But normalisation begins

On the other hand a new order has begun to entrench and normalise itself. The new Constitution has passed through the Constitutional Assembly, if not yet through the Constitutional Court. With the successful integration of MK and APLA into the SANDF the era when shopping centres needed to explain a range of bombs and grenades to their customers has gone. Gone too is the (always remote] possibility of a right wing coup: the new order is now bottom-line guaranteed by a new model army.


Political normalisation is also apparent. The first fine flush is gone: it is now quite ordinary for MPs to resign, for ministers to be reshuffled or sacked, and for ministers, who at first believed that they were in government but not truly in power, now to realise that they are indeed in charge. The presidential succession has effectively been settled and in the great struggle between exiles and "inxiles" the latter have been decisively worsted. With the closing of the RDP Office there has been an effective shelving of grandiose targets and a greater realism is apparent. Political violence has fallen to levels not atypical in Third World democracies.


With the NP's move to quit the government not only is the government now somewhat more logically composed solely of those who resisted apartheid but the Opposition has swollen from a minuscule 3% to a more normal 25% of Parliament.


The new political order has also been consolidated. Local elections have been held throughout the country in reasonable order, and this time even in KwaZulu-Natal nobody refuses to accept the results. [This is more notable than it seems for it is common ground that the IFP lost almost the whole of its white vote in 1996 - but still got 44.5% of the province's vote. If one adds back those lost votes one realises that the IFP's 1994 total must have been pretty much as announced.


Thus acceptance of the 1996 result there also implies acceptance of 1994.] In general the elections confirmed the 1994 result. The two biggest parties, the ANC and NP both lost 2% to 3% nationally on their 1994 figures and the third largest party, the IFP, lost ground too - but none of these losses was enough to change the basic shape of politics, with the NP dominant in the Western Cape, the IFP ahead in KwaZulu-Natal and the ANC overwhelmingly in the lead everywhere else. The slack was taken up by independents, ratepayers, the DP and the Minority Front. With several election-free years ahead there is a prospect of calmer and more settled political weather ahead.


The President himself remains the major exception to this pattern of normalisation, for he continues to float above the political landscape in a cloud of adulation. However much one admires Mandela it has to be realised that it is not a democratically healthy situation to have a head of government who is effectively above criticism. In effect, Mandela has become the Reagan of the Left - an old, charming, Teflon President, quickly forgiven when he misspeaks, under whose umbrella of authority government ministers can escape from full and proper accountability. Mandela's huge and unique contribution has been to preach and practise national reconciliation. If this remained his only contribution, it would still be irreplaceable. It is in this high politics - where the electorate wants him -that the succeeds best. Unfortunately, his authority is too useful to others in low politics for matters to rest there.

The ANC: right turn

The ANC over which Mandela presides has undergone enormous changes in just two and a half years. When Sam Shilowa says that it is "inconceivable" that the pre-1 994 ANC could have come up with its present macro-economic strategy he is surely right. Mandela himself, without apparent embarrassment, has in a few short years gone from trying to convince Swiss bankers of the merits of nationalisation to announcing flatly that "privatisation is the policy of the ANC". It is already becoming hard to credit the heady days of 1990-94 when men who are now besuited ministers marched in demonstrations declaring their faith in socialism, "people's power" and such maxims as "VAT kills". Nowadays such ministers travel in Mercedes, never mention socialism, deplore such manifestations of "people's power" as PAGAD and wonder whether they shouldn't increase VAT.


Sometimes one wonders if there shouldn't be a mite more embarrassment, an acknowledgement of past errors, or simply a bit more self-explanation. Take, for example, the egregious figure of Alec Erwin, now Minister of Trade. In the African Communist in mid-1992 Erwin argued that the key task was to "lay the basis for a future socialist society...! will argue that only the SACP has the political capacity to act as the catalyst to meet this challenge".


Setting his face against the IMF and World Bank, Erwin argued that "the distinguishing feature of a Marxist socialist party should be that its programme is informed by analysis located in historical materialism" and that the SACP, "representing class interests on the basis of socialist theory", must struggle for a Reconstruction Accord, enshrining a radical process of redistribution which "must go beyond" such timid ideas as wealth taxes, progressive taxation and sweeping land reform to more metaphysical notions such as "a redistribution of the access to economic power". And so on, and on. Heady stuff.


