South Africa needs Africa

The problem

In Architects of Poverty (2009), Moeletsi Mbeki, brother of the recently deposed President, asks why Africans remain so poor compared with the rest of the world. He blames African political elites which from the days of slavery have enriched themselves at the expense of their own people by serving the interests of foreign powers whose only concern is to exploit their countries’ human and natural resources. National politicians today continue this process of accumulation without development throughout Africa. He includes South Africa’s African National Congress (ANC) government in this critique, claiming that Black Economic Empowerment (BEE), the enrichment of a few black individuals with the right political connections, is similarly a pay-off by the white-controlled corporations of the ‘Minerals-Energy Complex’ for adopting economic policies favourable to their interests at the expense of those of the black masses.

Mbeki claims that the ANC was always marginal to the struggle against apartheid within South Africa itself and now relies on powerful paymasters for its ability to rule. The industrial economy launched by Afrikaner nationalists in mid-century has been run down over the last two decades and most South Africans remain poor, without meaningful jobs or the skills to better themselves. This economic strategy is going nowhere, he says, and it has already begun to provoke widespread unrest. Switching leaders from his brother to Jacob Zuma is merely cosmetic. The ANC remains what it always was, an African nationalist elite clinging to power without any programme for an economy capable of advancing the poor majority of citizens.

Drawing on the example of successful countries such as those of Scandinavia and Switzerland, Mbeki argues that the route to modern development lies in a commitment to manufacturing linked to investment in education and skills for citizens. Partnerships need to be formed at first with foreign capitalist firms who possess up-to-date technologies, but with a view to the eventual indigenization of ownership and control. This model was adopted by the Afrikaners, but for their own exclusive benefit, and it underlies China’s recent success. The only comparable African case, apart from South Africa’s flawed example, is Mauritius whose economy is now based on hi-tech textile manufactures and tourism. He dismisses regional cooperation as a way of increasing the size of the home market. In other words, what we call ‘national capitalism’ (see the following section) remains the only viable path to a country’s development, but the political class in charge has to be genuinely committed to the interests of all its citizens.

We accept some of Mbeki’s political critique, but reject his main economic strategy. It is true that Africa’s underdevelopment today may be substantially attributed to the self-serving actions of a fragmented political class that is for sale to the highest foreign bidder or indeed to any bidder. And the ANC government has followed a depressingly familiar route, when one considers the global legitimacy it inherited from the anti-apartheid struggle and the potential of the South African economy. But we do not agree that the Afrikaner model of import-substituting industrialization, which was the predominant paradigm of its time, remains a viable option in today’s world or that it makes the most of South Africa’s existing advantages. Whereas national capitalism remains a possibility for countries such as China that have already tested their industries in the world market, the past three decades of neoliberal globalization also saw the emergence of large trading blocs offering a measure of protection for nation-states against the harsh winds of globalization (the European Union being the most striking example). Accordingly, we offer here a strategy for South Africa, its immediate neighbours and the African continent based on the premise of a need for greater regional integration.

A shift from economic development conceived narrowly as a national project to a more inclusive process of regional cooperation, ultimately involving Africa as a whole, is unlikely to succeed if the only actors are the existing ruling powers, the political class identified by Mbeki as the main cause of Africa’s fragmented vulnerability and persistent underdevelopment. African people – and South Africa is notable for this – have generated a plethora of social movements, which for shorthand we could call ‘civil society’, whose dynamism comes from having largely by-passed national bureaucracy in reaching out to the contemporary world. These movements are commercial, artistic, intellectual, religious, political, technical and much more besides. What they currently lack is an overarching vision of Africa’s drive for emancipation of the sort that made Panafrican resistance to colonial empire the world’s most inclusive political movement in the first half of the twentieth century.

The development of modern civilization is founded on the twin pillars of democracy and science, on establishing government by the people for the people and on the drive to acquire systematic knowledge of the world adequate to that task. Until Africans have made a significant contribution to both projects, the world society we live in will continue to assign them bottom place on racial grounds. South Africa is indispensable to any such project; its people’s own aspirations to modernity require them to abandon the principle of national capitalism in order to embrace this more inclusive cause.

There are some persistent problems with thinking about African political economy. The first is a tendency to lump the continent’s many regions together in a vague abstraction, ‘Africa’, which is then made the subject of oversimplified general theories, themselves often swinging between polarized extremes. The second problem concerns how ‘development’ has often been represented as a leap from one idea to its negation, whereas historical reality is always a more gradual shift in emphasis. The third concerns glib notions of political agency, as if development were a free choice from a smorgasbord of historical or comparative examples, regardless of the constraints imposed by world political economy at a given moment. The South African case encourages politicians and intellectuals to adopt such positions, and if anything to exaggerate them, especially when it comes to the country’s relationship to the rest of Africa.

