The blame for the trauma of state cap­ture doesn’t lie only with the Zuma pres­i­dency

Sunday Times - - Opinion - Z I YA D MOTALA Motala is a pro­fes­sor of law at Howard Univer­sity School of Law in the US

In a se­ries of speeches, for­mer fi­nance min­is­ter Trevor Manuel has raised a le­git­i­mate ques­tion: why is it tak­ing so long to pros­e­cute those in­volved in state cap­ture? The erst­while min­is­ter, a dar­ling of the lib­eral estab­lish­ment, sounds the war drums against state cap­ture by the pri­vate sec­tor. Our coun­try is trau­ma­tised by the malfea­sance and mu­tu­ally prof­itable col­lab­o­ra­tion be­tween the Gup­tas, the pre­vi­ous pres­i­dent, and oth­ers. How­ever, the nar­ra­tive that elites in the Zuma pres­i­dency were the first to ma­nip­u­late state poli­cies for fi­nan­cial gain is a con­ve­nient mis­truth.

The pe­riod im­me­di­ately af­ter 1994 was not an in­no­cent age and war­rants scru­tiny. The re­lent­less push to em­brace free trade, sweet­heart deals that al­lowed favoured com­pa­nies to move their as­sets abroad, and bi­lat­eral in­vest­ment treaties were pro­foundly detri­men­tal to the econ­omy and the coun­try’s abil­ity to deal with the lega­cies of apartheid. One must ask: who ben­e­fited from these poli­cies?

Coun­tries in the de­vel­oped world agreed to en­gage in mu­tu­ally ben­e­fi­cial free trade when their economies achieved cer­tain lev­els of so­phis­ti­ca­tion and devel­op­ment. They did this as their pop­u­la­tions func­tioned un­der su­pe­rior stan­dards of ed­u­ca­tion and high ma­te­rial stan­dards of liv­ing.

South Africa adopted free trade un­der cir­cum­stances of ex­treme in­equal­ity, ab­ject poverty and a de­fi­cient ed­u­ca­tion sys­tem, im­peded by decades of apartheid rule.

No sim­i­larly sit­u­ated coun­try has shown such obei­sance to the ne­olib­eral and largely dis­cred­ited Wash­ing­ton Con­sen­sus — the 1989 free mar­ket “re­form” pol­icy rec­om­mended for de­vel­op­ing coun­tries — as South Africa. Whose in­ter­ests were the de­ci­sion-mak­ers rep­re­sent­ing?

The trade agree­ments meant tar­iffs in the tex­tile and other in­dus­tries had to be re­duced. This con­trib­uted to the dec­i­ma­tion of key sec­tors of the econ­omy, re­sult­ing in a loss of jobs and a greater need for wel­fare, all im­pos­ing a large fi­nan­cial drain on the state.

If there was a crime called eco­nomic trea­son, this would be a text­book ex­am­ple.

The em­brace of free trade also meant that the coun­try was legally cir­cum­scribed in sub­si­dis­ing its in­dus­tries. For South Africa, this meant that the his­tor­i­cally dis­ad­van­taged pop­u­la­tion, sad­dled with decades of dis­crim­i­na­tion and at­ten­dant dis­abil­i­ties, could not be sub­sidised or given a leg up to par­tic­i­pate in the econ­omy be­cause this would in­vite charges of un­fair trade prac­tices. The de­ci­sion­mak­ers were the in­stru­ment of whose agenda?

The lib­er­al­i­sa­tion poli­cies also re­sulted in the move­ment of ma­jor South African cor­po­rate head of­fices out of South Africa, to­gether with the out­flow of large amounts of cur­rency. Com­pa­nies and their share­hold­ers ben­e­fited by mov­ing their cap­i­tal to more lu­cra­tive mar­kets. These com­pa­nies were given the green light to move their head of­fices abroad, thereby re­duc­ing their obli­ga­tions in South African and di­min­ish­ing the tax base. What ben­e­fit did this bring to the South African econ­omy or to the im­pov­er­ished ma­jor­ity?

South Africa en­tered into many bi­lat­eral in­vest­ment treaties with de­vel­oped coun­tries, which con­strained its abil­ity to adopt leg­isla­tive and pol­icy frame­works to ad­vance its so­cial and eco­nomic goals. Many of the treaties, which com­ple­ment free trade, con­tained pro­vi­sions in­con­sis­tent with con­sti­tu­tional imperatives.

Did the de­ci­sion-mak­ers who took South Africa down this dev­as­tat­ing path fail to ap­pre­ci­ate the im­pact of these mea­sures on their abil­ity to fash­ion pro­gres­sive poli­cies to ben­e­fit the dis­ad­van­taged? Or were they serv­ing a dif­fer­ent mas­ter?

Some might say the eco­nomic choices made im­me­di­ately af­ter 1994 are at­trib­ut­able to un­so­phis­ti­cated de­ci­sion-mak­ers within the ex­ec­u­tive with no bank­ing, le­gal, or eco­nom­ics back­ground, who were suck­ered into em­brac­ing poor pol­icy choices. We now know that some de­ci­sions were taken with lit­tle con­sul­ta­tion and in­com­plete anal­y­sis. More telling, there are no min­utes of cab­i­net meet­ings sur­round­ing the bi­lat­eral in­vest­ment treaties.

At a min­i­mum, let’s pub­licly call on the de­ci­sion-mak­ers to jus­tify their de­ci­sions. Were these de­lib­er­ate choices to ben­e­fit some elite or just mis­in­formed eco­nomic choices? If the lat­ter, on a scale of blun­ders, it needs to be called out. Ev­ery in­stance of malfea­sance, be it the crude and crass va­ri­ety of the Gup­tas or the so­phis­ti­cated ver­sion en­gulfed in the nar­ra­tive of the Wash­ing­ton Con­sen­sus spi­der’s web, needs to be in­ves­ti­gated.

In terms of con­se­quences, the eco­nomic, mone­tary, and trade choices im­me­di­ately af­ter 1994 that were in­dul­gent to big busi­ness rank among the big­gest rip-offs in the South African econ­omy. If we are to reckon with state cap­ture, we must un­der­stand that its his­tory is rooted in pol­icy choices made dur­ing this coun­try’s in­fancy.

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