Political opponents, radical university students and his own party’s establishment smell Jacob Zuma's blood, writes Patrick Bond.
Several contradictions have exploded in President Jacob Zuma’s face. Political opponents from across the spectrum, radical university students and his own party’s establishment smell the blood, as Zuma’s fabled patronage system is in the spotlight, apparently now in tatters.
Zuma has suffered two major legal defeats: the fumbled state attack on Finance Minister Pravin Gordhan, which was humiliatingly withdrawn by a prosecutor after a national outcry, and the release of the public protector’s “State of Capture” report on the Zuma family’s relationships - a report he and two cabinet colleagues unsuccessfully attempted to quash.
While Zuma tried delaying tactics, rumblings at the base have grown louder. The EFF and DA held anti-Zuma marches last week, with Julius Malema clearly distancing himself from a third event - the Save South Africa people’s assembly at St Albans Cathedral in Pretoria.
Prior to the 355-page State of Capture report, Malema’s deputy Floyd Shivambu had written the most thorough analysis of the Gupta brothers’ influence.
Meanwhile, other proletarian elements are also growing restless.
One of the three most important trade unions still backing Zuma, the National Education Health and Allied Workers Union (Nehawu), announced last Tuesday it now wants the president to resign. It follows the National Union of Metalworkers of SA (Numsa), which did so in late 2013.
As a former guerrilla fighter with no formal education, Zuma, 74, is a genius at maintaining not only talk-left walk-right ideological flexibility, but also membership loyalty within his ethnic group and the KwaZulu-Natal, Mpumalanga, Free State, North West and Limpopo political leadership.
Recall that in the municipal elections, the ANC lost 8 percent of the vote compared to 2011, but won handily in most of these areas.
Zuma is, however, potentially threatened again by 783 corruption charges relating to bribery in a French military deal. But the main day of reckoning could dawn primarily because of the Gupta family’s links to him.
South Africa still remembers with trepidation the four days following Finance Minister Nhlanhla Nene’s firing last December, which provoked a currency crash and a business uprising led by three white bankers (from Absa, Goldman Sachs and Investec), which forced Zuma to replace the hapless Des van Rooyen - the Gupta-friendly appointee - with Gordhan, who had served in the same job to corporate applause from 2009 to 2014.
Throughout 2016, Gordhan’s stance has become increasingly untenable, thanks to the economic downturn and repeated attempts by Zuma allies to prosecute him for what appear to be either nonsensical claims or relatively trivial misdeeds in his prior role in the tax authority.
Just as the economy has barely dodged a recession, Gordhan’s 2016 budgetary manoeuvres have been complicated by rising popular dissent - and threats of a junk-bond-rating downgrade.
That junk rating has long been threatened by the local managers of three agencies: Moody’s, Fitch and Standard & Poor’s. But while Gordhan goes to great lengths to appease them and the financiers they front for, the three agencies are often so spectacularly wrong - such as with AAA ratings for Lehman Brothers bank and AIG insurance in 2008 - and so apparently biased towards the prejudices of Western banks, that in Goa, south-west India, last month, the Brazil-Russia- India-China- SA (Brics) alliance pledged to introduce their own.
The neoliberal financial elites in the Brics machinery ensured, however, that the wording for such an agency’s mandate emphasised “market-oriented”, so, as with the Brics New Development Bank and Contingent Reserve Arrangement, there would logically be no difference with existing institutions.
And as with Brazil and Russia, which were also given junk status recently, South Africa pays a 9 percent interest rate on its now dangerously high $135 billion (R1.8 trillion) foreign debt, which indicates that the markets already consider South Africa to have junk status.
With those three agencies firmly in mind, Gordhan revealed his latest Budget two weeks ago.
As we know, several thousand furious university students had met him for a talk at Parliament’s gates before his mid-term budget speech. They were heartbroken by his decision to offer only R5.7 billion in new grant funds, after more than a year of social debate and protest in the wake of a legacy of university underfunding by Gordhan’s predecessor, the famous neoliberal Trevor Manuel, who now works for Rothschild Bank.
But the students should not have been surprised. Gordhan did after all signal divide-and-rule budget politics during a New York interview amid his last investor road-show, on October 5.
