What Went Wrong in South
WTO globalization harks back
to 19th century imperialism
by Andrew Nowicki
Z magazine, February 2004
In 1994, Nelson Mandela was elected the
first black leader of what was hailed as a new multiracial, multicultural,
and democratic South Africa. Now in 2003 in Soweto, one of the
central battlegrounds in the antiapartheid struggle, people get
their electricity cut off and no longer have ready access to water.
Private security firms evict them from their inadequate housing.
Through 1999 and 2000, protests grew against
unemployment and privatization of basic services. Crackdowns by
the ruling African National Congress (ANC) became increasingly
repressive. In 2002, private security guards fired live ammunition
to disperse around 100 people demonstrating over electricity cutoffs
outside the home of Johannesburg's executive mayor, Amos Masondo,
in the swank Johannesburg suburb of Kensington. The ANC, aiming
to make an example, arrested the demonstrators, denied them bail,
and held them in Sun City, a notorious maximum security prison,
which formerly held anti-apartheid activists. The new South Africa
has rapidly regressed into the South Africa of old.
However, in the new South Africa the repression
is not to enforce a rigid racial hierarchy. Now, the ANC is suppressing
opposition to its policies, which have led to a marked stagnation
in economic development. Annual total gross domestic product (GDP)
has stagnated at about 1 to 3 percent since the early 1990s. Unemployment
figures in most of the country's provinces have hovered near the
50 percent mark since the late 1990s. Social services have suffered
massive cuts despite South Africa's national health emergency
due to AIDS.
The forces of neo-mercantilist globalization
responsible for South Africa's continuing economic and social
chaos were entrenched years before apartheid collapsed. Indeed,
when the apartheid government was clearly doomed, faced with overwhelming
international protests and a strong sanctions regime at the climax
of the Cold War in 1989, the international financial institutions
(IFIs) stepped in. They were determined to influence the forces
of social and economic change in the interests of international
finance and business. In the early 1990s, the World Bank sent
advisors to South Africa to recommend neo-liberal ideology and
policies promising economic growth. In 1993, the International
Monetary Fund (IMF) granted South Africa a $750 million loan conditioned
on the adoption of neo-liberal policies.
The IFI's neo-mercantilist policies emphasize
centralized corporate control over under-developed economies through
trade agreements while only allowing liberalization in areas that
the developed economies and their multinational corporations already
dominate, such as international capital flows. The globalization
currently being imposed through the World Trade Organization (WTO),
regional trade agreements, and IFI Structural Adjustment Programs
(SAPs) hark back to l9th century imperialism. Now, as then, the
resources of the imperial possessions in the periphery are directed
towards the core developed economies-these days Europe, North
America, and Japan.
Unfortunately, Nelson Mandela and the
new ANC establishment in South Africa adopted elements of the
neo-mercantilist agenda enthusiastically in the first post-apartheid
national economic program called the Reconstruction and Development
Program (RDP). The RDP did retain some redistributive elements,
but these were rapidly abandoned in favor of the Growth, Employment
and Redistribution (GEAR) program in 1996, due to the growing
influence of the neo-liberals in the ANC.
GEAR was drawn up almost solely by 15
economists picked from the World Bank, neo-liberal think tanks,
and various African development banks. The GEAR program emphasized
commercializing and then privatizing all of South Africa's public
companies and services. It drastically cut government spending
and secondary taxes on corporate profits. It meant substantially
and prematurely reducing tariffs designed to protect South Africa's
key infant economic sectors, including textiles and value-added
manufactured agricultural goods.
GEAR also liberalized capital controls
and foreign exchange rates that left the value of South Africa's
national currency, the Rand, and South Africa's import and export
economic activity highly susceptible to the volatile and rapidly
changing nature of international capital markets. Thus South Africa,
a newly emerging semi-developed economy, was forced to adopt economic
standards of liberalization that no developed economy, including
the United States, has been able to implement successfully.
GEAR Turns The Screw
South Africa's next president, Thabo Mbeki,
elected in 1999, was even more enthusiastic about neo-liberal
policies than Nelson Mandela and was one of the main political
forces behind the adoption of GEAR. The GEAR program has accomplished
the exact opposite of its stated aims. While the International
Monetary Fund (IMF) praises the fact that the GEAR programs have
resulted in an economic growth rate of around 3 percent for 2003,
the Congress of South Africa Trade Unions (COSATU) and the ANC
estimates that South Africa will need an economic growth rate
of at least 6 to 8 percent to achieve even minimal reductions
Although GEAR promised 120,000 new formal
sector jobs in its first year of implementation, South Africa
lost more than 100,000 formal sector jobs by the end of GEAR's
first year. For the remaining 11 million employed people in South
Africa in 2003, at least 4 million are employed in the volatile,
low wage informal sector and engage in temporary, subcontracted
economic activity ranging from prostitution to street hawking.
South Africa, under the ANC, has the dubious
distinction in 2003 of having a larger income gap between the
rich and poor than any other country in the world except Guatemala.
The most surprising aspect of South Africa's post-apartheid economic
programs was that the ANC embraced these programs so wholeheartedly.
South Africa, with its comparatively low foreign debt of only
around 5 percent of its total budget deficit in the 1990s, was
under no pressure from the IFIs. While highly indebted states
throughout Africa were having neo-liberal programs imposed on
them, South Africa adopted them willingly.
