History’s economic imbalance persists in SA

In the final part of our New Frame, New Economy forum on inequality, Ayabonga Cawe says South Africa has to first reckon with its long history of economic favouritism and exclusion along racial lines.

Any effort to undo inequality must begin in the real and concrete conditions of life in South Africa, and the continuing underdevelopment of its “Native Reserve”.

And by Native Reserve, I don’t only mean the former homelands. It spills over to include precarious life on the margins of South Africa’s cities. Native Reserves are not just a space. Nor are they simply a flashpoint of 20th-century colonialism. Rather, they are enduring manifestations of South Africa’s world-beating inequality.

To be born Black and female, queer or disabled in a former Bantustan marks one out for the bottom of South Africa’s barrel of inequity. There are hardly any opportunities to jump the class hierarchy, despite what is often suggested, which accounts for the “incredibly strong passing on of disadvantage and advantage across generations” that Murray Leibbrandt laments.

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Without economically dislocating the Native Reserve in South African life, any policy attempts to confront inequality are tripped up by a booby trap of well-meaning intentions without a concrete assessment of what drove and continues to drive inequality in the country.

The ghosts of Bantustans

“In future nine-tenths of them,” Cecil John Rhodes read from the Glen Grey Bill in 1894, “will have to spend their lives in daily labour.” One hundred years later, South Africa experienced a democratic breakthrough. This breakthrough, however, failed to displace the Native Reserve as a place where, as Rhodes said, “every Black man cannot have three acres, a cow or four morgen and a commonage right”.

Once the labour needs of bourgeoning industries ballooned after the discovery of gold and diamonds in South Africa in the 19th century, first colonial and then apartheid policies coherently sought to reduce the reservation wages of Africans.

The reservation wage was the lowest wage, beneath which a worker would not be willing to take up work. And, as Rhodes’ remarks made clear, the flourishing project of primitive accumulation in South Africa needed to restrain the reservation wage of Africans on the mines and farms.

The measures implemented – from poll taxes to restrictions on trade unions to influx control and the colour bar – all sought to repress African wages, maximise white profits and make fiscal provision for the social reproductive needs of impoverished whites.

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When asked about the “undesirability” of the migrant labour system by a commission looking into Native economic affairs in 1930, Mr Payne, a white member of Parliament, said, “It is not desirable, but I do not see how it can be avoided.” What he was getting at was that, while many whites knew that dispossession and the exploitation of migrant and cheap labour was wrong, existentially, they could see no alternative.

Our discussions on contemporary inequality are punctured with the same hapless reluctance.

Some say inequality cannot be avoided, and the task is to make “growth” more “inclusive”. As Leibbrandt notes, exclusive growth cannot sustain the momentum of the growth process.

But, if we are serious about confronting inequality, then we have to understand that it is more than a momentary limit on growth. Inequality is a structural, endemic and baked-in feature of economic and social life in South Africa. And growth will never be sustainable until the policies aimed at boosting it overcome the reasons for continued low reservation wages and the cheap labour habits of industry.

Black debt, white credit

Leibbrandt notes that “even the credit ratings agencies flag the fact that persistent and extremely high inequality impacts on our viability and sustainability”. The same ratings agencies, however, frown on asset transfer mechanisms that can improve life chances outside the labour market and raise the reservation wage within it. Ratings agencies call for “market-based” land reform, for instance, even after the “willing buyer willing seller” model has failed to meaningfully return life-giving land to those from whom it was taken before, during and after 1913.

Ratings agencies’ ignorance of the role of finance and credit in enabling cheap labour is also disingenuous.

As far back as 1930, James Hedashe, an African community leader speaking at the 1930 Native Economic Commission hearings in Adelaide in the Eastern Cape, spoke of the pernicious credit system operated by white store traders, which reduced the means of survival outside of desperate reliance on waged farm work:

“… people starve. They have got to buy … they will always take food on credit and then, at month-end they have to reckon out, and all that money is earmarked … the debt then increases like that, because a bag will be worth more than ten shillings and at last, he will have to give his beast, if he has any, to get rid of the debt …”

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The same store traders would often take agricultural produce and livestock from African producers on consignment, creating a cash flow challenge that led Antyi Sobopha and Caroline Sitsila, two women leaders from the Garveyite Universal Negro Improvement Association and the African Methodist Episcopal church movement, to lament in a letter to the commission that “our local traders have no mercy to pay cash for our agricultural produce”.