Cecil Rhodes and his contemporaries saw South Africa as a launching pad for British imperialism in the continent as a whole. Then, as the world retreated from imperialism to a national model of capitalism, South Africa withdrew too. This sense of a ‘white man’s country’ isolated from the ‘dark continent’ peaked in the decades after the Second World War when extreme segregationist policies provoked worldwide rejection of the apartheid regime. The ANC’s accession to power opened up a new phase of South Africa’s potential leadership of a drive towards African unity,  as once envisaged by independence movements,  and it was captured by Thabo Mbeki’s slogan of an ‘African renaissance’. But the ANC’s actual strategy combined openness to neoliberal globalization with policies that strengthened the opposition between the ‘rainbow nation’ and other Africans. South Africa’s poor citizens, faced with the enrichment of a few blacks and their own continuing economic exclusion, were invited to identify with the beneficiaries of apartheid against their African neighbours who had supported them in the struggle. In all likelihood, Jacob Zuma’s regime will feel obliged to address the needs of poor black citizens; and this would reflect a worldwide turn at present from economic liberalism to more intervention by the state.

We wish to explore, therefore, how South Africa might assume a role of political and economic leadership in Africa, starting with its own hinterland. This requires us to dispense with the myths surrounding that relationship, by identifying what South Africa’s relations with Africa and the world really have been, both when it was thought to stand apart from the continent and now when it is included. Any sustainable future for Africa as a whole must be consistent with effective solutions to South Africa’s long-running attempt to evolve from an export-oriented mining enclave to a modern industrial economy. To this end, we draw on a critique of the concept of ‘national capitalism’, the dominant model of ‘development’ in the twentieth century. South Africa is the only country in Africa to have come close to implementing this model, and then only with the benefits of whites in mind. If the rest of Africa remains in a pre-industrial stage of agrarian civilization, economic relations with South Africa must acknowledge this unequal development, while relying on regional integration as a source of mediation between extremes.

It is not enough, therefore, to seek answers to the conundrum of development within South Africa or any other individual country, as is the norm. For at least a century and a half, it has been an integral part of world society, first pioneering what became racial exclusion while supplying the gold that sustained the international economy, then offering an introverted example of white supremacy, before emerging as the ‘rainbow nation’, the only instance of national capitalism in Africa. South Africa’s history is so different from its neighbours that most commentators are understandably content to focus on what happens exclusively within its boundaries. But the South African case cries out for a global and regional perspective to complement its national history, if only as a way of addressing how and why the ANC embraced nationalism and neoliberal globalization simultaneously, probably to the detriment of both.

In what follows, we first explain what we mean by national capitalism. Then we identify the persistent problem of South Africa’s economic history: its contradictory attempt to make the transition from a mining enclave to a modern economy. The British imperialism that gave birth to modern South Africa was succeeded by two variants of national capitalism: the racially exclusive version devised by the Afrikaner National Party and that pursued by the ANC since the mid 1990s. At this time of global economic crisis, the underlying problem of South Africa’s development remains unsolved.

Regional integration is one path towards a solution; but South Africa has a complicated history of relations within its own region. We propose a more active African strategy for South Africa as a precondition for its own transition to economic democracy. Such a strategy must start with rationalizing relations within the Southern African Development Community (SADC), which now includes countries as far afield as the Congo, Tanzania and Mauritius, with the aim of freeing up the movement of people, goods and money within the region. Such a regional perspective must also embrace African unity in a meaningful way. Rather than return to a mid-century model of industrial development, we base South Africa’s (and Africa’s) economic future on cultural services such as entertainment, education, media, software and information, along with finance, communications, transport, construction, energy and minerals.

National capitalism in the long twentieth century

‘National capitalism’ is our term for the modern synthesis of the nation-state and industrial capitalism: the institutional attempt to manage money, markets and accumulation through central bureaucracy within a cultural community of national citizens. It is linked to the rise of large corporations as the dominant form of capitalist organization and is in essence Hegel’s recipe in The Philosophy of Right, namely that only state power can contain the excesses of capitalism, while markets in turn limit the excesses of political power. Society should be managed by an educated bureaucratic elite in the national interest. Marx certainly didn’t envisage anything of this sort, but Weber recognized such a synthesis in Germany’s historical experience of the alliance between Rhineland capitalism and Prussian bureaucracy. ‘National capitalism’ is still the dominant social form in our world, even if the transnational aspects of neoliberal globalization over the last three decades have obscured that fact.

