South Africa: Mass protests follow cabinet reshuffle as Zuma impeachment vote looms

  

By Patrick Bond

April 28, 2017 — Links International Journal of Socialist Renewal — On South Africa’s political left, the Economic Freedom Fighters (EFF) party dominated recent news by leading a mass march on President Jacob Zuma’s office in Pretoria, following a government power shift seen as amplifying corruption. The move also catalysed a ‘junk’ rating by two neoliberal credit ratings agencies. And an impeachment process on the immediate horizon represents the first real parliamentary threat to Zuma’s eight-year reign.

‘Whitelash’ or working-class blacklash?

The downgrade of state debt to junk status by two German officials at Fitch and Standard & Poor’s was as explicitly a political act as bankers dare commit. It was a reaction to Zuma’s dramatic midnight cabinet reshuffle on March 30, when 20 ministers and deputy ministers were fired or shifted, including Finance Minister Pravin Gordhan and his deputy Mcebisi Jonas (both former leftists turned neoliberal). Having held the line against welfare spending and also resisted the most extreme manifestations of corruption that characterise South Africa’s state-capital nexus, their departure was deemed catastrophic by the mainstream media. The value of the local currency, the rand, fell from R12.3/$ to R14/$ in the immediate aftermath, and interest rates the state must pay for 10-year bonds rose to third highest among the 60 main economies.

This stung the middle class and on April 7, protests by an estimated 60,000 outraged – and disproportionately white – critics of Zuma in a half dozen cities gave the president an opening. Having watched mass protests against Brazilian President Dilma Rousseff in 2013 shift from anti-austerity (against public transport price hikes) into generalised dissent soon hijacked by right-wing elites leading to her (illegitimate) 2016 congressional impeachment, Zuma has periodically condemned the ‘West’ for trying to overthrow the BRICS bloc (Brazil, Russia, India, China and SA).

In an April 10 speech memorialising Chris Hani – the South African Communist Party leader assassinated in 1993 by a white Polish immigrant – Zuma played the race card: 

 
“There is a resurgence of racism in our country. It is also clear that racists have become more emboldened. The marches that took place last week demonstrated that racism is real and exists in our country. Many placards and posters displayed beliefs that we thought had been buried in 1994, with some posters depicting black people as baboons. It is clear that some of our white compatriots regard black people as being lesser human beings or sub-human. The racist onslaught has become more direct and is no longer hidden as was the case in the early years of our constitutional democratic order. Racists no longer fear being caught or exposed. In the fight to combat racism, we should look beyond only overt racist utterances and public displays that we saw during the marches last week. We should also look at the ideological and institutional machinations that continue to give racism more traction. Racism is a gross violation of human rights and plunged this country into decades of conflict in the past. We cannot allow and assist racists to take our country backwards.”

Indeed there is no doubt that at least one profound problem with the recent ‘whitelash’ against Zuma is its class character. Even though the poor – who number more than 60% of the population and are nearly all black – have been most adversely affected by his policies, while the top 1% have maintained the worst inequality in the world, it is in Zuma’s looting of parastatal agency coffers that established white businesses feel threatened. The electricity supplier Eskom is most often cited, potentially for a $100 billion Russian nuclear deal which Gordhan had opposed. There are also unending mining-related Eskom boondoggles that favour a new breed of coal capitalists, especially the controversial Gupta brothers. The three Indian immigrants are regularly accused of brazen ‘state capture,’ for example, in a long critique by EFF deputy leader Floyd Shivambu.

