South Africa

Caught in neoliberal trap

Print edition : March 18, 2016

Supporters of the EFF march towards the constitutional court in Johannesberg where judges were hearing the case over President Zuma spending public money on his retirement home in KwaZulu-Natal. Photo: John Wessels/AFP

Jacob Zuma, President of South Africa. Photo: Nic Bothma/AP

Julius Malema, leader of the Economic Freedom Fighters party. Photo: SIPHIWE SIBEKO/Reuters

Atul Gupta welcoming guests arriving for a family wedding at the Waterkloof Air Force base in May 2013. The company he created from scratch is among the biggest conglomerates in the country today. Photo: Eye Witness News/AFP

Charges of corruption, cronyism and nepotism against President Jacob Zuma have put the government on the back foot in a country already reeling under high levels of economic inequality and unemployment.

President Jacob Zuma is under enormous political pressure, both from within his party and from the opposition, on an array of issues. His handling of the economy has been particularly under the scanner. Plummeting commodity prices have hit the South African economy hard, which is heavily dependent on mineral exports. The mining sector, dominated by big conglomerates, accounts for 35 per cent of the country’s exports. It is the second largest economic sector after agriculture. Since the end of the last year, the value of the South African currency, the rand, has been steadily falling. Concurrently, inflation has been rising. South Africa has one of the highest levels of economic inequality in the world and an unemployment rate of around 25 per cent. Unemployment is higher today than it was during the apartheid regime.

South Africans blame corruption and cronyism for the problems they are facing today. A recent opinion poll revealed that 83 per cent of the people believed that corruption was on the rise in South Africa. There have been quite a few instances of high-level corruption. The head of the South African railways was caught using company funds for taking luxury holidays with female friends. The company’s chief engineer was found to have a fake degree. The railways spent $200 million importing carriages from Spain which were not suited for the country’s railway tracks. There was a lot of documented corruption during the 2010 football World Cup hosted by South Africa. Companies illegally overcharged more than $5 billion for construction contracts relating to the world cup.

The current Deputy President, Cyril Ramaphosa, is one of the richest South Africans. He was a former trade-unionist who had played an active part in the decolonisation struggle. But after the African National Congress (ANC) took over, he became an entrepreneur and within a short period, with help from the white captains of industry, became part of the business elite. Many former ANC and trade union leaders who were at the forefront of the struggle against apartheid have gone into business and have become immensely wealthy.

In early February, protesters belonging to the opposition parties took to the streets of Pretoria and accused the President of being corrupt and having close links with an Indian business house. Atul Gupta, an Indian entrepreneur from Saharanpur in Uttar Pradesh, had come to South Africa in 1993, before the formation of the first ANC government. He started cultivating top ANC leaders after the collapse of the apartheid regime. Today, the company he created from scratch is among the biggest conglomerates in the country, with stakes in gold, uranium and coal mines in South Africa and other countries in the continent. The Guptas also own a pro-government newspaper and a 24-hour television news channel in South Africa.

Critics of the ruling party allege that the Gupta family’s spectacular financial success owes a lot to the patronage extended to it by leading figures in the government, particularly President Zuma. Three of the President’s close relatives are employed by Gupta and includes his son Duduzane Zuma, who is a director in one of the Gupta companies. In 2010, the state-owned Industrial Development Corporation (IDC) lent $17 million to a Gupta company and Duduzane Zuma to buy a uranium and gold mine. The IDC claimed that the deal was above board and turned out to be a profitable one as the mining company bucked the general trend and was making a profit. No workers had been retrenched and the IDC converted its loan into a stake in the company.

The Guptas became international tabloid fodder in 2013 when they flew more than 200 guests in a chartered plane from India to the high security Waterkloof Air Force base in Pretoria for their niece’s wedding. Commercial planes are not allowed to land at the air base. After a public outcry, the government ordered an inquiry. The inquiry report said the Guptas got the Indian embassy to make a request to the South African government for permission to land at the air base, stating that the guests were on an “official” visit. Virendra Gupta, the Indian High Commissioner to South Africa at the time, justified the request saying that senior Indian Ministers and politicians were on board the plane. The report said the Guptas then falsely invoked Zuma’s name to get clearance for the plane to land at the high security air force base. Many senior Ministers in the Zuma Cabinet were guests at a lavish reception hosted by the Gupta family at Sun City.

