Thabang Motsohi
Thabang Motsohi

Inequality will derail our democracy

The magnitude of the problem of inequality in our country, compounded by the painful reality of unemployment and poverty, will hobble any future development prospects unless we seriously debate the efficacy and appropriateness of our policy responses in post-apartheid South Africa. Let me put the problem in context.

It had always been clear in the minds of the National Party leadership during the latter part of the apartheid era that a transition to a new political order in line with the vision of the liberation movement was inevitable and that political power would be in the hands of the black majority. But they were also prepared to push this eventuality as far out into the future as possible. However, a confluence of global political changes beginning with the collapse of the Soviet Union and the re-ordering of the global balance of power accelerated the demise of the apartheid regime. Inevitably, very few options were available to the National Party leaders and the need to preserve the lifestyles and wealth accumulation gained and enjoyed during apartheid dominated their mind-set and approach as it became clear that transition negotiations were inevitable.

It is important to recall that the rationale for the apartheid policy was, through the use of state power and resources, to enforce preservation of opportunities for wealth accumulation and development on a racial basis for the sole interests of the white people and to the exclusion of the black majority population. The racially structured inequalities that characterised apartheid South Africa were the outcome of this policy and strategy. The rigid labour market and spatial planning policies that were rigorously implemented were designed to provide cheap black labour to the business sector.

The post-apartheid reality is such that political power relationships have changed dramatically and yet the undeserved wealth accumulated by whites under the protective apartheid system remains untouched. In fact, for many, the value of wealth that was accumulated has been massively increased by the global opportunities brought about by democratic South Africa.

On the other hand, the economic power relations that rendered apartheid unfair and unjust have continued in the democratic South Africa. The undeserved poverty and inequality suffered by the black majority continue to exist and in fact, they have increased on a number of measures. We are now the most unequal society in the world as result of the policy decisions we made post transition.

The following perspective by Ronnie Kasrils is instructive: “All means to eradicate poverty, which was Mandela’s and the ANC’s sworn promise to the ‘poorest of the poor’, were lost in the process. Nationalisation of the mines and heights of the economy as envisaged by the Freedom Charter was abandoned. The ANC accepted responsibility for a vast apartheid-era debt, which should have been cancelled. A wealth tax on the super-rich to fund developmental projects was set aside, and domestic and international corporations, enriched by apartheid, were excused from any financial reparations. Extremely tight budgetary obligations were instituted that would tie the hands of any future governments; obligations to implement a free-trade policy and abolish all forms of tariff protection in keeping with neo-liberal free trade fundamentals were accepted. Big corporations were allowed to shift their main listings abroad. In [Sampie] Terreblanche’s opinion, these ANC concessions constituted ‘treacherous decisions that [will] haunt South Africa for generations to come’.”

Ben Turok (2008) underscores the enormity of the challenge: “The ANC inherited a strong market economy, whose acceptance was part of the negotiated settlement. However, a market economy is not designed for the equitable sharing of national resources. It always favours the strong, and in South Africa that means the entrenched and still overwhelmingly white economic power block.”

Several surveys have demonstrated that our society has become more polarised along class structural lines that reflect the continued narrow class interests of the “entrenched and overwhelmingly white economic power block” and political elites. A deconstruction of the driving motives behind the so-called “service-delivery protests” and other negative social phenomena, points to a society that is showing growing signs of revolt by the poor. This must be worrying. Adam Habib warns that “inequalities polarise societies, and it is hard to imagine South Africa sustainably addressing its social pathologies — violent crime, the abuse of women and children, racial tension — or even HIV and Aids and the service-delivery crises without a sustained reduction in both inequality and poverty”.

The debate about inequality requires the following questions to be raised: Did the liberation alliance movement have a transition strategy going into the negotiations that matched the avowed mission of the “social democratic revolution”? What were the critical elements of this purported “revolution” and what benchmarks were set for evaluating its progress? If our constitutional democracy and the electoral system that underpins it represent the reversal of political power relations, what benchmarks were set in the transition strategy to represent “corrective justice’ in economic power relations? The temptation to cite BEE as a shining example would be patently false as it was designed to benefit a few politically connected people and fails to pass the basic test of “corrective justice”, which would require some form of wealth alienation on the part of those that were selectively favoured by the apartheid system. Michael Fargher declares that “this raises difficult questions of blame, guilt and how one practically ensures restitution in the face of intergenerational justice”.

What we have done well is put in place a very extensive social-welfare network in order to mitigate the effects of poverty. But we have not thought of a radical and fundamental approach to deal with the question of wealth inequality and lack of opportunity. The question that I continue to battle with is the following: Is it possible to say that comprehensive democracy has been achieved if the political economic power relationships that existed during the apartheid period remain intact? Furthermore, is it possible to address the question of wealth inequality without considering wealth transfer from the rich to the poor in one form or another?

