Alliance under pressure

Alex | Oct 01, 2009
A scheduled alliance summit has been postponed indefinitely, a sign of the strain the alliance is under.

Just a couple of months into his presidency, Thabo Mbeki is facing a crisis over job losses and associated labour unrest. Suddenly the whole direction of the economy and the ANC’s alliance with the South African Communist Party (SACP) and the Congress of South African Trade Union (Cosatu) is on the line. The news that a summit of the ANC and its alliance partners, scheduled for earlier this month, has been postponed indefinitely, is a sign of the strain the alliance is under.

Having failed to shore up the gold price with appeals to the left-of-centre governments and trade unions of Britain, France and Germany, Mbeki’s options are all extremely tough, particularly since he is committed to a programme of privatisation which, initially at least, is bound to result in further job losses. Already the SACP leader, Blade Nzimande, has demanded an immediate moratorium on all retrenchments to stop the “job loss blood bath”, a stand supported by Cosatu’s acting general secretary, Zwelenzima Vavi (also an SACP member).

The July/August issue of the SACP’s paper, Umsebenzi is demanding “an aggressive state-led developmental programme”. It wants to see the market rolled back, state subsidies extended and an acceptance that “capitalism constitutes one of the biggest threats to our fledgling democracy”. Democracy and social advance, it warns, are “threatened by the dominance of the profit motive and the fact that the bulk of the wealth of this country still remains in private hands.” In order to push through this advance towards socialism the SACP must strengthen its presence at mass level by taking up “the key question of jobs, focusing on job creation, fighting retrenchments, seeking worker-friendly labour market reforms”.

“The very forces that voted for the ANC — notably the working class, the urban and rural poor — need to be mobilised at the centre of the transformation process”. One need look no further for an explanation of the current wave of strikes, marches and protests. Irrespective of the rationality or otherwise of particular wage or job demands, the SACP and Cosatu are attempting to position themselves, as Umsebenzi puts it, “to play an effective role in the acceleration of change”. Or, to put it another way, to try to ensure that they achieve a virtual necklock on the new government, exercising maximum pressure for the adoption of its programme right along the line.

Mbeki does not wish to accept this agenda, but neither does he wish to reject it outright at this point. So his first option is to give in to union pressure and attempt to save jobs by increasing state subsidies to loss-making industries. Given the key role the SACP and Cosatu played in securing his election victory last month this option cannot be dismissed but it would leave his economic policy in ruins. It would also make nonsense of his exhortations to the Organisation of African Unity that Africa must adapt itself to the global marketplace. But if he takes the second option, bites the bullet and accepts the job losses, the political damage will be severe and could exercise intolerable strains on the ANC alliance. Mbeki is carefully saying absolutely nothing about which way he will jump: this will have to be gradually deconstructed and decoded over time.

The probability is that the president will attempt to fudge the choice. He will try to save some jobs here and there, deflecting pressures by the cunning use of patronage wherever he can and trying in what public utterances he makes to balance the different wings of the movement in the general cause of maintaining its unity. The decision to demonise the Democratic Party by labelling it “neo-Nazi” and “neo-fascist” in part derives from this need for unity. All sections of the ANC can enjoy this new form of blood sport, thus providing a bonding experience at a time when real unity is under unparalleled pressure.

Mbeki’s third option is to cut interest rates sharply producing a devaluation of the Rand. Devaluation reduces mine costs in dollar terms and can thus restore mines to profitability at a stroke. However it will not prevent job losses in textiles, the railways or the civil service and it can hardly be seen as a long-run solution. And the fact that the Rand has already fallen by half in the ANC’s first five years weighs heavily upon the government and Mbeki is known to want a stronger currency. Lower interest rates would also make South Africa a far less attractive place in which to park short-term hot money and a gaping hole will open up in the current account balance — unless a far greater amount of direct foreign investment can be secured.

A strong flow of inward investment is the one factor that could waft away all these problems. The great miscalculation of the Mandela years was the idea that this could be achieved simply by sending the great man abroad to ask for it. “The more I heard him say we deserve your money”, one major foreign investor confided, “the more I knew that he simply didn’t understand capitalism. Mandela’s a fine man but I don’t invest in countries like that.” Secondly, Mbeki and Mandela seem to have believed that simply by announcing Gear in 1996 they could turn on the investment tap. But in practice the market wants deeds not words.

And this is the nub of the matter. The market is demanding not just that the government moves briskly ahead with privatisation, abolishes exchange controls and repeals the crazy labour laws, though that would be a good start. In addition, strong measures have to be taken to stop the brain drain — indeed to reverse it — and to make it as easy as possible for highly skilled foreigners to settle here. If Mbeki is to win the holy grail of large-scale foreign investment he not only has to junk a large part of his programme but he is going to have to do it up front and publicly, slamming hard into those parts of the alliance which want to stop him. It cannot be done by stealth.