Despite the 1994 political victory against apartheid, its economic legacy persists by Haydn Cornish-Jenkins

Abstract

In 1994, South Africans were liberated from a system of apartheid which had controlled their lives for nearly fifty years. Twenty-one years later, South Africa remains one the most unequal countries in the world; a small group thrive whilst the majority are economically underprivileged or live in poverty. The apartheid economy was designed to favour the Whites, however, it is debatable if real economic change has been experienced since the end of the political manifestation of apartheid. In this paper I argue that the economic legacies of apartheid persist in modern South Africa, primarily due to the employment of neoliberal policies since the 1990s. My analysis focuses on the disadvantaged economic situation of the African racial group, comparing them to the White racial group. Analysis of the Coloured and Asian racial groups’ economic situations is not covered due to limitation. The paper is split into three sections. Firstly, I argue that apartheid was intertwined with the South African economy. Secondly, using recent data, I demonstrate that the African group are disproportionately the economically underprivileged. Finally, I argue that the economic legacy of apartheid has been maintained by neoliberalism which created a biased economy. 3

Although the system of apartheid was discontinued in 1994, South Africa remains one of the most unequal countries in the world (Ngepah & Mhlaba, 2013). Those who were repressed by the system have experienced political liberation, however, the economy still appears to work in the favour of the White minority (Terreblanche, 2002). In this paper, I argue that the use of neoliberalism in South Africa since the 1990s has maintained the economic legacy of apartheid which disadvantages the African majority. In order to properly analyse the economic implications of apartheid I assess the economic structure before, during, and after apartheid. Firstly, I outline the rise and fall of apartheid, paying particular attention to its economic motivations and consequences. Secondly, I draw on data from the most recent census to show that the African racial group is still at a disadvantage compared to the White racial group. Assessment of the economic situation of the other racial groups, Coloureds and Asians, will be foregone due to limitation; however, to properly understand the bias in the economy further analysis of these groups would be required. In the final section, I argue that neoliberalism is the major cause of the continued economic legacy as it built the post-apartheid economy on top of an unfair repressive system.

The Rise and Fall of Apartheid

Apartheid was introduced by the National Party in 1948 following their election success; the system was designed to withhold citizens’ rights from all non-White members of South Africa (Clark & Worger, 2004). It is important to note that apartheid was not the start of racial segregation in South Africa. Since the formation of the Union of South Africa the government had employed racial segregating policies, such as the formation of the ‘homelands’ in 1936 which limited where Africans could live (Deegan, 2001, p.25). Instead apartheid can be seen as the crystallisation of segregation. The system divided the population by alleged racial groups: Africans, Coloureds, Whites and Asians (Clark & Worger, 2004). All political, social, and economic aspects of people’s lives were governed by these categories. For example, the Reservation of Separate Amenities Act enforced racial 4

segregation in all public areas such as transport and leisure activities (Deegan, 2001). South Africa essentially acted as a police state during the period of apartheid, any opposition was quickly supressed (Clark & Worger, 2004).

Many argue that apartheid was simply segregation under a new name, based on the ideological belief that races should not mix; however, Wolpe (1972) argues that it was motivated by economic reasons. For Wolpe, apartheid developed as a response to the challenges faced by the system of cheap labour in South Africa. Before apartheid, South African capitalists had benefitted from a cheap low skilled workforce made up of migrant African workers. These workers lived with their families in the ‘homelands’ and migrated for work. Their families worked the land to provide a level of subsistence whilst the workers migrated. As workers had additional support, employers could pay the migrant workers a wage below that needed for subsistence, hence, the employers could maximise profit whilst maintaining a workforce. Wolpe argues that this cheap labour system started to erode due to the deterioration of the soil standards in the homelands. As the land was overpopulated and had little investment, the soil became unable to produce the food needed for subsistence. Families no longer had enough income to survive which resulted in protests, strikes, and mass urban migration. Apartheid, Wolpe argues, responded to this breakdown and managed to maintain the cheap labour supply. Instead of using subsistence, apartheid used repression to remove workers’ rights, control workers’ geographical mobility, and stop upwards pressure on wages. This economic importance of apartheid for the White minority should not be overlooked. Relying on the low wages maintained by apartheid, South African firms had an average annual profit of 25% by the early eighties compared to 6.5% in Britain at the same time (Clark & Worger, 2004, p.63). The economic improvements were only experienced by the Whites, whereas for Africans the situation became worse. In 1971, the real African mine wage was lower than it had been in 1911, and African factory workers were paid 18% of their White counterparts’ wages (Clark & Worger, 2004, p.63). 5