Patrick Bond, a professor at Witwatersrand
University in Johannesburg, termed these ANC policies "homegrown
structural adjustment." South Africans are now forced to
deal with self-imposed corporate-controlled globalization in increasingly
desperate ways that meet with increasing repression. Even though
all South African citizens are constitutionally guaranteed "sufficient
food and water" in South Africa's Bill of Rights, the ANC,
encouraged by World Bank advisors, embarked on a nationwide campaign
to privatize South Africa's public-owned and operated water systems,
contracting the management of water systems to large multinational
The ANC ignored more realistic, viable,
and legal methods of ensuring water access to South African citizens.
They might easily have funded small-scale local service providers
and maintained overall regulation of the national water system
to ensure water access to the low income groups that would not
be able to afford the new privatized water rates. Nor did the
ANC contractually obligate the water-MNCs to provide water to
the poor. The results of this privatization without corporate
accountability in a country in which the majority of the workforce
is unemployed was disastrous.
By 2001 there was a massive cholera outbreak
that spread from rural areas in Kwa-Zulu Natal Province to the
outskirts of Johannesburg. It sickened hundreds of thousands and
killed at least 300 people who had to turn to polluted, cholera-infected
water systems after they could no longer afford the water charges
of the new privately owned water companies. The cholera epidemic
cost the South African government millions of dollars as it sought
to treat infected people and contaminated river systems.
Water prices increased by 300 percent
in the town of Fort-Beaufort and to similar heights in other urban
areas throughout South Africa. In 2003, the village, town, and
city councils tried to cancel the contracts with the water multinationals
(MNCs). The urban councils are contractually obligated to pay
the debts to the MNCs. Nevertheless, the ANC continues to illegally
restrict access to water despite the constitutional right of all
South Africans to water.
The government also continues to arrest
individual citizens and members of community organizations. Prominent
among these are the Anti-Privatization Forum (APF) and the Soweto
Electricity Crisis Committee (SECC). In addition, anti-housing
eviction campaigns risk arrest and detention as they try to restore
electricity to residences, prevent housing evictions from taking
place, and destroy prepaid water meters, installed so water can
only be accessed by those who can pay.
The chairperson for the APF, Trevor Ngwane,
is a former ANC member who was expelled from the party for opposing
its privatization policies. He was arrested and held without bail
in 2002 for protesting outside Johannesburg Mayor Masondo's property.
Ngwane has said, "Corporations seeking profit from a natural
resource will never create a product or system that will benefit
the disadvantaged. "
"Free Trade" Straitjackets
Instead of taking South Africa's status
as a low-income country and the needs of its impoverished majority
into account, the ANC governments embarked on a system of complete
privatization of its essential services. This centralized corporate-mercantilist
control of South Africa's resources will become even more entrenched
under trade agreements whether already completed or on the table
with the United States and the European Union (EU). The World
Trade Organization (WTO) recognizes that semi-developed economies
like South Africa need "special" and "differential"
terms permitting trade tariffs and other trade protections to
shield their developing economies. But the current bilateral negotiations
have undermined those WTO prescriptions as well as South Africa's
industry, agriculture, and labor force.
For example, the trade agreement with
the EU forces South Africa to open 90 percent of its trade to
the EU. The EU in return only allows the South African economy
access to 50 percent of its market. The EU has also enacted further
non-tariff barriers (NTBs) to trade with South Africa, such as
strictly enforcing health and safety regulations that block many
South African goods from entering the European market.
The EU trade agreement also encourages
South Africa to export only cheap raw materials instead of more
value added manufactured goods, which reinforces South Africa's
position as a dependent, periphery economy. South Africa has also
entered into trade negotiations with the United States, along
with the other semi-developed southern African states that belong
to the Southern African Customs Union (SACU), such as Namibia
and Swaziland. These negotiations are due to conclude at the end
This trade agreement with the U.S. will
increase corporate control of southern Africa's economies, resources,
and labor. Indeed, in order for southern Africa to qualify for
"free" trade with the United States, all southern African
states must "liberalize" all sectors of their economies,
including social services. Corporate taxes have to be reduced
or eliminated. Corporations must be allowed to purchase social
services, land, and resources wholesale from African governments.
At the same time, duties and tariffs on manufactured goods from
the U.S. must be substantially reduced.
The U.S., EU, and large multinationals
aim to gain as many concessions as possible from South Africa
through these trade agreements while simultaneously seeking to
avoid even limited concessions and access to markets in return.
South Africa cannot compete with the developed economies, so economic
development within South Africa has collapsed. While there is
economic growth in assets such as stocks and property, these assets
are concentrated among the wealthy minority. The ANC government
remains unenthusiastic about national development strategies designed
to lift the poor black majority out of wrenching poverty. According
to the Landless People's Movement (LPM) of South Africa, the government,
although constitutionally obligated to do so, has not initiated
even small-scale land redistribution to impoverished black South
Africans. In 2003, 86 percent of the land in South Africa is owned
by around 120,000 white farmers and the central government.
Government economic policy has favored
rigid, narrow growth strategies designed to increase corporate
profit and roll back the state. South Africa's economy depends
overwhelmingly on the economies of the developed countries. The
extreme concentration of wealth, the collapse of social services,
the explosion in social problems like prostitution, crime, urban
terrorism, and gang warfare, and the rapid spread of AIDS, mean
the end of hopes for a better future. The dreams of millions of
South Africans, which rose to such heights after the collapse
of apartheid, have turned into a national nightmare with no end
Andrew Nowicki is a social justice advocate
based in Washington, D.C.