The 1860s saw a transport and communications revolution (steamships, continental railways and the telegraph) that decisively opened up the world economy. At the same time a series of political revolutions gave the leading powers of the coming century the institutional means of organizing industrial capitalism. Capitalism has always rested on an unequal contract between owners of large amounts of money and those who make and buy their products. This contract depends on an effective threat of punishment if workers withhold their labour or buyers fail to pay up. The owners cannot make that threat alone: they need the support of governments, laws, prisons, police, even armies. By the mid-nineteenth century, it became clear that the machine revolution was pulling unprecedented numbers of people into the cities, where they added a wholly new dimension to traditional problems of crowd control. The political revolutions of the 1860s, from the American civil war to the Meiji Restoration and German unification, were based on a new and explicit alliance between capitalists and the military landlord class to form states capable of managing industrial workforces and of taming the criminal gangs that had taken over large swathes of the main cities.

Before long, governments provided new legal conditions for the operations of large corporations, ushering in mass production and consumption through a bureaucratic revolution. The national system became general after the First World War and was the dominant social form of twentieth-century civilization. Its apogee or ‘golden age’ (Hobsbawm) was the period 1948-1973. This was a time of strong states and economic expansion when the idea of ‘development’ (poor nations growing richer with the help of the already rich) replaced colonial empire for most Third World countries. When, shortly before his downfall, Richard Nixon announced that “We are all Keynesians now”, he was reflecting a universal belief then that governments had a responsibility to manage national capitalism in the interests of all citizens.

The 1970s were a watershed in world economic history. United States expenditure on its losing war in Vietnam generated huge imbalances in the world’s money flows, leading to a breakdown of the fixed parity exchange-rate system devised at Bretton Woods in 1944. America’s departure from the gold standard in 1971 triggered a free-for-all in world currency markets, leading in 1975 to the invention of money market futures in Chicago to stabilize export prices for Midwestern farmers. At the same time, the world economy was plunged into depression in 1973 by the formation of OPEC and a hefty rise in the price of oil. ‘Stagflation’ (high unemployment and inflation) increased, opening the way for conservatives such as Reagan and Thatcher to revive the strategy of giving economic priority to the ‘market’ rather than the ‘state’. The economic conditions of three decades ago and the policies devised then find their denouement in the global economic crisis today.

In 1975, all but a minute proportion of the money exchanged internationally was paid for goods and services purchased abroad. Three decades later, this function in turn accounted for only a small fraction of global money transfers, the vast bulk being devoted to exchanging money for money in another form. This rising tide of money, sometimes known as ‘the markets’, represented the apotheosis of financial capitalism, with the actual production and sale of commodities and political management of currencies and trade virtually abandoned in favour of an autonomous global circuit of capital.

Apart from being based on a new ruling class alliance, national capitalism was committed to mobilizing citizens of all classes, and especially the new urban working class, in the drive for economic modernization. This meant principally taking the high wage, high productivity route to industrial capitalism, with some political support for unions and workplace democracy. It also meant the development of a national education system capable of raising work standards in an industrial economy that relied increasingly on sophisticated machines; a welfare state capable of meeting all citizens’ needs for social security, health, housing and basic transport to some degree; and a commitment to containing wealth inequality engendered by markets through redistributive taxation, unemployment benefits and equal pricing of utilities across all regions.

South Africa embarked in the twentieth century on a bizarre variant of this programme, national capitalism for whites only. The failure of apartheid in the 1970s and 80s, as national capitalism everywhere entered the turbulent waters of neoliberal globalization, is closely related to the inherent contradictions of trying to build a modern economy where the majority are deliberately excluded from the working class bargain on which national capitalism was normatively founded. It is not surprising then that South Africans of all classes tend to stress the unique character of their national society or that the comparative study of capitalism has often been built around paradigmatic national cases (Britain, the USA, France, Japan, S. Korea etc). What makes national capitals distinctive is the specific character of the class alliance that marked the emergence of capitalism in each country. Whatever its general features, pre-existing social and cultural forms have always been incorporated into making it work.

Overcoming the limits of a mining enclave economy

South Africa was and still is for the most part a poor, dry country. Apart from a scattering of hunter-gatherers, it was only settled by African herders and farmers quite late, in the last millennium. Since then its history has been made by migrants. The Dutch East India Company made a refueling station at the Cape in 1652 and explicitly sought to restrict colonial settlement there. During the Napoleonic Wars, the British seized control of the Cape Colony and the following decade, the 1820s, saw the birth of the peoples who dominated South African history in the nineteenth century and after: an influx of British migrants secured the area for the Empire and forced the Dutch to move inland to form the Afrikaner republics, while Shaka and his successors formed the Zulu nation. All three peoples subsequently fought wars against each other, with victory of sorts going to the British against the other two. South Africa did not develop a staple export comparable to Australian wool or Canadian timber. All this changed with the discovery of diamonds at Kimberley in 1867, shortly followed by gold in the Rand. Suddenly from the 1880s South Africa was a major exporter of minerals, notably supplying much of the gold that secured international trade before the First World War.