In the first wave of resistance, on April 7, the main public face of the ‘Save South Africa’ movement coordinating the protests was Sipho Pityana. But the firm he chairs – AngloGold Ashanti – is among Apartheid’s most notorious. Its origins date back a century, to Harry Oppenheimer’s control of Johannesburg gold in the same tradition as De Beers’ founder Cecil John Rhodes. AngloGold is still headquartered in Johannesburg – unlike De Beers and others in the Anglo stable, which has progressively moved to Europe, beginning in 1990 when democracy dawned – but has operations across the world. In Colombia last month, 98% of the residents in a mountain village voted against the firm’s proposed $35 billion open-cast gold mine (the world’s largest), and yet Anglo aims to bulldoze ahead. In Ghana, AngloGold controversies include using the army to retake control over a major mine guilty of massive pollution and cutting power supplies to communities, while in South Africa, Anglo is appealing against a lawsuit it lost providing compensation payments to more than 4300 silicosis and TB victims.

Leaving anti-Zuma politics under the leadership of Pityana was dangerous, and so it was heartening that on April 12, the march to Zuma’s Pretoria office by more than 50,000 (mainly Black) protesters linked up the Parliamentary opposition – from the EFF to Pan-Africanists on the left to the centre-right Democratic Alliance and a few smaller parties – in a well-disciplined, joyous and formidable show of EFF organising force, reflected in the vast bulk of marchers wearing its red T-shirts.

Early next month, these parties will reconvene in Cape Town for a Parliamentary no-confidence debate on Zuma’s presidency. He has survived eight prior votes but if the Constitutional Court agrees with the opposition, this one may be held by secret ballot. If so, fifty of the ruling party’s 250 members of parliament may be persuaded to vote against Zuma, leading to his replacement by either the deputy president or speaker of the parliament. 

As political conflict grows more heated than at any point since 1994, an already stagnant economy is now teetering. Even if the credit rating agencies’ biases and competence should be questioned, investors are likely to soon begin a ‘run on the bank’ similar to 1985 when Apartheid leader PW Botha’s crazed ‘Rubicon Speech’ catalysed a new round of financial sanctions by Western banks. Botha was compelled to default on a $13 billion debt and impose exchange controls, as the foreign debt to GDP ratio hit 40%. Today it is nearly 50%.

The Zuma defense is to proclaim a long-overdue era of redistribution, racial justice and what is officially termed ‘radical economic transformation,’ but which essentially means greater black capitalist participation in state procurement contracts. This is the renewed rhetoric of many African National Congress (ANC) ideologues, and was also the promise of Gordhan’s replacement as Finance Minister, Malusi Gigaba, the day after he assumed office: April Fool’s Day.

‘Zupta’ white elephant breeding

Similar false promises of transformative infrastructure left society disappointed during Gigaba’s 2010-14 role as Minister of State Enterprises (in between he was a controversial Home Affairs minister). The mega-project mania he endorsed included 

 
· Eskom’s corrupt (and now unnecessary) Medupi and Kusile coal-fired power plants, as well as its desired R1 trillion in nuclear plants apparently pre-contracted (vendor-liability-free) from Moscow’s Rosatom; 
 
· Transnet’s climate-frying plans to facilitate a $57 billion rail line to export 18 billion tonnes of coal from Limpopo, Mpumalanga and KwaZulu-Natal, and an $18 billion Durban port-petrochemical expansion; 
 
· PetroSA’s proposed $5.7 billion Mthombo heavy oil refinery; and
 
· 2010 World Cup stadia now recognised (even by local organiser Danny Jordaan) as white elephants after initial assurance they would not be – though thankfully Gordhan’s last act as Finance Minister was to halt the ridiculous $450 million Durban 2022 Commonwealth Games.

Sports mega-events aside, these are mainly foibles of State-Owned Enterprises, yet Gordhan gave them $49 billion in state loan guarantees. The associated liabilities as well as the failed Sanral e-tolling and failing SAA ‘turnaround’ (and around) were the second reason – after political hijinks – for S&P’s junk label.

