South Africa’s Transition to Democracy Left Neoliberalism in Place
The negotiations to dismantle apartheid in South Africa in the early 1990s failed to challenge the neoliberal economy created by the ruling National Party. The water shortages and blackouts sweeping the country today are a direct result of that failure.
South Africans protest against energy and water shortages in Johannesburg on February 2, 2023. (Ihsaan Haffejee / Anadolu Agency via Getty Images)
South Africa’s transition from an apartheid state to a democratic republic did not inaugurate an era of either prosperity or egalitarianism.
This year, South Africa has seen its worst period of planned blackouts, which the country’s government has taken to euphemistically refer to as “load shedding,” since the advent of multi-racial democracy. According to some studies, the average citizen spends 27 percent of the year without power. Meanwhile, some 15 percent of South Africa’s water supply systems are in poor condition and seventy million liters of drinkable water are lost daily as a result of poor-quality infrastructure.
Many have blamed corruption for the country’s ills. A popular narrative has developed that the country’s state-owned enterprises (SOE) are dysfunctional because these companies are in the hands of the government. Cutting back red tape, critics argue, is the most efficient way to improve the dire situation. By stealth, South Africa’s infrastructure crisis has provided a justification for a turn towards economic liberalization, a move which would only worsen the conditions for the poor who suffer most from the country’s inadequate social provisions.
A Collapse Generations in the Making
South Africa had its own version of the turn away from social democracy pushed forward by Ronald Reagan in the United States and Margret Thatcher in Britain. The country’s National Party (NP), which was largely responsible for upholding the apartheid regime, adopted similar neoliberal policies that stressed the state’s role in upholding free-market institutions.
During the 1980s, international sanctions brought against the South African government because of its violations of human rights forced Eskom — the state-owned power utility — to raise the cost of electricity. Unsurprisingly, these increases were wildly unpopular, and the NP responded to widespread anger by launching the De Villiers committee in 1984. The committee recommended the company be sold off, ushering in an era of privately run electricity in South Africa.
By the early 1990s, when the country began the four-year process of negotiations that would culminate in the end of apartheid and the African National Congress (ANC) becoming the country’s first democratically elected government, leftists found themselves faced with a pyrrhic victory as Mandela’s party released their economic policies.
The socialist restructuring promised by the ANC was, in these proposals, completely absent — while the privatized energy policy implemented by the NP remained in place. Despite being driven out of power, the NP and its allies quickly recognized that their economic interests could still be served in the absence of racist policies. On the left, Mandela and the ANC were forced to make concessions regarding macroeconomic policy out of fear that a newly democratic South Africa would face economic isolation.
Failed Economic Reform and Redistribution
In 1996, the ANC implemented the Growth, Employment, and Redistribution (GEAR) Act as a means to further situate South Africa in the global economy. The GEAR Act was a huge turn away from the formerly socialist values of the ANC. GEAR embraced neoliberal austerity and deregulation measures, and committed the country to the privatization of state assets and heavy reliance on private investment in the distribution and allocation of public services.
Despite being criticized by socialists, trade unions, and all those on the left of the political spectrum, the ANC backed the GEAR Act, arguing that attracting foreign investment in the pursuit of capital accumulation would rectify the issues of unemployment and inequality.
The implementation of the GEAR Act and similar initiatives signified a fundamental change within the South African economy. Leonard Gentle, the director of the International Labor and Research Information Group summarized this shift:
[It was] a change from a form of Keynesian racial capitalism, in which the state secured the conditions necessary for accumulation for the capitalist class as a whole based on cheap black labour power, cheap energy, and regulated capitals, to a neoliberal state attempting to open up new arenas for commodification.
Beginning to an End of Eskom
Two years after the GEAR Act, a government white paper warned that without investment into new generative capacity, South Africa would experience a critical energy supply shortage by about 2007.
However, such a big project financed through public investment and led by a state utility was not in line with the neoliberal approach stipulated in the GEAR Act. The government therefore did not see the need to invest in Eskom’s generative capacity and instead relied on private sector actors.
The low profit margins within the electricity sector meant that the private sector did not deem it financially viable to build new power stations. Right on time, widespread electricity shortages hit South Africa in 2007. In response, then president Thabo Mbeki issued a public apology: “When Eskom said to the government, ‘We think we must invest more in terms of electricity generation,’ we said no. . . . We said, ‘Not now, later.’ We were wrong. Eskom was right.”
The Commodification of Water
Following the first democratic elections, the pressure was on the newly-elected ANC to address the legacy of apartheid spatial planning. The Left placed a great deal of attention on the need to reform the existing water supply infrastructure, which had historically serviced the white minority areas and ignored black townships.
The National Water Act of 1998 seemed to answer the public’s call for social redress, but the act actually facilitated the marketization of the water sector. Specifically, the act called for devolution of control over water supply and provision to local authorities. Decentralization had the effect of making it easier for water services, now broken up into small chunks, to be controlled by private sector players.
Johannesburg Water is one of the companies owned and operated by the local municipality of Johannesburg and is responsible for water delivery from dams managed by the Department of Water and Sanitation (DWS). However, in 2001, a management contract was awarded to the French corporation Suez.
To fulfill their corporate mandate, Johannesburg Water, under the management of Suez, implemented a metering program in which residents would have to pay based on water consumption, eliminating the fixed rate that the apartheid government had set. This new system of prepaid water meters was especially dire for poor communities in Soweto. These communities eventually took Johannesburg Water to court in 2008, deeming it unconstitutional to increase the fee for water. When this case went to the Constitutional Court, the judges ruled against the plaintiffs and argued that following market principles was vital and necessary to address human rights.
Because companies like Eskom are run based on market principles, they must recoup all of their costs through profits, rather than funding an unprofitable but essential service through revenue raised from taxation. In a country where eighteen million people live in poverty and 30 percent of the population is unemployed, it is difficult to pay for improvements in energy capacity by raising prices.
Rising poverty, exacerbated by energy shortages, has only shrunk the pool of funds from which Eskon can draw. According to the free market principles that govern the company it has two options — raise its prices or take out more loans — both of which will deprive citizens, especially working-class black citizens, of affordable and safe access to electricity.
The path to South Africa’s current market-orientated approach to energy provision began decades ago, when its transition to democracy failed to live up to its radical promises. In order to address the country’s woes today, the Left will need to find a way to reclaim the language of economic, as well as racial, equality.