The British annexed the Transvaal and the Orange Free State and for three decades from the 1880s, South Africa participated fully in an age of financial globalization driven by imperial rivalry, with Britain at its centre. As Arthur Lewis argues, this was when the world economy took on a distinctively racial character with European and Asian migrants divided between high- and low-wage areas. South Africa was one of the main places that these streams converged (especially in Natal as a result of mass recruitment of Indian indentured labour) and the policies of racial discrimination employed there were intensified as a growing body of African migrants went to work on the mines and commercial farms. This was when Cecil Rhodes found a stage for his vision of an Africa united under British rule ‘from the Cape to Cairo’; and the British theorist of imperialism, J.A. Hobson celebrated the adventurous spirit and business acumen of the men who headed the companies around Johannesburg then:

“Never have I been so struck with the intellect and the audacious enterprise and foresight of great business men as here. Nor are these qualities confined to the Beits and Barnatos and other great capitalists; the town bristles and throbs with industrial and commercial energy. The utter dependence upon financial “booms” and “slumps” conjoined with the strain and kaleidoscopic changes of the political situation, has bred by selection and by education a type of man and of society which is as different from that of Manchester as the latter is from the life of Hankow or Buenos Ayres”.

The Union was formed in 1910 as a compromise between the two main white groups and the end of three decades of financial imperialism in 1913-14 provided the next watershed moment, a break whose economic and political impact reinforced greater isolation in South Africa. Anglo-American, the country’s dominant economic force in the twentieth century, was formed in 1917, marking a transition from imperial finance to a ‘South African’ economy aspiring to greater self-sufficiency. In other words, 1914 saw an end to that earlier phase of globalization and the beginning of the trend we call ‘national capitalism’ which flourished until the 1970s.

Afrikaner nationalism was a force before and after the Boer Wars. The Pact government of 1924, representing the white working class in general and the Afrikaner rural/urban poor in particular, launched national capitalism for the whites after the caesura of the First World War, focusing especially on large state enterprises. For them, maintaining the colour bar was everything, even though the explicit interest of capital was often the opposite. Where the interests of the two converged was in a drive, led by Anglo-American, to diversify the South African economy, with a view especially to securing local supplies of mining inputs such as explosives, coal, steel and electricity. The result was the development of an industrial core to the South African economy, focusing on minerals and utilities, that was subsequently dubbed ‘the mining-energy complex’ or MEC by Fine and Rustomjee. In the Depression years the Sanlam insurance company and Volkskas Bank led a savings movement that provided a launching pad for Afrikaner capital after the next world war. At that time too, Anglo-American laid the foundation for South Africa’s modern capital market by establishing the National Finance Corporation. Anticipating what later became knows as ‘Black Economic Empowerment’, Anglo sold off some of its gold-mining interests to Afrikaner capital which became General Mining (now part of BHP Billiton).

South Africa’s boom of 1948-73 matched exactly the growth of the world economy at the time and South Africa turned to depression when the world did. The development of manufacturing and utilities in that period always depended on subsidies from gold exports since these sectors ran a persistent balance of payments deficit. South Africa’s gold supply ran out when demand for it did. This was disguised by the eight-fold rise on the gold price after the United States moved off the gold standard in 1971. The crisis became obvious in the 80s when the gold price fell. ‘The engine of South Africa’s economic growth) had stalled’ (Feinstein). The oil-induced world depression after the energy crisis of 1973, hostility to the apartheid regime and the beginning of what later became significant capital outflows merely exacerbated this trend. South Africa’s low industrial efficiency and high costs of production now faced rising demands from a more militant African labour force. The dual economy was bankrupt and its perpetrators knew it. This was the immediate context for a negotiated settlement with the African majority.

The transition to African majority rule thus took place when the South African economy was running out of steam, without the volume of gold exports that supported growth for a century from the 1870s, with a failing attempt at industrial diversification and the legacy of a cheap labour policy that excluded most of the country’s inhabitants from full participation in the modern economy. The ANC soon opted for policies consistent with neoliberal globalization which led to even greater economic inequality and the rapid decline of home-made manufactures in the face of cheap Asian imports. The services economy, especially finance, shopping malls, communications and security, boomed. But the country’s underlying economic malaise, exacerbated by the global recession, persists and the evidence of social unrest is everywhere.

The ANC’s Freedom Charter of 1955 included a proposal to nationalize the mines; and, after its unbanning in 1991, the Macro-Economic Research Group (MERG) came up with some fairly radical economic policies, consistent with the ANC’s past. But white capital had other ideas: when Sanlam sold off part of its insurance activities to black businessmen, this inaugurated what became a major plank of ANC government policy (but had never been before), Black Economic Empowerment (BEE). The ANC’s 1994 election manifesto was based on the Reconstruction and Development Programme (RDP), an ambitious plan to mobilize the energies of South Africa’s poor black majority through devolved and integrated development. But the Growth Employment and Redistribution policy (GEAR), introduced without negotiation in 1996, marked a sudden shift to conformity with the demands of neoliberal globalization. Presumably the government wished to pursue what it felt was a credible economic strategy in global markets in the face of pressure from a falling currency and the absence of an approved macro-economic framework (Padayachee).