And today? Erwin not only breathes no word of a Reconstruction Accord but, on Mandela's British visit was one of the leading spokesmen for privatisation. On his return he took up the cause of the National Lottery Bill, which restores many of Sol Kerzner's lost privileges (including a special clause giving Kerzner a three year indemnity from the provisions under which more than 3 000 competing casinos are to be closed). Erwin not only stressed that he would continue the policies of his NP predecessor, Chris Fismer, but praised the way that Kerzner's group had "invested money and employed people". He then followed this up by personally writing the disciplinary charges against Kerzner's accuser, Bantu Holomisa.


One can't help admiring the much-maligned Kerzner. He may have been one of the principal financial supports of the "homelands" system but he is surely also a good businessman: he may have given R2 million away to the ANC but who can say he isn't getting value for money? Erwin, who has gone from communism to casino capitalism in just four years, deserves equal praise for his astonishing flexibility. In effect he seems to have made a complete U-turn. Addressing NAFCOC, for example, Erwin warned businessmen that laissez faire was now government policy: there would be no more protection, no import tariffs and "at the end of the day, we won't interfere with market forces".


The real point, though, is not to make fun of Erwin but to point out the magnitude of the turn the ANC has made - and how the Left has lost. It has been a curious, even a contradictory process, for as the NP left power so the SACP, both at national and provincial level, moved into the gaps thus vacated. In terms of the old "two-stage" theory of revolution, this ought to be when we hear SACP ministers - never so strongly represented in government as now - begin to talk of "socialist transformation", the need to "radicalise the revolution" and so on. Instead, there is no such talk. Indeed, at the precise moment that the SACP was launching its attack on the government's macro-economic strategy, the two chief spokesmen for that strategy in London were Erwin and the Deputy Minister for Finance, Gill Marcus, communists both. It would be unnecessarily conspiratorial to believe there was any pattern to this.

What does the SACP stand for?

It is, indeed, quite difficult to know what the SACP now stands for. The key document before its recent central committee meeting, Build a Broad Movement for Transformation, talks of how the party must "share trenches with the patriotic bourgeoisie", but there is only vague talk of "the socialisation of the predominant part of our economy" and most of the economic section is a series of questions "which must be addressed" -but aren't. The document is firm about only two things - the need for the party to give priority to youth and "to guide and intervene...particularly [in] the struggle for transformation of academic institutions", and the need for the party to "strive for greater hegemony" over civil society by "locking into processes of transformation" those forces "that have the capacity to undermine our objectives".


This should be taken in conjunction with the party's condemnation of the DP and NP because "they attempt to create the impression that a strong Opposition is needed to secure


democracy". No such thing is necessary, it turns out: "... propping up a weak opposition can never be our objective" and soon the Opposition has become "weakening and disintegrating". Far more important than an Opposition is "a strong and vibrant civil society".


This angry dismissal of the Opposition, together with the fact that the Party has already committed itself to gaining greater hegemony over civil society, leads to the same old instinctive drive to single partyism and monopoly political control. So no change there. The party's drive for power hasn't changed but it is in a state of complete intellectual confusion as to what it should use its power for. Not surprisingly, this is leading to a visible shrinkage; even an implosion, of the real influence of the Left.


The signs abound: Slovo and Hani have disappeared and no one of their stature has emerged to replace them. The ANC populists - Winnie Mandela, Tony Yengeni and Holomisa - have been marginalised and Peter Mokaba re-admitted to the inner circle only on a promise of good behaviour. The ANC Women's League, a possible site of dissent, has had its funds stopped and the Youth League has had its leadership changed and now leads the charge against Holomisa.


Mandela has repeatedly criticised the SASCO radicals who are now the only vocal populists left. In the local elections all the small parties gain - except the PAC, whose support falls by more than half. An old communist like Mac Maharaj pushes through privatisation in the face of a transport strike while Jay Naidoo's former COSATU cronies stand appalled at his talk of Telkom privatisation. Ronnie Kasrils talks of the urgent need for rearmament - which means spending billions on corvettes, submarines and let fighters - at the same time that health and education are starved of resources.