The opposition parties also alleged that Mosebenzi Zwane, the Minister of Mines whom Zuma appointed in September last year, had close links with the Gupta family. “Welcome to the Gupta Republic of South Africa: The New Minister of Mines is an extension of the Gupta family,” a press handout issued by the populist opposition Economic Freedom Fighters (EFF) party said after the appointment was announced. For the upcoming countrywide local elections, the EFF has made the Gupta-Zuma linkages the centrepiece of its campaign strategy.

“We cannot allow a situation where South Africa is being colonised by a family,” the EFF’s firebrand leader Julius Malema said recently. Zwelinzima Vavi, a respected leader of the South African trade union movement and a former high-ranking ANC official, said the South African government now served only big business and the ruling elite. He alleged that the Guptas were “a shadow government and a sign of what is wrong with our country”. The new rallying cry of the EFF is “Zuptas should fall”, a cryptic reference to the alleged connection between the Zumas and the Guptas. “The flow of cash is so much that money has more power than political ideology and political consciousness—that is the biggest threat to the ANC,” said Gwede Mantashe, the ANC Secretary General.

The opposition parties alleged that the Guptas had a hand in the disastrous reshuffling exercise in the Finance Ministry which Zuma carried out late last year. Zuma first sacked Finance Minister Nhlanhla Nene on December 9. Reports in the South African media said the Minister was sacked because of his opposition to many of the President’s decisions, including a $50-billion deal for the construction of nuclear plants that Zuma and Russian President Vladimir Putin signed. Nene, apparently, was of the view that deal was financially prohibitive. The opposition claimed that the Guptas would be among the beneficiaries of the deal as the uranium for the nuclear plants would come from their mines. But it is also a fact that South Africa is in dire need of assured energy supplies.

Nene was replaced by a relatively unknown technocrat, David van Rooyen. The news of his appointment sent shares and stocks of South African companies plummeting. There was strong criticism from within the ANC too about the appointment. Zuma was virtually forced to remove the newly installed Finance Minister and replace him with Pravin Gordhan, who had held the position before.

Serious charge

Probably the most serious charge of misuse of office against the South African President relates to the millions spent to upgrade his retirement house in Nkandla, in KwaZulu-Natal province. The President had used state funds to the tune of $19 million to refurbish his large compound, which boasts a swimming pool and a helipad. He offered to reimburse a part of the money to the exchequer, but the opposition is not satisfied. It wants him to quit office on this issue. It is suing the President in the country’s highest court on charges of violating the Constitution. The public prosecutor appointed by the government had ruled that Zuma should fully reimburse the state for the expenses incurred in the construction of his luxury retirement home. A constitutional court is hearing the case.

However, according to many South African commentators and economists, the roots of the country’s economic malaise is directly related to the ANC-led government’s decision to adopt neoliberal policies, two years after it came to power. The ANC’s partners in government, the South African Communist Party (SACP) and the Confederation of South African Trade Unions (COSATU), were willing parties to this decision. Post-apartheid denationalisation allowed many of the conglomerates to restructure and move many of their operations and investments overseas. A small but powerful black capitalist class has allied itself with white corporate interests.

Land reforms and public housing were put on the back burner. The private sector’s share of the GDP grew from 6.5 per cent in 1994 to 20 per cent in 2009. The in-house coup by the ANC against Thabo Mbeki was spearheaded by a group of left-wing leaders who felt that the government had deviated from the core principles of the alliance on issues such as land reforms and labour rights. Zuma was masquerading as a populist leader at the time. Among his main supporters then were people like Julius Malema and Zwelinzima Vavi, who hoped that Zuma would reverse the pro-business policies that were in place since the time of the Mandela presidency. But once in office, Zuma continued with the old policies. Malema and Vavi were later expelled from the ANC and went on to form their own political outfits.

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