By the late 90s, a number of major South African corporations listed their headquarters overseas. The period 2000-7 saw significant growth, but without increased employment and with rising inequality. The ANC government recognized the need for development of education, training and skills. But its uneasy commitment to both globalization and national capitalism led to tension between nationals and non-nationals. Problems in the townships over utilities culminated in xenophobic conflict and violence.

Charles Feinstein, in An Economic History of South Africa, has provided a well-conceived account of South Africa’s experiment in national capitalism for whites only. He argues that it was the country’s failure to extend the principle of citizenship to Africans that underlay its inability to make a successful transition to industrial modernity. For him, as for us, this project hinges on developing the home market by equalizing income across the classes; building a national system of education in support of industrialization; extending citizenship to the workplace (unions, bargaining etc); and caring for the health, welfare and housing of all the people. Marx held that capitalism in its progressive form takes the path of what he called ‘relative surplus value’, with the emphasis on increasing labour efficiency, mainly through machines. Reliance on cheap labour (‘absolute surplus value’, a variety of sweatshop capitalism with affinity to feudal extraction of a surplus from peasants) offers one way into the international economy, but improved productivity is the only way of staying in. Development through a mining or plantation enclave separated from the rest of the local economy is the opposite of national capitalism and it does not offer a route to modernity. South Africa was an enclave export economy of a special kind (gold) with aspirations to modernity for the whites. But the gold ran out by the 1970s. And the limited success of Afrikaner national capitalism in establishing industrial manufactures and utilities has since suffered a reverse under ANC stewardship.

So for Feinstein what makes South African capitalism special is this combination of a gold bonanza with instituted racial inequality: the economic recipe was unlimited demand for the principal export (including windfalls from time to time) and low wages for labour whose supply was paradoxically scarce. Comparing South Africa with Newly Industrializing Countries in Europe, Asia and Latin America as well as with the old Commonwealth, he shows how gold masked the contradictions of failure to follow an inclusive national path until the 70s and especially the 80s.  This problem has not gone away with ANC rule and may have been exacerbated. In what follows we consider how South Africa’s relations with the rest of Africa are central to any lasting solution.

South Africa’s relations with Africa

History has conspired to isolate South Africa from the rest of the continent or at least it often seems like that. As we have already noted, Bantu migrants arrived there relatively late; the Dutch were only interested at first in a relay station to points east; the British saw the country as a launching pad for their own imperial interests in the region; but the discovery of diamonds and gold encouraged the development of a mining enclave whose main economic ties were to western financial centres. The First World War and developments between the wars marked a turn inwards towards the construction of a more self-sufficient national economy. The National Party government elected in 1948 extended the principle of racial division to what they called apartheid. As a result, South Africa became a pariah state, reviled by newly independent Africa and eventually by much of the rest of the world. The release of Nelson Mandela in 1990 seemed to open up a new era of potential South African leadership in Africa and his successor as president, Thabo Mbeki, was energetic in pursuing his vision of an ‘African renaissance’.

Like many simple pictures, this one needs qualification. It is true that Cecil Rhodes’ vision of an Africa united by British imperialism from ‘the Cape to Cairo’ briefly found its adherents and South Africa’s metropolis was for many decades London. But the logic of nation-state formation always pulled the South African economy inwards and Anglo-American’s concentration of economic power in the twentieth century was expressed in fairly systematic promotion of industrial and financial diversification within the national economy. The most misleading aspect of the conventional description concerns the apartheid regime’s presumptive isolation. In fact, the World Bank made substantial loans to South Africa in the 1950s and for a time it was second only to Mobutu’s Zaire as an African recipient of IMF credits. As an American ally against the Communist threat during the Cold War, South Africa’s security interests led it, under Vorster’s and Botha’s leadership, to establish fairly close ties with a constellation of African states in the 1970s and 1980s, mainly but not exclusively in southern Africa. The ANC government’s enthusiastic commitment to the ‘Washington Consensus’, even after the World Bank itself was beginning to question it, inhibited closer cooperation with neighbouring African countries and indirectly reinforced in its citizens a degree of alienation from the African migrants who were attracted there by the development gap between South Africa and their own homelands.