In South Africa, Africans had always rallied together against segregation, their response to apartheid was no different (Lodge & Nasson, 1992). The most well-known group who participated in the anti-apartheid movement was the African National Congress (ANC), but they were not alone; many political parties, trade unions, and people’s movements opposed apartheid (Lodge & Nasson, 1992). The aspirations of the anti-apartheid movement was not simply to end apartheid but to create an equal society free of segregation; these goals were clearly set out in the ANC’s freedom charter which was adopted by numerous anti-apartheid groups (Deegan, 2001). The freedom charter called for universal rights and suffrage for all members of South Africa’s society to promote political equality. Furthermore, the freedom charter had economic ambitions; it called for the realisation of workers’ rights and the transfer of the national wealth back to the people (Deegan, 2001). This recognition of the need for economic reform again indicates that apartheid played a crucial role in South Africa’s economy.

The anti-apartheid movement used a variety of tactics to oppose apartheid; these included mass demonstrations, boycotts, strikes, and armed struggle (Lodge & Nasson, 1992). In 1989, the election of reformist F.W. de Klerk marked a change for apartheid (Glad & Blanton, 1997, p.567). In 1990, he shocked the world by announcing the release of Nelson Mandela an ANC political prisoner, the legalisation of previously banned political parties such as the ANC, and the repeal of the Separate Amenities Act (Glad & Blanton, 1997, p.567). Between 1990 and 1993, the National Party lead by de Klerk and the ANC lead by Mandela met many times for negotiations over the future of South Africa. In 1993, they announced that the first democratic elections would be held the following year under the proviso that a government of national unity (GNU) would share power for the first five years to ease the transition (Glad & Blanton, 1997, p.568). In 1994, the GNU was formed of the ANC, the National Party, and the Inkatha Freedom Party; which sought to ‘heal the divisions of the past’ and quickly passed a new constitution which enshrined many of the rights included in the freedom 6

charter (Clark & Worger, 2004, p.113). The 1994 elections mark the end of the political manifestation of apartheid, and for many represented hope for the future of a fair South Africa.

The Economic Legacy of Apartheid

Twenty-one years later, although politically apartheid has finished, the economic legacy arguably lives on. As shown above, apartheid determined the structure of the economy by benefiting the Whites and forcing the African workers into low paid labour. Some improvements regarding inequality were made by the GNU and the following ANC governments. The most significant social-economic achievement is the provision of basic services to those in most need. Between 1994 and 2000, the government improved water access for four-million people, improved sanitation for three-million people, built around six-hundred new health clinics, built over one-million new houses, and electrified 1.5 million homes (Aliber, 2003, p.476). There has also been a growth in the black middle-class, whose numbers increased by 78% between 1991 and 1996, which is largely credited to increased social mobility in post-apartheid South Africa (Seekings & Nattrass, 2005, p.309). However, enhanced opportunities at the top have mainly failed to bring more opportunities for those at the bottom (Seekings & Nattrass, 2005). Inequality in general has not changed significantly since the 1994 elections as both in 1995 and 2011 the Gini Coefficient was 0.65 (SSA, 2014, p.35); however, this measurement does not distinguish between interracial and intra-racial inequality. In this section I argue that interracial inequality is still an issue in South Africa.

