The politics of South Africa’s governing African National Congress (ANC) may be hogging today’s headlines, but they are a symptom of the economy’s development over the past two decades. They are unlikely to offer a cure. But they could help decide whether a remedy will be possible.
The ANC drama reached new heights late in November at a national executive committee meeting at which some Cabinet ministers and some senior officials called for the removal of President Jacob Zuma. Their attempt was thwarted by Zuma’s supporters on the committee.
It is common to reduce the politics of the ANC to a battle between personalities: more specifically, to one in which the future depends on whether the president stays or goes. In reality, it is a fight between two factions, both of them products of trends in the economy. The battle’s outcome will have important implications for the economy but, without other changes, they will not be as dramatic as we are sometimes led to believe.
To understand what is happening within the ANC, we need to look at the economy’s path since the country became a democracy. In 1994, South Africans were divided into economic insiders who derived the benefits of the formal economy, and outsiders who were largely excluded. The main criterion for inclusion or exclusion was race.
Since then, the economy has absorbed new black entrants who have joined the insider group. But there are still strong barriers to entry into the formal economy – a point made by, among others, International Monetary Fund deputy managing director David Lipton. And so, despite the emergence of black professionals and managers, many black South Africans remain economic outsiders.
What feeds the politics of patronage
This insider-outsider divide explains the division within the ANC. Many of the ills which are associated with Zuma’s presidency are, in reality, the work of a faction which relies on using public office to acquire resources which it uses to buy support.
One cause of this style of politics is that it is not that easy for ambitious black people, freed of the legal burdens of the past, to make it in the formal economy. So some see politics as a way of getting ahead. The insider-outsider divide makes sure that they have a ready support base if they are able to hand out resources to people who live on the economy’s margins.
Because many people are still excluded, they cannot rely on formal jobs to make ends meet. If they can, they therefore attach themselves to politicians, giving them support in exchange for (some) resources. This opens the way to patronage politics, in which private and public interests get together to use public resources for their benefit and, if they are politicians, to build their power base.
The president is part of this faction, and the Gupta family is one source of its resources. But there is far more to it than one politician and one family. Its goal is to feed the public-private networks which keep its money flowing. This is why it is eager to take over parastatals and the National Treasury, which would be a source of patronage bounty if people who want to keep public money public are removed.
The ANC faction which opposes them largely represents those who have been absorbed into the market economy. This does not mean that all its politicians are directly engaged in the private economy, although many are. But they rely for support on voters whose livelihood depends on the formal economy and who would lose out if the government damaged it. This group is not restricted to business people and professionals. It includes trade union members whose wages or salaries give them a stake.
While cosy relationships between public and private interests happen in the formal economy too, people who have been absorbed into the market economy have an obvious interest in protecting it from a takeover of the National Treasury or other damage inflicted by the patronage faction.
ANC politics does not make much sense unless we see it as a battle between the factions. While we are often told that ANC statements are contradictory or confused, this usually means that the factions are taking opposing positions. It was the patronage faction which wanted Des van Rooyen to become finance minister, their opponents who insisted he be replaced by Pravin Gordhan.
The battles over parastatals hinge around whether they will be used for patronage as does the continuing fight over nuclear power. It is the patronage faction which wants Zuma to remain in office, its opponents who want him out.
The battle continues
The battle between the factions is likely to continue next year despite the dramatic developments at the last ANC national executive committee meeting. The earliest this battle is likely to be settled is at the end of 2017, when a new ANC leadership will be elected.
This means that many skirmishes between the factions lie ahead – over the South African Broadcasting Corporation, power utility Eskom, South African Airways and perhaps the South African Revenue Service too. In every case, the issue will be whether patronage politics or the public interest (at least the interests of the public which is active in the formal economy) prevail. Although neither side will win a clear victory, the outcome of these battles will signal the direction in which the economy is heading.
Victories for the patronage faction will erode the market economy. Wins for their opponents would strengthen it. If the patronage faction loses the battle for control of the ANC, the economy in its current form will be insulated from attack by politicians and their private partners who want to turn it into their property.
But if that is all that is achieved, the gains for the economy will remain limited. The problem which strengthens patronage politics – the exclusion of many from the formal economy – remains. So do the poverty and inequality which are its product. Unless economic change is negotiated which opens the formal marketplace to the excluded the problem, and so the potential for damaging patronage politics, will remain.
Amid the political drama of the last few days there was one sign that this negotiation may be beginning. This was represented in the news that business, labour and government were discussing a deal in which a national minimum wage would be introduced in exchange for measures to reduce strikes. While that would be only the beginning, it is this sort of bargaining which could ensure that the market economy is not only saved from patronage politicians but that it begins to create conditions which will mean that patronage has far fewer takers.
None of this will be possible if the patronage faction wins. But, if it is defeated, the gains may not last long unless negotiation on economic change takes root.