Sam Shilowa, having campaigned for the ANC on a ticket of "Jobs, jobs, jobs" and which promised homeland civil servants that they would all keep their jobs, now confronts a government which talks of how it may need to lay off 250 000 people in order to achieve 100 000 job cuts in the public service, with homeland civil servants particularly targeted.

Cheap talk; expensive rhetoric

Admittedly, a great deal of this is thus far only talk - the number of public servants has actually risen this year, for example - but there is no doubt of the change of mind and mood. Sam Shilowa is quite right to say that it was "inconceivable" that the pre-1994 ANC could have come up with anything like its current macro-economic strategy. But even more remarkable was the fact that the Left did not come with a strategy of its own until business jolted it by coming up with its "Growth for All" plan - and the document it then hastily cobbled together was completely ignored by the government. Until then the government had drifted along with no real policy except for an increasingly incredible RDP, consisting largely of unbelievable targets [a million houses by 1999, 30% of ail land to be redistributed by the same date etc] and vacuous rhetoric ["now is the time to take the RDP to the masses, to make it a people-driven RDP" etc]. More than any other single factor it was this sense of policy drift which lay behind the sharp drop in the Rand.


Officially, of course, the RDP still exists but it is hard to see what really remains of it: the targets have been quietly dropped, the RDP office abolished, the rhetoric abandoned. What one hears now about all this is truly sad, like Billy Cobbett declaring that the Housing Ministry has made great progress and now has a splendid housing policy. But just no houses.


In many areas the rhetoric has been actively counter-productive. Health Minister Nkosazana Zuma's tough talk about forcing doctors to work in rural areas has simply encouraged more medical emigration and damaged health care. Similarly tough talk about agriculture has scared farmers into evicting farm workers and tenants on a grand scale: the ANC government has probably presided over more such evictions in two years than its predecessors did in the previous decade. The saddest part of this is that agriculture has been [thanks to last year's good rains] the most buoyant part of the economy and might have been expected to be a sector showing gains in employment. In fact the reverse is true. Farmers, alarmed by ill-judged signals from government, have striven to shed labour not only by mechanisation but in many cases even at the cost of lower standards of maintenance of farm buildings, roads, fences and so on. Jobless farm workers and their families have little effective option save to join the ever growing throng of squatters camping round the cities.


Similarly, progressive sounding talk and legislation about state education can hardly disguise the disaster of the exit from the profession of thousands of the most experienced teachers and the clear flight towards private schools. Within higher education the ready resort to the rhetoric of "transformation" cannot disguise the reality of campuses caught in a pincer movement from SASCO/NEHAWU radicals on the one hand and, from government's side, pressure to take ever more students and make affirmative action appointments under conditions of continuing financial stringency. The results are disorder, demoralisation and the undermining of institutions critical to the country's future. Similarly, the notion that 1994 would usher in a period of the redress of historic grievances when "the people shall govern" had, by mid-term, to confront the threatened collapse of the justice system and the fact that the main instance of "people's power" is the rise of PAGAD, its popularity a standing rebuke to the state's failure to maintain the law and protect the weak. The sight of the Minister of Justice fleeing into hiding in a "safe house" while the police placed the houses of alleged drug lords under armed protection mocks the state's ability to perform even the most elementary of its functions.

The macro-economic gamble

The heart of the matter now - and for the rest of the government's term - is whether or not the government is really going to implement its macro-economic strategy, which calls for a reduction of the budget deficit from 6% to 3% of GDP, greater labour flexibility and a programme of privatisation. The continuing fall of the Rand since the policy was announced in May underlines its shaky credibility. This is not surprising, for the policy is beset by large difficulties, the best known of which is its rejection by COSATU and the SACP. In effect, the imposition of the strategy represents a sort of coup within the ANC-COSATU-SACP alliance. Faced by the fact that the SACP had achieved a complete stranglehold if normal procedures were followed, Deputy President Thabo Mbeki and the Finance Minister, Trevor Manuel -with Mandela's backing - simply cut their alliance partners out of the policy loop, declaring the strategy "non-negotiable" once it had been announced.


