Albatrosses hanging around Mbeki's neck

Alex | Sep 29, 2009
Patrick Laurence assesses the obstacles Mbeki will need to overcome in his war against poverty.

Summary - Bolstered by a massive endorsement from the electorate, president Mbeki is about to intensify the campaign against poverty. He is in a very good position to do so because of the financial prudence of the past ten years, which has re-established macro-economic stability. This has enabled finance minister Trevor Manuel to set aside R40 billion for community welfare and poverty alleviation and to finance an ambitious public works programme. On the downside, however, Mbeki begins his second term with several albatrosses hanging round his neck. Deputy president Jacob Zuma, for example, is not an asset to the government while the taint of corruption lingers about him. It is still open to question whether the government exercised financial discipline when it signed the arms deal, and this assumes renewed relevance in light of the huge demands that poverty alleviation is likely to impose over the next five years. The affordability team that examined the financial implications of the arms deal reports that the sums involved are ‘extremely large’ and extend ‘over long periods with high breakage costs’, and that the off-sets in the form of local investment ‘cannot be guaranteed’. The government could well find itself over-extended financially and may come to regret the commitments it made when it signed the arms deal. Frederik van Zyl Slabbert, noting that nearly two-thirds of government revenue comes from corporate taxes and personal income tax paid by four million citizens, asks whether the government will give in to the temptation to increase the tax burden on these revenue sources. This would almost certainly discourage foreign investment. Mbeki may face another problem, for which Sydney Mufamadi, minister of local government, is largely responsible. Local government is the most important site for the delivery of services on which the poor are heavily dependent. It is also the level where administrative competence is weakest. This does not bode well for the ANC, particularly as the new social movements such as the Anti-Privatisation Forum are strongest at local government level. The chances are thus high that local government could become a fiercely contested terrain between the ANC and the radical left.

President Thabo Mbeki, bolstered by a massive endorsement from the electorate in the 14 April election, is poised to intensify the campaign against poverty and thereby give greater substance to the decade old African National Congress promise of "a better life for all".

At the start of his second and last term as president, Mbeki is almost certainly in a better position to push back the frontiers of poverty than either Nelson Mandela was when he assumed office as South Africa's first fully democratically elected president in 1994 or than Mbeki himself was when he started his first term in 1999.

The reason is simple. The regime of financial prudence, introduced during Mandela's presidency and continued during Mbeki's first term in office, has re-established macro-economic stability in South Africa, through reductions in the public sector debt, the fiscal deficit and the level of inflation and positive, though less spectacular, increases in direct foreign investment, economic growth and per capita income.1

These achievements have set the stage for finance minister Trevor Manuel to set aside R40 billion for community welfare and poverty alleviation and to finance an ambitiously expanded public works programme to combat unemployment. Standard Bank chief economist Iraj Abedian succinctly sums up the situation: after a decade of democracy the country has "its best chance ever" to deal with the challenges of poverty alleviation, unemployment and social redress for past injustice and neglect.2

But, on the downside, Mbeki begins his final term as president with several proverbial albatrosses hanging about his neck, for which he cannot feasibly blame the previous white-dominated political order.

While the deputy president, Jacob Zuma, helped to rally ANC loyalists during the election campaign, he can hardly be identified as an asset for Mbeki for the task ahead, not while the whiff of venality continues to hang over Zuma's head.

It bears repeating that the national director of prosecutions, Bulelani Ngcuka, is on record as saying that there is a prima facie case of corruption against Zuma, meaning, in strict legal usage, that the evidence against him is strong enough for prosecution though not necessarily for conviction.

It does not help that papers filed before court in the pending corruption case against Durban businessman Shabir Shaik identify Zuma as the recipient of money and favours from Shaik. Neither does it help that Zuma avoided an opportunity to state his case before the Hefer Commission of Inquiry into allegations that Ngcuka might have been an "apartheid spy" at a time when Zuma was the ANC's head of intelligence.

While the ANC government might have exercised impressive financial and fiscal discipline generally, the question of whether it did so when it signed the multi-billion rand arms deal is open to question. Terry Crawford-Browne, of Economists Allied for Arms Reduction, thinks not. He has, in colloquial phraseology, put his money where his mouth is. Having lost an attempt to persuade the high court in Cape Town to declare the deal unconstitutional, he is seeking leave to take the issue on appeal to the Constitutional Court.

The findings of the affordability team that examined the financial implications of the arms deal assume renewed relevance in light of the huge demands that poverty alleviation is likely to impose on government in the next five years. The team's report warns that the payment obligations will stretch well into the future. The bulk of the payments are scheduled to take place between the years 2001 and 2013, a period which, significantly, includes the whole of Mbeki's second term.

The report warns further that the sums involved are "extremely large", that the contractual commitments extend "over long periods with high breakage costs" and that the off-sets, in the form of industrial and defence participation investments by the winning armament corporations, "cannot be guaranteed"3.

With a concerted drive against poverty high on the agenda for Mbeki's second term, the government may find itself over-extended financially. It may consequently regret the commitments that it made when the arms deal was signed, particularly if it is forced to pare back on funds budgeted to ensure "a better life for all".

In a perceptive dissection of the possible ramifications of the huge expenditure commitments on community welfare and poverty relief, political analyst Frederik van Zyl Slabbert asks how long South Africa's economy will be able to bear the burden4. Having noted that nearly two-thirds of the revenue available to government comes from the personal income tax contributions of about 4 million citizens and the corporate taxes paid by business, he asks whether the government will succumb to the temptation of seeking to increase the tax burden on these sources of revenue if it begins to run out of money.

He leaves the question open while suggesting, albeit indirectly, that the government may take the option of imposing additional taxes to buy off possible political discontent arising from shrinking funds for community welfare and poverty alleviation. Additional taxes will almost certainly have adverse implications for foreign investment.

Another entrapment might be lying in wait for Mbeki, for which his minister of local government, Sydney Mufamadi, must shoulder most responsibility.

Local government has been identified as the most important site for the delivery of social services on which the poor are heavily dependent. It is a sphere of government where ANC dominance is more pronounced than at national and provincial level but where administrative competence is weakest. The coalescence of these factors is not particularly auspicious for the ANC, particularly as the new social movements - from the Anti-Privatisation Forum in Johannesburg to the Anti-Eviction Forum in Cape Town - are strongest at local government level.

The chances are high of local government becoming a fiercely contested terrain between the ANC and the radical left or what the ANC establishment is wont to label the "ultra-left". It will bring ANC cadres and their often-corpulent seniors face-to-face in contestation with populist champions of the poor or, - as one trade union leader has pejoratively referred to them - "ill-informed demagogues."5

There is a certain irony - perhaps even a micro-scale historical nemesis - in that. The ANC government's capacity to deliver may well be adversely affected by the HIV/Aids epidemic. A recent leaked survey discloses that 100 000 civil servants are HIV-positive.6 It is a situation for which Mbeki cannot escape responsibility because of his long flirtation with Aids dissidents and their denialist stance on the modern plague.

Endnotes
1 Government discussion document: Towards a ten-year review.
2 ThisDay, 26 April 2004.
3 Democracy and the Arms Deal by Judith February of the Institute for Democracy in SA.
4 Rapport, 18 April 2004.
5 Quoted in Eddie Webster and Sakhela Buhlungu, The State of Trade Unionism in South Africa.
6 Southern African Report, 23 April 2004.