“We have a solution which will meet the needs of the poor students, and the so-called missing middle as well,” he said, “and it’s important that students who understand the calculations, who understand the trade-offs that we need between student fees being subsidised on the one hand, and housing and welfare and health and other issues being paid for on the other hand, that they should be part of a constructive conversation.”
Across South Africa, #FeesMustFall had rejected that “solution” when it was proposed by Higher Education Minister Blade Nzimande. They well understand that state subsidies provided 50 percent of university income in 2000, but steadily fell to 40 percent today, with students covering the bulk of the shortfall.
On October 25, Gordhan again told them to borrow more to pay for their undergraduate education.
The National Student Financial Aid Scheme’s low repayment rates (12.5 percent) reflect how that is working.
Adding household debt is usually only a short-term salve, as demonstrated by the ratio of borrowers who the National Credit Regulator deems “credit impaired”: still in the unsustainable region of 45 percent, barely lower than the 2008 high.
The choices Gordhan made last month necessarily set him against the public. For example, his February Budget provided a mere 3.5 percent nominal increase to foster-care providers and a 6.1 percent rise for mothers of many millions of child support grant recipients.
However, inflation for poor people will likely exceed 10 percent, due to a 15 percent rise in basic food costs, Eskom’s 9.4 percent electricity price increase and higher transport costs.
Reflecting the gap between Pretoria’s conscience and society’s hunger, the poverty rate is now an excruciating 63 percent. But South Africa has the fifth lowest social spending rate among the 40 largest economies.
Instead of targeting social spending, Gordhan could have referenced the R233bn in annual overcharging within Treasury’s R600bn procurement budget.
Treasury’s lead procurement official Kenneth Brown recently acknowledged that “without adding a cent, the government can increase its output by 30 to 40 percent. That is where the real leakage in the system actually is”.
Why has such fiscal wastage continued for so long?
Gordhan himself admits Treasury remains confounded by systematic ANC “rent-seeking. It means every time I want to do something, I say it is part of transformation. But in the meantime, it means giving contracts to my pals in closets”. (“I” and “my” refer to the Zupta faction.)
But there are also other pals in other closets, who normally cheer on Treasury neoliberalism: the 1 percent of rich South Africans who have had an exceptional run since the early 1990s, according to a World Bank report released last month.
Post-apartheid economic policies raised their income share from 10 to 12 percent of total income (excluding capital gains) in 1990 to 1994 to 18 to 20 percent since 2009, nearly unprecedented in the world.
These are also the (mostly) men who take assets abroad illicitly. For in addition to around $11bn in net profit, dividend and interest payments that leave the country - the main reason South Africa’s current account deficit often reaches a dangerous 5 percent of GDP - there is $21bn in annual average “illicit financial flows” (as counted by Global Financial Integrity over the past decade).
This threat continues unless the Treasury and the Reserve Bank counter it by tightening exchange controls. They won’t.
Apparently without any state regulatory friction, blatant tax dodging occurs at the biggest platinum companies, especially Lonmin, with its Bermuda “marketing” arm; De Beers, with its $2.8bn in diamond misinvoicing over seven years; and MTN’s cellphone profit diversions to Mauritius from several African countries.
A strong, committed finance minister would attack such depravities, so as to find funding needed to eliminate society’s deprivations.
Since Gordhan has failed, will society now ask what rearrangement of the balance of forces is required to finally construct a democratic, developmental state? But for the next stage, the ongoing prolific protests remain on the horizon as the political dust refuses to settle.
The period ahead will not only clarify whether the liberals and their allies fighting on behalf of Gordhan and the anti-corruption cause can defeat the master of nationalist survival politics, Zuma. Just as importantly, we will learn what pressures from below can be mobilised to generate non-violent regime change in the interests of a post-Zupta, post-neoliberal Budget next time Gordhan presents to Parliament, in February.
* Patrick Bond is professor of political economy at Wits. The third edition of his book Elite Transition: From Apartheid to Neoliberalism in South Africa, is published by Pluto Press.
** The views expressed here are not necessarily those of Independent Media.
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