The Union of South Africa is 100 years old. It is important to recall that, like other British dominions, its structure was federal, bringing together provinces with highly disparate histories, geography and populations, as well as being linked to a patchwork of territories under British rule within and beyond its boundaries. As part of the aspiration to coordinate and rationalize this patchwork, a South African customs union (SACU) was formed in 1889,  the oldest of its kind in Africa involving what became Botswana, Lesotho, Swaziland, Namibia and South Africa itself. For most of its existence, this union was tightly controlled from Pretoria; but, as part of Thabo Mbeki’s push to make relations with South Africa’s neighbours more equal, democratic and consensual, SACU headquarters were moved to Namibia in 20o4 and members were granted more independence in their dealings with other countries. This arrangement is now in disarray since the smaller countries have signed separate agreements with the European Union which in effect allow them to act of ports of trade for European goods, subverting South Africa’s attempts to control their entry and to draw revenues from their importation. Now relations within SACU are at a low, proof, if any were needed, that moves towards greater regional integration in future will have to acknowledge South Africa’s unequal weight.

At the same time, the Southern African Development Community (SADC) has been expanded since the fall of apartheid to include Angola, Botswana, Democratic Republic of Congo, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe. This makes SADC potentially the largest regional economy in Africa, one moreover that is naturally dominated by South Africa. But the reality within the region at present is a maze of national restrictions on the movement of people, goods and money, crosscut by bilateral deals of bewildering variety. Under the ANC South Africa has increased, rather than reduced a sense of division between its own citizens and the many Africans who come there to live and work. Nevertheless, we argue that SADC remains the best chance for South Africa to coordinate economic policy with its neighbours. This would mean making a serious breach with the existing assumption of ‘capitalism in one country’ and its plethora of confusing and contradictory bilateral deals. In fact, under President Mbeki, nothing much happened at the level of SADC, since his attention was firmly focused on reforming regional cooperation at the continental level.

Thabo Mbeki’s idea of an ‘African renaissance’ expressed the reasonable belief that a black majority government in South Africa might be a leading catalyst for an African economic revival based on greater political coordination between what have been, since independence, isolated nation-states that constituted easy pickings for the world’s great powers. His diplomatic energy was unstinted and, as a result, the Organization of African Unity in Addis Ababa was reconstituted as the African Union (AU), with as its economic arm the New Partnership for Africa’s Development (NEPAD) based in Johannesburg and as its political arm the African Peer Review Mechanism (APRM). A Pan African Parliament (PAP), composed of representatives nominated by member states, also sits in Johannesburg. The AU’s various instruments are committed to a medium-term timetable for integration set at between 10 and 20 years. The principal measures anticipated are a single currency for Africa as a whole, a continental central bank and trade harmonization. We will return to the question of South Africa’s relations with SACU, SADC and the AU (especially NEPAD) in the next section. At this stage we should point out that these institutional initiatives seem quite removed from economic realities on the ground; and, for all Mbeki’s travels and meetings, Africa was mainly just an afterthought in South Africa’s foreign economic policy which was principally aimed at influencing power centres outside the continent.

South Africa’s economic relations with the rest of Africa under the ANC have not been standing still, but at the same time trade with Africa follows a similar pattern now to what it was under the apartheid regime. The main innovation has been an increased emphasis on a bilateral alliance with Africa’s other great power, Nigeria, mainly it seems as an exchange of oil supplies for manufactures and services. South African investment has diversified in the last two decades, especially in East Africa, where hotels, retail, communications, security and minerals have been the main sectors. In a recent development, Ghana and Nigeria have drawn on South African expertise in biometric identity and finance to attempt to build elaborate national systems linked to credit whose prospects of success seem implausible. Although names like MTN and Shop Rite are now familiar in West as well as East Africa, most outward investment is still within the expanded SADC. Half of South Africa’s African investments are in Mozambique, with Mauritius next, mostly at the expense of Zimbabwe. Exchange controls on South African firms have been relaxed for African investments. The Johannesburg Stock Exchange (JSE) is now linked to Nairobi. South African banks are financing oil exploration in the Democratic Republic of Congo (DRC), Nigeria, Angola and Gabon. Some BEE firms have been active in the Congo, where the huge energy project of the Inga Dam led by the power utility Eskom is one sign of the DRC’s growing importance for South Africa’s expansion within the region.

Finally, India, Brazil and South Africa have formed a South-South alliance (IBSA) aimed at increasing trade and investment between them and perhaps influencing world economic councils together. But the existing level of common economic activity is embarrassingly small and the three countries were not even able to reach agreement for the Doha round of global trade negotiations.  There is nothing to stop any of them from forming a bilateral alliance with China, for example, that would further undermine their precarious unity. This more or less sums up South Africa’s foreign economic policy at present: SACU is in crisis, SADC appears to be going nowhere, the AU’s agenda is far removed from contemporary realities and South Africa’s relations with other big countries in Africa (Nigeria, Egypt) and elsewhere (India, Brazil, China) are at best incipient and often mutually inconsistent. The situation in Southern Africa is particularly complex owing to the legacies of British rule and the apartheid regime, as well as, it must be said, the ANC’s own policies. But we find all over Africa a maze of economic associations that must be consolidated and simplified before there can be any hope of effective continental union.