Moreover, Gigaba’s alleged close ties to the Gupta brothers are drawing attacks from leftist leaders of the EFF and SACP who lambasted the ‘Zupta’ state capture of the Presidency. Additional worry is expressed by business publisher Peter Bruce that “with the Treasury in their pockets, watch the Guptas and the Zumas and their coterie of hangers-on go for the Reserve Bank… it was Gigaba who formally switched on the state capture project for them when, on June 8 2011, he revealed to a cabinet meeting his plans to replace the chairmen and boards of Transnet, Eskom and Denel, among others, immediately. Many of the new board members were Gupta proxies and they quickly took control of the procurement operations of the boards they sat on.”

Since Zuma will not reverse either the cabinet reshuffle or his patronage tendencies, tighter exchange controls are the only way to prevent debilitating raiding of the currency once the next junk rating is registered in June, by Moody’s. Sygnia’s Magda Wierzycka cites Citibank’s World Government Bond Index as critical: “If our rand-denominated debt is rated as junk by S&P and Moody’s, South Africa will be dropped from the index. Immediately on that happening, approximately $10 billion will flow out of the country.”

The SA Reserve Bank will then be tempted to rapidly raise interest rates to restore financial inflows. The record was in mid-1998 when the Bank hiked rates 7% within two weeks during a currency crash from R7/$ to R10/$. The rand’s recent peak of R6.3/$ occurred in 2011 during Gordhan’s first term as finance minister, coinciding with the commodity super-cycle. At its trough 14 months ago, a raid by Goldman Sachs pushed the currency to R17.9/$, before strengthening to R12.3/$ more recently. 

Such volatility needs curing. To deter financial predators and gain the space to lower interest rates, stronger exchange controls could be applied. By all accounts, the requirement that institutional investors retain 75% of assets in domestic markets saved South Africa during the 2008 financial meltdown. Foreign financiers are a fickle group. To illustrate, on April 3, French bank Societe Generale actually increased its rand assets in search of high interest rates. Currently only two countries are paying more on 10-year government bonds than South Africa (8.9%): Venezuela and Brazil. With rates that high, financial markets are buoyed by speculative ‘hot money.’ Since 2014, both the private and state sectors have lowered fixed investment dramatically. So in response to S&P’s downgrade, Treasury was only partially correct to stress the need for “reducing reliance on foreign savings to fund investment.” 

True, with very high foreign debt ($145 billion), it is critical to reduce vulnerability to foreign finance, as the 1920-40s economist John Maynard Keynes warned. Moreover, when private capitalists delay new investment due to high interest rates and overcapacity, Keynes suggested lowering rates and increasing state spending.

However, judging by his record of corrupt patronage, if Zuma’s new team abandons fiscal austerity, the additional money would likely not be spent wisely. In any case, Gigaba has committed to continuing the austerity drive, to lower the 2019 budget deficit to 2.6% of GDP: “I will work within the fiscal framework as agreed by government and parliament. There will not be any reckless decisions.” That means Treasury will tighten a budget already suffering real (after-inflation) cuts in social spending, including lower social grants going to the poorest. But there remains a chance that Zuma will go for broke with expanded state borrowing, leaving the main task ahead a renewal of ideological debate over how, sensibly and without corruption, to protect the currency and kick-start the economy. 

South African Federation of Trade Unions

On, April 21-23, another left force entered the debate: the South African Federation of Trade Unions (SAFTU) which will have support from 680,000 workers in 21 unions, especially the country’s largest and most anti-Zuma, the metalworkers union NUMSA. Led by Zwelinzima Vavi, the highest-profile working-class leader, the launch of the new federation could soon challenge the existing Congress of South African Trade Unions, COSATU (with 1.5 million members) for labour movement dominance. If SAFTU becomes the main force for the left within civil society and links with an EFF capable of maintaining its momentum in parliament (where it holds 25 seats) and the arena of public protest, the choice society faces will no longer boil down to a slanging match of elites – Zuptas or neoliberals – but can expand to encompass the majority’s interests, at long last.

Patrick Bond is professor of political economy at the University of the Witwatersrand in Johannesburg.