A uni­fied mid­dle class can help SA

To ac­ti­vate rad­i­cal eco­nomic trans­for­ma­tion, strong lead­er­ship and pow­er­ful new play­ers will have to emerge and ne­go­ti­ate, writes Lumk­ile Mondi

CityPress - - Voices & Ca­reers - Voices@city­press.co.za

Deputy Fi­nance Min­is­ter Mce­bisi Jonas last week called for a New Eco­nomic Con­sen­sus to re­place the 1994 Agree­ment. Ac­cord­ing to Jonas, a crit­i­cal mass in so­ci­ety – em­a­nat­ing from within the state; the higher ed­u­ca­tion sec­tor; the busi­ness sec­tor, es­tab­lished and new; and labour and civil so­ci­ety, in­clud­ing the me­dia – must be mo­bilised to sup­port a num­ber of pol­icy choices that can rapidly tran­si­tion the econ­omy out of its low-growth, high-in­equal­ity tra­jec­tory.

This call was strate­gic and op­por­tune, com­ing as it did on the eve of the bud­get, de­liv­ered by Fi­nance Min­is­ter Pravin Gord­han on Wed­nes­day.

Over the past 23 years, many South Africans who fought for free­dom be­lieved the ANC to be the van­guard move­ment, well in­formed about the ma­te­rial con­di­tions, so­cial re­la­tions and pro­duc­tive forces shap­ing the coun­try.

The ANC would, they rea­soned, pur­sue a pro-poor agenda to ben­e­fit the ma­jor­ity of South Africans.

Even when the Re­con­struc­tion and De­vel­op­ment Pro­gramme was dumped in favour of the Growth, Em­ploy­ment and Re­dis­tri­bu­tion pol­icy and its suc­ces­sors, the Ac­cel­er­ated and Shared Growth Ini­tia­tive of SA and the New Growth Path, many South Africans re­mained loyal to the gov­ern­ing party, de­spite crit­i­cism by those in­side and out­side the ANC that a ne­olib­eral agenda was be­ing pur­sued.

Those loy­al­ists have come to rue their stead­fast ANC at­tach­ments as this week’s bud­get speech made it patently clear that the ANC had be­come a shadow of the lead­er­ship it had shown to such ef­fect in 1994. It was di­vided, eth­nic, cor­rupt and anti-demo­cratic.

There are some in the ANC who are will­ing to sac­ri­fice the coun­try to pur­sue their own in­ter­ests. They show scant con­cern for the eco­nomic con­se­quences of their ac­tions, par­tic­u­larly on the poor. For ex­am­ple, the con­se­quences of re­de­ploy­ing the for­mer fi­nance min­is­ter Nh­lanhla Nene in De­cem­ber 2015 had a huge up­ward spi­ral on food prices.

And now we see the de­ba­cle in the SA So­cial Se­cu­rity Agency, which threat­ens the liveli­hoods of about 17 mil­lion re­cip­i­ents of so­cial grants.

Last week, the coun­try was also greeted by the sur­pris­ing news of re­spected ANC MP Makhosi Khoza hav­ing been moved out of her po­si­tion on Par­lia­ment’s Stand­ing Com­mit­tee on Fi­nance to a new role in the pub­lic service and ad­min­is­tra­tion com­mit­tee.

There has been a raft of cor­rupt deal­ings over the past few years, but the Nkandla fi­asco tops them all. It sym­bol­ises a lead­er­ship that has placed it­self and the party first – do­ing so while claim­ing to be at the service of all South Africans.

De­spite all the shenani­gans that long-suf­fer­ing cit­i­zens have been wit­ness to, ex­pec­ta­tions for this year’s bud­get were high.

In line with the pro­pos­als es­poused by his deputy, Gord­han put more flesh on the trans­for­ma­tion skele­ton by out­lin­ing the prin­ci­ples that should guide this agenda. Th­ese in­clude the fol­low­ing points:

The lit­mus test of our pro­grammes must be what they do to cre­ate jobs, elim­i­nate poverty and nar­row the in­equal­ity gap.