We endorse Thabo Mbeki’s emphasis on African integration, but believe that he went about it the wrong way. He pursued African unity through grandstanding projects like a single currency when South Africa’s relations within its own region needed to be given priority. He sought to equalize with small countries like Botswana, Lesotho and Swaziland, when arguably a more comprehensive approach to his country’s regional hegemony was more appropriate; and the result is the current shambles within SACU over trade deals with the EU. South Africa’s economic policies were haphazard in respect of regional integration and generally followed the interests of the minerals-energy complex rather than being grounded in the opportunities for investment that South African capital found in Africa after the demise of apartheid. Above all, his leadership was aimed exclusively at that very political class that has failed Africa so often since independence from colonial rule and he neglected to incorporate the forces of civil society into his plans.

An African strategy for South Africa

As Daniel Bell once said, “The national state has become too small for the big problems in life and too big for the small pro”. One answer is to rely more on subsidiarity. This is one of the features of federalism, whereby sovereignty is divided between a central governing authority and constituent political units (like states or provinces). The principal of devolving power to the lowest effective authority is one condition for wider political association among previously sovereign entities. Federalism has been around for as long as the nation-state, if not longer; but, as we have seen, the assumption of a national monopoly over political economy is deeply rooted in contemporary civilization. Most of the largest countries are federal in constitution, but this has not prevented them from behaving like nation-states of late.

Before gaining independence from colonial rule, Africa’s political leaders often embraced the Pan African ideal, the unity of all people of African descent in a drive to recover control of their land from white imperialists. This movement, the most inclusive of its day, reflected the division of world society between European empires. The anti-colonial revolution, starting in Asia after 1945, took place when world society was being reformed as so many nominally sovereign nation-states. It did not take long for the Pan African idea to be replaced by what Fanon called ‘national consciousness’ and the continent was eventually divided into 53 states, most of whose boundaries were historically contingent. The new ruling elites probably never had strong ties to their subject populations and, once the legitimacy conferred by independence waned, they were forced to turn for material support to old foreign masters and some new ones. Moeletse Mbeke’s caricature, with which we began this essay, is too close for comfort and Jean-François Bayart’s account of ‘the politics of the belly’ in The State in Africa is depressingly accurate. Despite occasional claims for the ‘green shoots of democracy’ in Africa, the political norm is weak, fragmented states, ruled from the top down by presidential kleptocrats in league with foreign extractive, commercial and military interests. These ‘sovereigns’ pack the decision-making bodies of the world’s ruling institutions only to serve the interests of their paymasters, not those of their own people. At a time when North America, Europe, Asia and Latin America are forming regional trading blocs against globalization, Africa suffers from the labyrinthine confusion of regional associations we have seen which do little to strengthen their members’ bargaining power in world markets.

This is how Africa looks from the top. The situation on the ground is rather different, where African peoples have for centuries criss-crossed boundaries with patterns of movement and exchange that persist despite their rulers’ attempts to force economy and society into national cages. This is one major reason why so much of the African economy is held to be ‘informal’: state regulations are routinely ignored, with the result that half the population and most economic activity are made formally criminal and an absurd proportion of governmental effort is wasted on trying to apply unenforceable rules. The answer to this mess is classical liberalism, whereby people are encouraged to participate in the widest area of free trade and movement with minimal regulation by the authorities. Unfortunately, the last three decades of neo-liberal globalization have done much to discredit this recipe; and we too favour redistributive policies undertaken in the tradition of social democracy, especially at this time of global economic crisis. But we hold nevertheless that the boundaries of free commerce and of state intervention, for South Africa’s sake as well as those of its smaller African neighbours, should be pushed outwards beyond the limits of existing territorial monopolies.

South Africans like to think of their country as big and powerful, which it is when compared with its neighbours and even the rest of Africa. But it has nothing like the geographical size and economic clout of the United States, Japan, China, Germany, Britain, France, Russia, India or Brazil. Its population of under 50 millions is dwarfed by countries like Nigeria, Pakistan, Indonesia and Bangladesh; and the legacy of racial division which excluded and still excludes the majority of citizens from most benefits leaves South Africa some way behind smaller countries like Korea, Australia and Canada as an economic power. Africa is now the fastest-growing segment of the human population, a seventh of the total, but with only 2% of its purchasing power. Even so, Asian manufacturers have not been as slow as their European and American counterparts to target the African market, while competing for a larger share of the continent’s minerals. It seems obvious that South Africa needs to abandon the old imperial idea of being a white man’s country linked to other lands of temperate zone new settlement through the London metropolis. But how might it pursue a rational policy of integration with its African hinterland?