An almost comical alliance summit was called to discuss the strategy, consisting of Cheryl Carolus [ANC], Charles Nqakula [SACP] and Sam Shilowa [COSATU]. Since all three are SACP members they happily agreed that the strategy needed to be "refined" - that is, reversed - only to be abruptly brushed aside and their press conference cancelled. The strategy was issued under Mbeki's signature and he has used it to display the complete dominance he now enjoys within the movement, stating publicly that "there is no alternative" to the policy and that he personally would be willing to overrule the ANC's partners if necessary, calmly revealing a centralisation of presidential power in his office well before he has a formal title to it. White communists like Erwin and Marcus have, in effect, thrown in their lot with Mbeki and the macro-economic strategy rather than follow the party line. Given that Mbeki is known to tolerate no whites either in his office or in his extended brains trust, conviction and political prudence may point them in the same direction.


Nonetheless, the strategy is a huge gamble. It is economically far more conservative than anything the NP was willing to try: in effect PW Botha and FW de Klerk opted for a far softer policy on budgetary deficits, wage increases and privatisation. Thus the ANC, many of whose members thought they were coming to power to bring about the socialist revolution, is now being used as an instrument to carry through a capitalist counter-revolution against the mixed economy and the unions. The unions, whose members have suffered a large real wage cut thanks to the Rand's fall, are being told they must not only swallow that together with declining union membership but in addition they must lie down under large public sector job cuts. No self respecting trade union movement in the world would accept that.


True, the strategy talks airily of a 6% annual growth rate generating 400 000 new jobs a year by 2000, but even a casual glance at the plan's arithmetic suggests that these targets are somewhat wishful. Anyone who lived through the Thatcher period in Britain - as Mbeki did - knows that to cut a budget deficit in half means blood all over the floor, savage cuts in jobs and welfare and a climate of job insecurity and social demoralisation. France, Germany and the rest of the EU nations are, after all, straining mightily to reach the Maastricht targets of a 3% budget deficit.


If such a target is difficult for G7 states it is going to be tough indeed for South Africa: we have less fat to cut. The key point to understand is that much government expenditure is fixed and cannot be cut much or at all - which loads all the cuts onto a far smaller category of discretionary spending.


Thus to reduce the budget deficit in 1997 to 4% -Manuel's announced target - will, according to the Financial and Fiscal Commission, mean that the expenditure of provincial government departments will have to be cut by 7% in real terms and national government departments by a staggering 17%. The Commission was so alarmed by the size of these cuts that it warned that some provincial services, already straining under last year's economies, could collapse altogether. And yet another large cut would have to come the next year to get down to the 3% figure.


Mbeki has swept aside such worries by insisting that much of the savings required can be achieved through the abolition of fictional jobs in the old homelands. One doubts that even this will be easy. To cut salaries - even if paid for non-jobs - which would have been paid in the former homelands still means cutting spending power within the poorest areas of the country.

Is the government too conservative?

Politically, the macro-economic strategy is gravity defying. A glance at the 1994 election results shows that the ANC is, above all, the party of the African rural poor. This electorate was only a second order priority for the RDP - drawn up very much in the interests of the ANC's trade union and urban activists - but in terms of the new strategy it comes nowhere at all. It is a moot point whether an African populist party based on the votes of the poorest of the poor can really carry out an economic policy to the right of anything the National Party dared to try. Arguably, the macro-economic strategy is simply too conservative. The critique of the strategy by the National Institute for Economic Policy [N1EP] is, on a number of counts, devastating and deserves a larger audience than it has hitherto enjoyed.


At the least, to sell the strategy to its core electorate the government surely needs to be a lot more serious than it has been to date about living up to the welfare and housing promises of the RDP. The government in general - and Mbeki in particular - are surely taking an enormous bet when they promise that the strategy will yield 6% growth rates and 400 000 new jobs a year. It is a very long time indeed since the South African economy has performed such miracles - and when it did, it was usually the result of a lucky rise in the gold price. To bet on this is to bet on reversing a lot of history.