Trans­for­ma­tion must be mass-based, ben­e­fit­ing the most dis­ad­van­taged South Africans through the cre­ation of new as­sets, ca­pa­bil­i­ties and op­por­tu­ni­ties to build liveli­hoods.

Mo­bil­is­ing pri­vate and pub­lic in­vest­ment in so­cial and eco­nomic in­fra­struc­ture, new tech­nolo­gies and new ac­tiv­i­ties that help build a mod­ern and di­ver­si­fied econ­omy.

Con­fronting car­tels and col­lu­sion ro­bustly and pro­vid­ing new op­por­tu­ni­ties for ac­cess to mar­kets.

Re­shap­ing cities and build­ing link­ages across the ru­ral and ur­ban land­scapes where frag­men­ta­tion and sep­a­ra­tion char­ac­terised past pat­terns.

Trans­for­ma­tion must achieve a more bal­anced struc­ture of own­er­ship and control in our econ­omy.

Trans­for­ma­tion should build on and strengthen democ­racy, and en­trench open, trans­par­ent gov­er­nance.

Trans­for­ma­tion must build self-re­liance in South Africans, re­ject the de­pen­dence on debt and pro­tect our fis­cal sovereignty.

Trans­for­ma­tion must re­sult in an econ­omy that be­longs to all, black and white, where the legacy of racial dom­i­na­tion is no longer vis­i­ble.

Th­ese fea­ture in strong con­trast against the lat­est state of the na­tion ad­dress, de­liv­ered by Pres­i­dent Jacob Zuma two weeks be­fore, in which he made rad­i­cal eco­nomic trans­for­ma­tion the new or­der of gov­ern­ment busi­ness.

Ac­cord­ing to Zuma, rad­i­cal eco­nomic trans­for­ma­tion means “a fun­da­men­tal change in the struc­ture, sys­tems, in­sti­tu­tions and pat­terns of own­er­ship, man­age­ment and control of the econ­omy in favour of all South Africans – espe­cially the poor, the ma­jor­ity of whom are African and fe­male – as de­fined by the gov­ern­ing party, which makes pol­icy for the demo­cratic gov­ern­ment”.

Th­ese dif­fer­ences in­di­cate the con­trast­ing po­si­tions peo­ple hold within the ANC. Such dif­fer­ences of opin­ion ex­ist also in busi­ness, trade unions and civil so­ci­ety.

A pre­req­ui­site for a new po­lit­i­cal set­tle­ment is a com­bi­na­tion of power and in­sti­tu­tions that are mu­tu­ally com­pat­i­ble and sus­tain­able in terms of eco­nomic and po­lit­i­cal vi­a­bil­ity. We are not there yet.

South Africa is more deeply di­vided to­day than it was in 1994. Race and class are shift­ing el­e­ments in the mix.

Zuma, who is sup­posed to unite and bring hope to the ma­jor­ity, di­vides cit­i­zens by his ut­ter­ances on so-called “white mo­nop­oly cap­i­tal”. Right wing con­ser­va­tives and op­por­tunists in the ANC and in the white com­mu­nity re­vert to iden­ti­ties at their convenience.

The new po­lit­i­cal set­tle­ment pro­posed by Jonas has been de­ferred by the 2017 bud­get plac­ing a bur­den on those earn­ing more than R1.5 mil­lion a year. The per­sonal in­come tax in­crease to 45% has shocked many high earn­ers, among them the black mid­dle class, some­times re­ferred to as “clever blacks” by Zuma.

The term “mid­dle class” in South Africa takes on var­i­ous mean­ings. For ex­am­ple, for mar­keters the mid­dle class are con­sumers, or the so-called black di­a­monds; for economists large cat­e­gories of peo­ple are dif­fer­en­ti­ated for pol­icy pur­poses; while so­ci­ol­o­gists will bat­tle to de­fine groups. How­ever, all classes are in­cor­po­rated into most pro­fes­sions.