The first step should not be to seek economic coordination at the most inclusive level of the African continent as a whole. We do not agree that a single currency and central bank are appropriate to this stage of Africa’s development, given the disparities between member states. The global economic crisis has shown up vividly the limitations of such an approach for the eurozone, with countries like Ireland, Spain and Greece sacrificed to a central policy set by Germany and France, whereas Britain, Switzerland, Sweden, Norway and even Iceland have been able to take monetary measures suited to their own circumstances. The existing pattern of regional associations needs rather to be rationalized with the aim of simplifying administration and abolishing conflict between rules set at the various levels.

In South Africa’s case this should probably mean abandoning SACU in order to concentrate on building up SADC as a customs union with one set of rules for all members. At present visas are still required for travel between many SADC countries and a maze of bilateral deals and tariff barriers make a mockery of the idea of an ‘economic community’. A new model of integration within the Southern African region (eventually extending to East Africa) would have to break with the historical constraints imposed by existing bodies. Selective tariffs need urgently to be reduced within SADC, but this would not prevent protectionist measures being introduced at the regional level, where necessary. A consistent policy of trade liberalisation within the region would free up the movement of people, goods and capital and allow existing informal practices to conform more closely to economic rules. Only then would it make sense to reach out to other African regions such as the Economic Community of West African States (ECOWAS). The political elites can’t be kept out of such a process, but the driving force for regional integration on this scale would have to be a broad-based social movement. In making this point, our emphasis differs from those of both the Mbeki brothers.

‘Africa’ is still a significant category in world affairs and these piece-meal steps towards regional integration would benefit from a revival of the Pan African impulse that Thabo Mbeki tried to kindle. The AU and especially its economic arm, NEPAD, have a role to play in persuading the rest of the world that Africa’s poverty is a drag on the growth of the global economy. If the continent’s infant agricultural, manufacturing and service industries are to be given a chance to develop, there must be agreement at the level of multilateral institutions such as the WTO that Africa deserves special protection, at least for a period. Such arguments are unlikely to be persuasive coming from an Africa irrationally divided as at present. The continental and regional strategies need to be pursued side by side. We have stressed here and elsewhere the potential of the arts, culture, education, science and sport in Africa’s future development. African policy-makers need to think outside the box of their existing obsession with recapitulating the development stages of the old industrial economies. The continent’s educational and scientific institutions could make a significant contribution to this process if they made a serious effort to overcome the institutional legacy of colonial and postcolonial society.

Traditional African societies could be said to have supported economies whose object was the production of life as embodied in human beings. Hence the importance for many of them of cattle used to secure the reproduction of kin groups through marriage. Modern capitalist economies have as their object the accumulation of money through the production of inanimate things for sale. But in recent decades, the fastest growing sector of world trade has been in cultural commodities: services such as entertainment, education, media, software and information, along with explosive growth in the exchange of money itself and in the means of movement or transport. These trends make the economy more about what people do for each other (services) than the physical objects that go into making up their material livelihood. It could be said that, after the early phase of industrialization, the predominant focus of the world economy will revert to the production of human beings. There is no limit to the stories we can tell each other or to the pleasure we can derive from watching performers excel at what they do. Africa is well-placed to leapfrog the industrial phase of capitalist development from which it was largely excluded. South Africa, which for a time aspired to join in that industrial phase, should not pine for a return to shoe factories and chemical plants. The future of South African commerce with Africa and the world lies elsewhere.

It is obvious enough that South Africa would have to be a driver of regional integration and continental revival, if they are to stand any chance of even partial success. But what constellation of political and economic interests might push the country in that direction? Nelson Mandela’s vision of a ‘rainbow nation’ has come under severe strain in the last fifteen years. South Africa is still a racially divided dual economy with an extremely advanced hi-tech sector focused on mining, finance, security and retail (‘ walls and malls’); and a more mixed elite is surrounded by black poverty. Economic growth since 2000 has fed this divide, with the consequence that South Africa two decades after Mandela’s release remains a world leader in inequality. The economy is too small to go it alone and its racist past still weighs heavily. The premise of national capitalism will not produce the expansion that is needed nor will nostalgia for the days of an Afrikaner industrialization subsidized by gold. Hosting the soccer world cup in 2010 has generated a lot of hype; but the event is also a symbol of the contemporary world. Africa is a unity is this competition and the television audience generated by the cup final will bring together at one moment as many people as existed on the planet half a century ago. This is the world society that all of us confront today. Only an economic vision attuned to that reality can begin the long haul towards a federal Africa, led perhaps by a South Africa that has rediscovered its own roots in federalism.

This is part of work in progress on the history of South African capitalism undertaken by Keith Hart and Vishnu Padayachee, School of Development Studies, University of Kwazulu-Natal, Durban, South Africa.

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