In other words, COSATU and the SACP may seem like losers now but they could well be long-term winners. As the pips squeak a considerable opportunity will open up for a populist critique of government and it would be surprising if the field was left to Bantu Holomisa alone. At the same time one has to admire the government's courage in embarking on a policy certain to be so massively unpopular; no other African nationalist regime has begun life this way. It is this uniqueness which leads some to doubt whether the government understands what it has opted for, and others to doubt whether it will really stick to its guns as the true price becomes clear. If, on the other hand, the government backs away from the strategy there will be a further collapse of the rand, accelerated white emigration, and thus the loss of the entrepreneurial skills necessary to take advantage of devaluation.


Critics of the macro-economic strategy such as the N1EP point out, quite correctly, that the strategy has not only killed off the RDP but effectively means that the government has accepted the IMF's structural adjustment programme without the formal involvement of the IMF. But the contradiction goes deeper. Because our savings rate is so low we need foreign investment to grow at the rates we need. But we can't get large scale foreign investment unless we privatise much of the public sector - and even then we may have difficulty. For while exchange control abolition is deferred foreign investors will hold off, believing that they could invest more cheaply later. But given the low level of foreign reserves - currently less than $2.5 billion - we cannot afford to abolish exchange control, given the huge overhang of blocked Rands. If we abolish controls the holders of blocked Rands would decide en masse to cash them into other currencies and we don't have the reserves to pay them off, so the Rand would have to fall like a stone.


The only way out is a deal with the IMF so that it puts some of its massive reserves behind us to tide us over the crucial first months after exchange control abolition. In other words, there is no escape from a deal with the IMF. Indeed, such a deal may already have been made, with the documents all signed and merely waiting to be dated.

Privatisation problems

Whether we can even get to first base with this strategy will depend on the government's privatisation policy. Here the signs are not promising: the government is instinctively dirigiste and loath to trust the markets. The policy was first announced by Mbeki in December 1995. In effect 1996 has been spent back-pedalling and gradually coaxing COSATU on board, the price apparently being an agreement that the state will always maintain a large majority share of any "restructured" enterprise. Thus in the case of Telkom, the first major candidate for privatisation, the way to maximise the proceeds and ensure that the enterprise ends up with the operator most determined to enhance its value is clearly to organise a flotation of shares and let them go to the highest bidder, while the best way of giving consumers value for money is obviously to encourage keen competition in the telecommunications marketplace.


The government is instinctively trying to do the opposite of all this: Minister of Telecommunications, Jay Naidoo, will decide who the buyers should be and will try to insist that there is no single buyer but a consortium [which can only be done by forbidding shareholders to sell their shares to one another). There will be no flotation, merely a government allocation of shares, and the government will also guarantee that no competition will be allowed in the telecommunication market for at least five to seven years.


Most striking of all, the government intends to retain complete management control - which, doubtless, will be used to insist on strong affirmative action policies and to prevent the sort of shedding of labour which tended to follow telecom privatisations elsewhere in the world. Whether it will really be possible to get foreign telecoms to invest large amounts of capital and new technology under such conditions remains to be seen. The scheme is uncomfortably reminiscent of PW Botha's plan to privatise the railways while retaining government management control: nobody was willing to invest money on such terms and the plan was stillborn.


Already this sort of heavy handed government dirigisme has led to the expensive collapse of the attempt to privatise Mossgas: the government not only sought to set the price of the sale but to stipulate that the buyer must continue to run it as a synthetic fuels operation and must also give guarantees against job losses. Given that Mossgas, with its present labour complement and synfuel operation, runs at a large loss, this amounted to demanding that bidders must pay large amounts of money for the privilege of running a certain loss maker. So ludicrous were these conditions that many concluded that the real objective had been to put bidders off so as to keep Mossgas in the public sector.


As government learns the market facts of life it is possible that some of this foolishness will be dropped-but there is, meanwhile, a danger that the new management installed in many of the parastatals will quickly run them into deficit so they become unsellable, or sellable only at a Far lower price than they would have previously merited. This tendency is already visible: Portnet's instruction to allow a 12.5% bid margin to black contractors is bound to increase its costs significantly; the railways are in steady deficit; the SABC has lurched into deficit -and so has South African Airways, regarded as second only to Telkom as a privatisation candidate.


SAA's problems are, in fact, symptomatic: having turned in a R340 million profit in 1995 it ran into heavy loss in early 1996.


