On the South African Economy

The price of fuel is strangling our economy and is preventing it from growing at the appropriate speed. Under Apartheid the National Party controlled the value of the Rand in order to counter the effects of international sanctions. It also vigorously promoted parastatals such as Sasol, Eskom, SAA and Iscor, firstly to create jobs for poor white Afrikaners and secondly to drive industrialisation and later to overcome the effects of sanctions. It is interesting that many of those who today attack the parastatals in the past were the biggest supporters of state run enterprises.

SASOL existed to overcome the oil embargo and today produces as much as 50% of South Africa’s petrol. However when the Apartheid regime realised in the mid 1980s that the end of the system was near the vigorously promoted policies to privatise state enterprises and to develop a black middle class. In privatising state enterprises they thought that they could protect white jobs even after Apartheid ended.

And indeed at places like Sishen which was a Iscor project we still find black workers complaining of white nepotism now that it is Khumba Iron and privately belongs to Anglo American. Sasol existed to make the country self reliant in petrol, however, since privatisation Sasol has entered the global market and now sells fuel to the South African market at global prices instead of at controlled prices. The government claims that it is the weak value of the Rand that causes the high petrol prices.

However if SASOL was still under state control the government could fix the price of fuel and supply at least 50% of our fuel at much lower prices. The Reserve Bank of South Africa, which used to be a parastatal is also privatised, so our Rand actually belongs to private shareholders of the Reserve Bank instead of the nation. Both Sasol and the Reserve bank are not driven by patriotism but by the profit motive as they now operate on a “business model”.

Therefore the Rand is unprotected by government and left to the speculation of international gamblers on financial markets. This means that any decisions that government makes regarding the economy which the local and international ruling capitalist class do not like leads to them selling of Rands, weakening the currency and punishing the government.

Weak government and a low price in the Rand benefits the foreign owned mining industry, because they operate inside South Africa with costs defined in Rand value but sell their minerals global at British Pound, US Dollar and Euro values. Therefore the lower the value of the Rand the lower their operating costs. Mines are very expensive to start, and very expensive to close, but in their operational phase they are very cheap to operate. Their major costs being labour, fuel and energy.

So if mine workers demand R12 500 in 2012 when the Rand traded at R9 to the dollar and in 2016 the Rand trades at R15 to the dollar, Then R12 500 to is actually worth about R7000 at 2012 values (rough calculation. Sasol also benefits from the low value of the Rand. As a privatised industry selling at global prices while producing in Rand costs it is making a killing at the expense of the South African consumer, the very beneficiary it was created for in the first place.

However, while mines and the extractive industries befeit from the low value of the Rand, the manufacturing sector selling to the domestic market is taking a beating. In the first instance because the domestic market is limited by cheap labour, and therefore does not represent effective demand, but also because the manufacturing industry depends on imported machinery and equipment, which because of the low value of the rand becomes very expensive. This traps the South African economy in extractivism, making it impossible to escape. Opening up our market leads to dumping by the USA through AGOA for example which will lead to the progressive de-industrialisation of South Africa.

The ANC after 1994 retained most of the Apartheid civil service, both in the National Government and from Bantustans in provincial governments, as a consequence of this, and as a result of pressure from the World Bank and IMF the ANC adopted National Party policies as they evolved in the late 1980s, lock, stock and barrel. It was therefore no surprise that the ANC would absorb the National Party.

This has lead to the privatisation of health services, the closure of numerous teaching training colleges and schools and at least one university as part of the privatisation right sizing/downsizing process and austerity. Many state run hospitals were privatised “:to maintain standards” for the beneficiaries of Apartheid capitalism, and now the Neo-Apartheid ruling class. The privatisation of Iscor has led to the collapse of iron and steel production and the plunder of this enterprise, which was built with public funds and labour by foreign and local capital. The same will happen to SAA, and SASOL instead of working for us, is working for the profit of its shareholders.