In order to argue that Africans are still unfairly disadvantaged in the modern South African economy, I will present data on three different variables: income and poverty, unemployment, and education. Using the most recent census data from 2011, it is clear that Africans on average receive a much lower income than the other racial groups. The 2011 average annual income for a White household was six time higher than the average annual income of an African household (SSA, 2012, p.42). This 7

means that Africans are more vulnerable to poverty than other groups. In 2011, 54% of Africans lived in poverty, whilst only 0.8% of Whites lived in poverty (SSA, 2014, p.27). In order to fully comprehend how unequal interracial income is in South Africa the following statistic is effective: 94.2% of all South African individuals living in poverty are African, a figure that has been increasing since 2006 (SSA, 2014, p.27).

Unemployment also disproportionately affects Africans. In 1999, 45% of Africans were unemployed, and of this group 73% had never been employed in the past (Aliber, 2003, pp.478-79). This figure has since increased, by 2011, 46.35% of Africans were unemployed, compared to 10.3% of Whites (SSA, 2012, p.52). Unemployment is particularly devastating for Africans due to only a small percent of them owning arable land (Seekings and Nattrass, 2005). This means that once Africans fall into unemployment they have no available subsistence farming to support them, which explains the high percentage of Africans living in poverty.

Education data gives a prima facie reason to think that the economic situation for Africans is improving. In the 2011 census, 74% of Africans between five and twenty-four were attending an educational institution; this is a very similar percentage to Whites where 78% of the age group were in education (SSA, 2012, p.32). However, econometric analysis of incomes shows that the similar levels of education do not translate to similar earnings. Looking at the average earnings of Africans and Whites who both completed university, Africans earned only 63% of their White counterparts’ wages (Sherer, 2000, p.318). This diminished value of African education attainment has two possible explanations. Either, the educational institutions which Africans typically attend provide a lower quality service than the White institutions; or, employers are being covertly racist by choosing White employees for higher paid jobs (Sherer, 2000). Regardless of the reason, the fact that educated Africans are paid less than educated Whites is a barrier for Africans who are trying to escape poverty and hardship through education. 8

Addressing the above data, it is clear that Africans are still relatively disadvantaged in the South African economy compared to Whites. I argue that this demonstrates that the economic legacy of apartheid has been maintained. Furthermore, academics are not the only ones who have observed this unequal economy; a relatively new South African political party, the Economic Freedom Fighters (EFF), also argue that ‘the economic system which marginalised oppressed and exploited the black majority is still intact’ (EFF, 2013). The EFF argue that those who ruled through apartheid still have economic privileges and exploit the African workers. Theoretically, in a capitalist economy there should not be vast differences in income and unemployment between racial groups, only between economic classes (Terreblanche, 2013). Hence, the governments since 1994 have failed to remove the economic manifestation of apartheid. In the following section I will discuss why this might be.

Neoliberalism: Playing a Rigged Game

Before the 1990s, the ANC supported an economic model which held redistribution as a central theme (Habib & Padayachee, 2000). Although they were never specific on what form of economy they would advocate, they supported an interventionist state which would address the injustices of the past. For example, in 1990 when Mandela was released from prison he made a speech in which he stressed the importance of redistribution and nationalisation (Habib & Padayachee, 2000, p.248). However, between 1990 and the 1994 elections, the ANC’s policies on redistribution slowly became softer. In 1992, the ANC’s policy conference effectively removed nationalisation as a policy option and radically changed their stance on foreign investment from cautious to supportive (Habib & Padayachee, 2000, p.249). This is not to say that the ANC completely abandoned social democratic principles; for example, in 1993 they adopted the Reconstruction and Development Program (RDP) which envisioned an important role for the state in regulating and leading the economy through government spending (Aliber, 2003). The RDP also aimed to redress the imbalance of power 9

between employers and employees (Deegan, 2001), a structure which had been created by apartheid. However, it is clear that the ANC was moving towards a market-oriented approach even before the elections (Aliber, 2003).

The shift in the ANC’s economic vision meant that the GNU’s policies were increasingly neoliberal. RDP was formally adopted by the GNU following the elections; however, it was short lived as it was effectively replaced in 1996 by the Growth, Employment and Redistribution (GEAR) program (Deegan, 2001, p.119). GEAR advocated a neoliberal approach which reduced the government’s role and promoted the market by increasing privatisation and deregulation (Habib & Padayachee, 2000). Unlike RDP, which sought to directly address the inequalities of the past, GEAR encouraged redistribution through the market (Aliber, 2003). The ANC have continued to embrace neoliberal policies during their consecutive terms in office (Ngepah & Mhlaba, 2013).