In my view these are the real questions that need to be debated and yet they have been conveniently avoided because of our belief that economic growth on its own will be the miracle solution. Some form of wealth transfer is a small sacrifice to achieve equity and redress. As a magnanimous gesture by those who were selectively advantaged by apartheid system. It may serve as acknowledgement that first, the grotesque system was unjust and second, some form of reparation or redress is morally justifiable. It may also serve to manage the growing unrest in the country and strengthen efforts towards nation building. What I am proposing is that the question should be transferred to a national platform for debate by all stakeholders and away from the irresponsible rhetoric of the political platforms.

What I have suggested above is not new. Many prominent people have proposed a similar strategy but I detect a fear to think out of the box on this matter. Habib has argued that if Germany could have instituted such a tax in 1991 to rebuild East Germany, how is it, that South Africa could not do so even though “black South Africa” was in a far worse position than East Germany.

It is necessary to caution though that wealth transfer by itself will not be the silver bullet needed to solve our triple ills of inequality, unemployment and poverty. What is clearly necessary and urgent is a need to have a comprehensive dialogue by all stakeholders on an appropriate and shared growth path for South Africa.

Tags: , , ,

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    • Marx

      Inequality is a valid concern, but absolute poverty is a greater concern. Ironically, nations that worry about inequality tend to create greater poverty. Nations that worry about absolute (not relative) poverty tend to create wealth and reduce inequality. The example of East and West Germany is a good one. East Germany created poverty by its bankrupt Communist ideologies. SA is similarly hobbled to a pathetic growth rate not by capitalism, but by similar bankrupt socialist ideas. And it will remain a losing – and unequal nation – until these are discarded.

    • michael

      Reminds me of what the famous indian chief Sitting Bull once said and i quote ” the white man knows how to produce everything but he does not know how to distribute it”.

    • http://www.aspo.org.za Yaj

      Brilliant article. One of the best I have read recently on the topic. The other was by Redge Nkosi in the Business Report Monday 18/11/2013.

      We need to start with the immediate issue of a universal basic income. This can be done creatively using local currencies as they are currently being used in the UK (Bristol pounds), Netherlands and France.

      Secondly we need tax reform, scrapping income tax and VAT and replacing them with a levy on all financial transactions, a land value tax and of course a carbon tax.

      Thirdly we need fundamental monetary reform.Money should be created by our own Reserve Bank debt-free and lent to government interest-free for specified investment in new job-creating infrastructure such as renewable energy generation, a comprehensive light rail network and small-scale farming and light industry. Money should not be borrowed from the private financial sector at interest for this purpose !

      Finally , banking reform is essential. All government business should be conducted via State/public banks to generate savings and create the credit required for small businesses to thrive. Reserve requirements for all banks should be raised as to prevent inflation of the money supply through reckless private sector credit extension .
      The financial transactions tax as proposed will have the same effect of capital controls and stabilize the value of our currency, tax speculation;is unavoidable and progressive.

      http://www.positivemoney.org.uk provides a…

    • Stiglitz

      Inequality of opportunity is a disaster. Equality of outcomes is an even greater disaster. Some people are more talented, harder working, more ambitious, more energetic and more motivated than others. This is a simple fact – it has nothing to do with ideology or theory.Seeking to legislate their achievements into failures, and the failures of those who lack all of the above into achievements – is to condemn all not only to perpetual mediocrity – but to utter tyranny.

    • Honecker

      “Habib has argued that if Germany could have instituted such a tax in 1991 to rebuild East Germany, how is it, that South Africa could not do so even though “black South Africa” was in a far worse position than East Germany.” This is an interesting, and valid argument. However, rather than the tax being paid by the successful, hard-working West Germans to the East Germans, the tax should have been paid by the USSR and its rotten Communist party which successfully bankrupted not only East Germany, but much of Eastern Europe. And exported its putrid ideology to the SACP hangers-on, which will successfully bankrupt SA if it is allowed to.

    • Sterling Ferguson

      @Motsohi, there is a book written by Moelesti Mbeki, the book is called “Architects of Poverty” in this book the author blames the governments in Africa for the poverty in Africa. He claims these countries all setup an economies of extraction to sell their resources overseas without adding value to them and this has led to widespread inequality. In an economies of extraction only a small percentage of the population will benefited from these policies.