The severe strains owing to landlessness, infrequent cash incomes from the mines and farms, and declining commodity prices associated with the Great Depression made life more precarious. Debt served as a functional instrument for consumption and dispossession.

In South Africa’s contemporary inequality regime, debt remains the operative mechanism of facilitating consumption amid widespread unemployment and stagnant wages.

Yet for the white community, debt has served the function of guaranteeing social reproduction and accumulation. In moments of economic crisis in the 1930s, the Union government offered price guarantees to white farmers when prices for wool, mielies, wine, sugar and tobacco were down. Black farmers got little beyond the increased prices passed on to them as indebted consumers of white-owned trading outposts.

To subsidise white life and livelihoods, the Union government levied quit-rents, poll taxes, passes, lodger’s permits and other fiscal instruments on Africans and gave little or nothing back.

Inequality’s scaffolding

This is the foundation and scaffolding on which South Africa is built, accounting for why inequality, even under conditions of democracy, continues to thrive.

Rather than widespread improvement in wages and life chances for those on the margins, the democratic transition has broadened the safety net for Black households and created a vulnerable middle class through social transfers and the extension of credit to households.

But while consumptive credit is readily available – at grocery stores, at the local Pep retail store, in a social grant queue and even on your phone if you use an airtime advance – productive credit remains elusive for many Black producers.

Who gains from this? Leibbrandt’s insight that the wealthiest people derive substantial income outside of wages and salaries provides some answers.

The richest benefit from a financialised system of accumulation. Returns for owners of financial, insurance and real estate assets continue to grow far more than the national rate of growth. The financial sector channels resources that could otherwise have been invested in production and employment into these assets, generating periodic income and capital gains for the owners of capital.

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Traditional banks are also disincentivised to lend to riskier but productive sectors. Their income is heavily skewed towards non-lending sources of income like service and bank fees, trading activities, payoffs from fiduciary duties, insurance commissions and rental income.

The strategy in the South African financial sector has been to maximise flows from service fees on digital transactions, cross-market services such as airtime on credit, loans and insurance, and generate large data on consumers for monetisation and predictive products, while downscaling physical branch networks and laying off workers.

The lesson for South Africa is instructive. Capitalism can accumulate now, without the restraints of labour. But what does this mean for our efforts to reduce inequality?

It means that while some answers may lie in the labour market, others do not.

In the case of finance, some of our answers lie in the redirection of investment towards areas that socially reproduce life and livelihoods, even beyond the mill, mine and farm. Finance has the power to influence the nature and direction of the growth we experience. But unchecked, it can also place the future of businesses, households and people at risk.

Beginning the assault on inheritance

The starting point in reducing inequality is to recognise the regressive nature of taxation and other fiscal policies in our colonial and apartheid histories. These have underinvested in the social reproduction of large parts of our population.

First, policies that reverse this trend by providing free healthcare, education, comprehensive social security and household services for impoverished people need to be a priority. Austerity, in a social formation like ours, leaves intergenerational scars and Black people in South Africa have now lived through centuries of it.

Second, asset-transfer programmes involving land, housing and upgrading shack settlements need to be accompanied by a broader ecosystem approach.

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Take a redistributive programme like social grants, for instance. It is hollow for grants to effectively provide cash flows to large supermarkets, food processors and other retailers, while enterprises set up by land-reform beneficiaries cannot access the consumer market. Grant beneficiaries should instead be able to access locally produced goods and services in vibrant municipal markets.

Last, lending should be channelled to areas in the former homelands and urban townships that actually produce stuff. Dominant oligopolies, such as big supermarkets, have crept further and further into township and rural retail value chains over the past few years. One way to reverse this is by resuscitating old industrial parks and linking them to public procurement.

Our history of accumulation by dispossession means there are few alternatives to wage income for unskilled Black workers. If you are unskilled and discouraged in South Africa, you are likely to have been touched and reared by the Native Reserve in some shape or form, marking you, in all likelihood, for a lifetime of working poverty, inactivity or discouragement. It is a historic inheritance many have little prospect of escaping.

Only once policy explicitly and intentionally creates livelihood and wealth creation alternatives for those closed off from such opportunities, can we wage a meaningful assault on income and asset inequality in South Africa.

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