Some cat­e­gories of the black mid­dle class are ben­e­fi­cia­ries of af­fir­ma­tive ac­tion and em­ploy­ment eq­uity poli­cies ini­ti­ated by the ANC gov­ern­ment. Th­ese in­clude gov­ern­ment of­fi­cials, man­agers in the pri­vate sec­tor and in­de­pen­dent con­sul­tants.

Some are in debt and have en­rolled their chil­dren in pri­vate schools. They tend to re­sent cor­po­rate life, de­spite work­ing there, as they feel in­creas­ingly re­moved from the lad­der to suc­cess. This group will be neg­a­tively af­fected by the 45% tax hike as their dis­pos­able in­comes will drop.

They face a dou­ble-edged sword. Their pur­suit of the good life is com­pro­mised by the poor use of state re­sources on the one hand and by cor­po­rates cur­tail­ing their am­bi­tions on the other. Some also drive petrol guz­zlers and will be af­fected by the fuel levy in­crease of 30c a litre.

Within the black mid­dle class there are en­trepreneurs who have ben­e­fited from the gov­ern­ment pro­cure­ment sys­tem in the past. They would have been ex­cited by the gov­ern­ment pro­cure­ment pro­gramme, about 30% of which is aimed at them. De­pend­ing on what en­tity they have used in ac­cess­ing op­por­tu­ni­ties to deal with gov­ern­ment, they should be smil­ing that the cor­po­rate tax re­mains at 28%.

This group may be con­cerned about how their taxes are be­ing de­ployed by the state – jus­ti­fi­ably so. Should the cur­rent mis­man­age­ment in cer­tain state en­ti­ties con­tinue un­abated, and the state un­der­mine the rule of law, this could lead to col­lec­tive ac­tion, as wit­nessed in the post-Nene de­ba­cle. The black mid­dle class may not be or­gan­ised to­day as a po­lit­i­cal for­ma­tion, given that it is scat­tered among var­i­ous pro­fes­sions. But if co­or­di­nated into a civil body, this group could be­come a pow­er­ful player in help­ing to trans­form South Africa in part­ner­ship with their white coun­ter­parts, par­tic­u­larly in a new po­lit­i­cal set­tle­ment. Gord­han may have reached a ceil­ing in mo­bil­is­ing re­sources from per­sonal in­come tax. His next avail­able op­tions will be value-added tax, cur­rently 14%, and the 28% cor­po­rate tax. The min­is­ter may be open­ing an es­cape route should the fore­cast 1.3% of gross do­mes­tic prod­uct growth not ma­te­ri­alise. In the next two years of the medium-term bud­get pe­riod (2018 and 2019), taxes will have to in­crease to fill R15 bil­lion and R16 bil­lion short­falls, re­spec­tively. This is a recipe for fur­ther di­vi­sions in our al­ready frac­tured so­ci­ety. We need the New Eco­nomic Con­sen­sus es­poused by Jonas, but without strong lead­er­ship, it can­not hap­pen. It re­mains to be seen which pow­er­ful po­lit­i­cal and so­cial for­ma­tions will gather ground and meet at the ne­go­ti­at­ing ta­ble. Tougher eco­nomic times and an even weaker ANC gov­ern­ment may just be what it takes to get the New Deal on the go. For now, we ride the roller coaster.

TALK TO US How would you de­fine “mid­dle class”? Do you agree that the black mid­dle class can in­flu­ence a new eco­nomic dis­pen­sa­tion?

SMS us on 35697 us­ing the key­word CLASS and tell us what you think. Please in­clude your name and prov­ince. SMSes cost R1.50 Mondi is se­nior lec­turer at Wits School of Eco­nomic and Busi­ness Sciences

PHOTO: LERATO MADUNA

SO­CIAL SE­CU­RITY AP­PEAL In this 2015 photo, a pen­sioner takes to the street out­side Par­lia­ment in Cape Town, de­mand­ing that the old age grant be in­creased. In this year’s bud­get, de­liv­ered by Fi­nance Min­is­ter Pravin Gord­han on Wed­nes­day, the pen­sion was in­creased to R1 600 a month for peo­ple over sixty and to R1 620 for those older than 75

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