Squeezed on its international routes by mounting competition, it faces the need to cut out loss-making routes [such as the Singapore-Durban route, where competition from Singapore Airlines is proving too tough) while domestically the stiff competition from Comair [now linked to British Airways) and Sun Air [linked to Virgin] was actually leading to trade gossip that SAA might have to pull out of its domestic circuit.


At the same time SAA cannot now afford the new Boeing 747s and 777s that it has ordered and stands to forfeit the R100 million deposit it has already placed on the order. If it goes ahead with the purchase it can only do so out of borrowings, lowering its equity value - yet if it does not go ahead its ageing and fuel expensive fleet will face competition from airlines that do have the fuel efficient new planes. Here, as elsewhere, there is an urgent need for tough and decisive management, sharply focused on budget bottom lines and the facts of international market life.

The second half-term

As one looks back, the main judgement has to be that the government, for all its failings, has come a remarkably long way in a very short time. It is only eight years since the SACP, then the strategic brain of the ANC, declared that its ambition was to build a new East Germany in Africa. Anyone within the ANC who then predicted that the movement would stand where it does today would no doubt have been indignantly expelled. This teaches a sharp lesson about the need for political incorrectness.


As one looks ahead, two questions stand out: what lies behind the ANC's turn away from the Left? And will the policy drift, so evident in the government's first half-term, continue?


The two questions are related, for both stem from the chief sociological phenomenon of this period, the rapid rise and consolidation of a new black middle class, spearheaded by the new black political elite. Seldom has South Africa seen class politics in so straightforward a form as in the last two and a half years. The new elite immediately voted itself perks and salaries on a scale which led to a public outcry and a presidential order to reduce all such salaries by 10%. Unabashed, the new elite worked energetically to multiply, installing its like [and sometimes its relatives) as ambassadors, civil servants, judges, members of a vast new array of commissions, and onto the boards and into the bureaucracies of parastatals, regulatory bodies, technikons and universities: nothing like it had been seen since 1948-50. Moreover, the new class insisted that institutions which did not follow this example lacked "legitimacy", thus triggering a large emulatory movement in the private sector as enterprises of every kind scrambled to re-position themselves within the new order.

The new class

Affirmative action was, so to speak, the professional ideology of the new class but it was soon noticeable that not a few of the political elite - even those of outstandingly socialist views - were quietly migrating from politics to the [better paid) business class. Kagiso Trust transmogrified from a development agency into a big business holding company while Dr Motlana forsook a possible political career for one in business, an example soon followed by Dikgang Moseneke, Saki Makozoma, Cyril Ramaphosa and even Benny Alexander. As in 1948-50, there were many benefits from this process: institutions became more representative, previously unrecognised individuals got their chance, fresh talent was discovered and new vested interests created in old institutions, which thus earned their chance to survive.


To be sure, the changes of 1990-94 ushered in a real democracy and were fundamentally more benign so there is a sense in which the comparison with 1948-50 is unfair: there has been a wider spreading of opportunity this time and it has seen the erosion of racial boundaries rather than their strengthening. But the comparison still holds.


Sociologically, the result was that while inequalities between black and white continued to decline, inequalities within the black community soared. Moreover, given the large rise in the numbers of the black unemployed and homeless, inequality increased not just relatively but absolutely. [And the NIEP is surely right to argue that the government's macro-economic strategy will further increase systemic inequalities.]


Oddly, the causes of egalitarianism and socialism have been most strongly espoused by the black political elite - all comfortably within the top 1 % by income. This lop-sidedness defies the political laws of gravity and is a potent reason for policy drift. It is entirely obvious that, all rhetoric apart, the new ministers do not really care about building more houses, heading off the Aids crisis or creating more jobs even one tenth as much as they care about making sure that affirmative action policies are applied within their own sections of the government bureaucracy. In practice this is the only real priority and it is pursued with much energy and great flourish.


But, of course, the same process also helps explain why the ANC has been able to move so swiftly and smoothly towards the centre: a middle class revolution is in full progress and provided that the new class is allowed to enrich and enlarge itself as it wishes, it has less and less quarrel with the old social structure and a greater and greater appetite to become part of it. It is, however, a richly nuanced process, not least because the political legitimacy of the wealthy new elite depends on its continuing claim to represent the poor.