      In the case with SA, this since 1994, has been following in the footsteps of other African countries by exporting their resources without adding value to them. SA is a country that has exported million of jobs to Asia , mostly China, for cheap inferior goods. The manufacturing sector in SA is being wiped out and many industries like the footwear manufacturing no longer exist. The government has been focusing on the BEE deals that only help the elites in the ANC and not the masses and this is the primary cause of inequality in SA.

    • bernpm

      @Marx:…”inequality is a valid concern, but absolute poverty is a greater concern. ”

      The nail on the head!!

      SA’s current drive to eradicate (this poorly defined) inequality is a political dream.
      No country in the world has been able to create an equal society yet.

    • http://google Musa Khumalo

      I suggest Thabang this is a non-discussion. ANC has created a monster BEE corruption platform. Inequality where? In South Africa ? You must be joking Thabang

    • Barbra

      True. That plus greed, corruption and empty promises.

    • alexx zarr

      We continue to frame the perceived problem, but hardly address the solution. It seems that the solution is rather a vague suggestion than a clear statement.
      Today (5Dec13) there are a few on-line articles and discussions covering a similar theme. My responses to the others have been this.
      However we define and couch the objective economic and social conditions in SA, if there is any sense that these will be materially resolved by massive wealth transfers. If we take the most extreme case, where all whites are stripped of their assets, and all whites who are employed hand over these jobs to black folk – will the conditions of unemployment, underemployment, low economic growth, poor educational levels, deteriorating infrastructure, poor service delivery, ineffective policing and prosecuting systems and so forth, be solved?
      If this was possible, would SA be a better place for all SANs in 5, 10, 20 years time?
      There is no doubt that history, intuition and a sense of what is right, tells us massive and enduring disparities in wealth, opportunity, hope and so on leads to revolt.
      The difficulty we have is in credible, sustainable and inclusive solutions.
      Punishing the past may not be the best solution, or even the right one, never mind that it will make (some of) us feel good for a day or two.
      What we gave away in the negotiations, we’ll get back now. Yippee…

    • Mr. Direct

      Why do we currently have cascading taxation rates on salaries in South Africa, where the more you earn, the higher percentage you pay? Surely this is the current mechanism to extract wealth from the rich, and through governmental services, enrich the poor?

      All this tax money, minus the wasteful expenditure and corruption deals, minus the enormous government wage bill, minus the funding for poorly performing parastatals, end up in social services and governmental spending that is directly related to the benefit of the poor, in the form of services such as (poor) schooling, (appalling) medical services, and (minuscule) social grants.

      Does the author still believe there is an outstanding debt to pay in modern day society, that is now 19 years different to the fall of apartheid, where the lines between rich and poor are no longer as colour defined as they used to be, and that there is a whole stack of white immigrants post 1994 that had jack shit to do with apartheid that also need to put their hands in their pockets for the sin of others?

      The time for compensation has passed, there is no longer a way to extract a just and fair payment for the negatives of apartheid from our 2014 version of South Africa. Perhaps when people start realising this, the closer we will come to a truly unified South Africa.

    • Momma Cyndi

      ?? so you are now going to tax the currently disadvantaged to pay the previously disadvantaged for something that the always advantaged has already left the county with ??

      I will honestly tell you now that, as a white person, I have made a hell of a lot more money since democracy than I ever made before. My corporate job was given to two black men so I had to open my own business. I am not black and my colourd partner isn’t “black enough” so we do business outside of SA. We bring about 2 mil into the country a year in forex. Look at the stats, we are the norm.

      I can also tell you that, because my business is all outside of South Africa, that the more you make it difficult to do business here, the more that moving to Namibia or Uganda or Kenya or Nigeria, looks enticing (my partner wants to go to Malawi but their internet is lousy and I love Botswana but their internet is even worse). That is probably why their growth is outstripping ours by miles.

      You cannot increase the pie by dividing it. You only increase the pie by baking more. I love my country and I will always support it, but I am not willing to sacrifice my children’s heritage or my ability to go on pension for it

    • Sterling Ferguson

      @Mr Direct, it was observed by Plato three thousandth years ago, that the division of labor creates inequality. In the 18th century an Englishman name David Ricardo observes that the division of labor creates wealth. Therefore, one can argue that inequality is good for a nation to create wealth.

    • Silvio F.

      @Marx I think the fight against inequality and the one against poverty are part of the same struggle and must be pursued along the same political path. Scandinavian countries, for decades, have shown that this could be done @bernpm it’s obvious that to eradicate inequality completely can’t be the actual goal of any policy, but the effort to reduce it should be consistent because it’s essential for any democracy to have a good degree of social cohesion to avoid disintegration of the society.

    • Sterling Ferguson

      @Momma Cydi, the government should give tax breaks to people that invest in businesses, and there should be a high tax put on luxury goods such as, high price cars.