The founders of neoliberalism based their theory on the premise that human dignity and individual freedom are fundamental to well-being (Harvey, 2005). They argued that these values were threatened by state planning and interventionist policies which were inevitably biased towards the interest group that held the balance of power (Harvey, 2005). Alternatively, by maximising the use of the market, individuals would be free to make their own decisions and achieve well-being without interference. In order for this to be achieved, elements of economic governance which had previously been controlled by democratic institutions would be transferred to private institutions through processes of privatisation and deregulation (Harvey, 2005). Neoliberalism was initially brought into the mainstream after the failure of Keynesian policies in the 1970s; the theory was championed by Margaret Thatcher in the UK from 1979 and Ronald Reagan in the US from 1980 (Harvey, 2005, p.22-24). By the time the ANC came to power in the 1990s, they faced an international consensus on neoliberalism which had been spread across the world through international institutions such as the International Monetary Fund (Habib & Padayachee, 2000). The 10

prevalence of neoliberalism is one of the potential reasons that the ANC adopted their market-orientated economic approach. Crucially for them, the majority of South Africa’s trading partners also employed neoliberalism and their domestic businesses lobbied for the same (Terreblanche, 2002). Regardless of why the ANC adopted neoliberalism, I argue that it is responsible for the persistence of apartheid’s economic legacy due to its mode of distribution.

A neoliberal economy can be analogised to a card game. The economy functions similarly to a game of cards where everyone holds a random hand which they then use to gain points by taking risks and working hard. Some players succeed whilst others lose. In comparison, a state-controlled economy is similar to a game where the cards are purposely allocated to the players in an order that enables everyone to win points during the game. In the neoliberal game, as the cards are dealt randomly, the player’s success is down to hard work and luck, importantly the game promotes freedom of choice. However, if prior to the game the cards have been rigged so that a few players benefit, the game will be unfair and will fail to provide true freedom.

By establishing a neoliberal economy on a structure which was already biased to a group of individuals, the ANC have created an economy similar to a rigged card game. The problem for neoliberalism in South Africa is that as the market does not factor in power, the theory embeds any power imbalances present before its introduction (Harvey, 2005). When apartheid ended the Whites were left with significant advantages; compared to the other racial groups they owned disproportionate amounts of land, capital, and wealth (Clark & Worger, 2004). They also controlled the majority of human capital as a higher percentage of White individuals had been educated during apartheid (Sherer, 2000). Building this unequal distribution into the card game analogy, when the neoliberal ‘game’ started the deck was already manipulated to help the Whites. They held the most powerful cards, hence, they made the most points and were predominately winners. The Africans on the other hand entered the game with a hand of cards worth practically nothing, hence, they were 11

largely unsuccessful in the game as their chances of winning were slim. This does not mean that all White players won and all African players lost; instead, it means that the majority of winners were White and the majority of losers were African.

This analogy matches the economic inequality I have already presented. The ‘winners’ of the system are the Whites who held capital before the transition and a small group of African bourgeoisie who gained capital during the transition; whilst the losers are predominately disadvantaged Africans (Habib and Padayachee, 2000). When the ANC came to power they could have reshuffled the deck through redistribution and social democratic policies to create an equal footing for everyone (Terreblanche, 2002), instead, they decided to allow the people to play with the injustices of the past still affecting them. The rigged system of neoliberalism in South Africa is the reason that the economic legacy of apartheid still exists.

Conclusion

The above analysis has produced two arguments. Firstly, the South African economy still carries the characteristics of apartheid as the Africans are disproportionately disadvantaged compared to the Whites. Secondly, the employment of neoliberalism in South Africa has meant that the unequal distribution prior to apartheid has remained. Combining these two arguments, I conclude that the use of neoliberalism is the primary reason that the economic legacy of apartheid persists in modern South Africa. This is a morbid conclusion as, in the words of the EFF (2013), ‘political freedom without economic emancipation is meaningless’.