The results can be comic, as when the premier of Gauteng, Tokyo Sexwale, took up the cause of black squatters at Thembelihle whose wish for resettlement at Naturena was opposed by the somewhat better off blacks of that suburb who believed that such a development would bring higher crime and devalue their hard won property. The Naturena residents marched to Sexwale's own mansion in the upper class elite white suburb of


Houghton and built a shack in front of it as a protest. Sexwale sped to the squatter camp where he furiously denounced the Naturena residents as "middle class upstarts": "These people are like promoted slaves. The most vicious person against a slave is a promoted slave, who can be more vicious than a slave owner". He himself might live in Houghton but he had come from a shack in Soweto and was known as someone who still "goes about with poor people". Moreover, he insisted, the squatters were pleased that he lived in Houghton because he provided a positive role model of black achievement. The black paper, City Press, encapsulated Sexwale's balancing act in a single hilarious photo of him stripped to the waist in a roadside lay-by, his bodyguards mounted around his large BMW. Sexwale had begun his day with the squatters and had donned a tracksuit in which to address these raggedy people but, for his next business appointment, was making a quick roadside change to his normal, well tailored business suit.


Again, the same process was quickly visible after 1948. The great symbolic demand in both cases was for the nationalisation of the mines, a demand shelved just as quickly by the ANC elite as by the Afrikaner Nationalists before them. The NIEP is doubtless right to talk of the ANC's move away from the left as "a panic response to the recent exchange rate instability". But this is simply what liberals would call being disciplined by the markets. After all, if Gill Marcus or Alec Erwin made speeches now about Marxism-Leninism and the advance towards socialism, the Rand would plummet and they would wake up to find that their jobs had become much harder overnight. Such career considerations have a telling effect on almost any politician.

The Zimbabwe model

The danger presented by present developments is starkly visible in Zimbabwe: inequality grows, Aids advances, whites migrate, and centre stage is held by a political elite devoted to self-enrichment, radiating the arrogance of power, evermore distant from the masses it allegedly represents. Even after \6 years in power in Zimbabwe, the ANC's counterparts there have still not built the houses, created the jobs or redistributed the land that they promised in I 980. It could happen here-especially since our political elite has been deliberately insulated from constituency pressure.


But the differences are large. It is quite impossible to imagine Mandela arguing for Marxism-Leninism or the one party state or abusing public trust in the way Mugabe has. We are moving away from nationalisation while Mugabe moved towards it. The press is free, we have a multi-party system and no party is willing openly to advocate a change in that status quo.


Quite crucially, we also have the Democratic Party in Parliament, speaking up against abuse and corruption, insisting that the government live up to the liberal principles they profess but often do not mean.


There was, it should be remembered, no democratic opposition in Zimbabwe, merely a temporary white presence on a racially separate list, which had no legitimacy or impact. Here the opposition can play a key role. Liberals may feel under pressure in the new South Africa, but they have never been as valuable as they are now.


But the greatest difference of all is that the government is now committed to an economic strategy diametrically different from anything espoused by Zimbabwe or any other newly independent African state. If it truly holds to this strategy, the era of policy drift is over. The decision lies squarely in the lap of the new class and its emblematic leader, Thabo Mbeki. Their resolve is bound to be tested sorely both by the unpopularity of the strategy chosen and the increasing strains within the ANC's tripartite alliance it will occasion. As the pressure increases and inequalities grow, the contrast between the prosperity of the new black elite and the misery of their neglected constituents will become glaring. If the macro-economic strategy works then such criticisms will dissolve in a tide of growth and jobs. If it fails to work the new elite will come under such pressure that it is likely to experience the temptation to limit criticism by restrictions on the media and the Opposition.


The significance of the government's second half-term will lie not only in whether it will keep to its strategy and whether that strategy will work, but whether this can be achieved without any narrowing of our present political democracy.


But another question looms too. Liberals may yet have to ask themselves what to do if the government, faced by populist and Bonapartist surges from its grass roots, finds that its new strategy works no better than the RDP. No longer sure what it thinks or believes in, the government could simply fail to cope. It might need help. Should liberals then enter a new government of national unity to save the situation? And what should be the terms of such a deal? The best of times, the worst of times.