The privatisation agenda will not save South Africa

Mail & Guardian

5 hours ago

For the many who rightly feel abandoned by the government, and are sick of the state's failures, the private sector stepping in to solve problems with energy, water and logistics might appear rational and necessary. (John McCann/MG)
The World Bank has approved a $1.5 billion loan to South Africa. The
Does this new loan not contradict and undermine the government's stated efforts to practice fiscal responsibility and restrained government spending?
For the past several years, the treasury has nourished
Since 2010, the government has taken on
As irrational as treasury's loan agreements with the World Bank might seem to the public, it operates within a logic that justifies the broader agenda being pursued by the government of national unity (GNU).
Behind the curtain of political theatre surrounding debates on education, land reform and black economic empowerment (BEE), the GNU is united by an unwavering commitment to a series of structural reforms that will extend an exploitative, undemocratic and costly dependence on private investment for public infrastructure development and operation.
For the many who rightly feel abandoned by the government, and are sick of the state's failures, the private sector stepping in to solve problems with energy, water and logistics might appear rational and necessary.
The idea that private sector firms, and the capitalists who run them, are inherently more efficient, less corrupt and unburdened by political ideology is so pervasive an assumption that it barely receives any interrogation. Perhaps the most potent illusion this unexamined assumption instills is that what is best for big business is best for people.
In reality, maintaining profitability, cutting operational costs, minimising risk to investors, maximising shareholder value, ensuring returns on investment, remaining competitive and being exposed to the fluctuation of markets means that private sector firms — as an unavoidable imperative of surviving in a capitalist economy — will always put their prosperity over the welfare of the public. This is evidenced by international experiences in both developed and developing countries.
In the
The adoption of the
Rather than capacitating municipalities to deliver services on the basis of human need, national budget transfers to municipalities were reduced, non-core functions were outsourced to expensive private contractors and municipalities were compelled to pursue
A central component of placing public utilities and services into the hands of private operators is fiscal consolidation, that is, austerity. Austerity then shrinks the role of the state, weakening its ability to service the public and enforces reliance on private firms, clearing space for market competition.
Austerity measures in nations such as
Private companies also need to reduce the cost of labour, requiring workers who are easy to hire and easy to fire, unprotected by collective bargaining and often compelled to work without the lifeline of a minimum wage. Around the world, creating
The set of reforms being proposed, and gradually implemented, by the GNU are not novel inventions but belong to a tradition of economic practice that has dominated macroeconomic policymaking in South Africa and around the world since the 1980s. This economic practice has come to be known as neoliberalism.
Although a term often casually tossed around, a concrete definition of neoliberalism recognises that it is both an economic
The theory proposes that 'human well-being can be best advanced by liberating individual entrepreneurial freedom and skills within a framework characterised by strong property rights, free markets and free trade'. As a political project, neoliberalism aims to 're-establish the conditions for capital accumulation and to restore the power of economic elites'. To achieve the aims of neoliberalism, the role of the state is to create and preserve the institutional framework appropriate to the practice of capital accumulation.
The coalition government is advancing a surrender of public infrastructure development, basic service provision and equitable economic growth to the profit-maximising interests of domestic private companies, multinational corporations and international financial institutions.
As an example, the World Bank's use of the term 'modernisation' is merely a euphemism for the continued liberalisation of the energy and logistics sector, further commercialising state-owned enterprises and eventually leading to their privatisation. Liberalisation — which is the removal of government regulations, the breaking down of monopolies and facilitation of competition — precedes or coincides with commercialisation, setting the scene for private participation and market competition.
Through commercialisation, public utilities and services that should have a mandate to serve the public good are turned into enterprises that prioritise revenue and profitability. Their services are brought into a competitive market consisting of private firms with a mandate to make profits.
Privatisation, the process of transferring ownership and control of public assets and services to private entities to be run on a commercial basis, is often preceded by the liberalisation of public sector utilities and the commercialisation of public services.
The logic behind the GNU's agenda is for the government, using its authority to create legislation and enforce policy, to forge the most hospitable conditions for capital accumulation by cultivating a business friendly environment that will attract private investment in infrastructure, increase the efficiency of key economic sectors and grow our economy, producing jobs and reducing poverty.
Weaving sermons in the editorial rooms of the corporate-sponsored media and evangelising in the offices of the treasury, the priests of this trickle-down gospel portray private investment as South Africa's sole salvation.
The policy plans of government are not a rhetorical wishlist, but are clearly laid out in
The unbundling of Eskom and creation of a competitive electricity market to introduce private sector participation in generation, distribution and private
The
Continued fiscal consolidation — that is, austerity measures (budget cuts or limits on social welfare, public employment stimulation, tight monetary policy and regressive taxation to achieve a budget-surplus);
Mobilising up to R1 trillion in financing from the private sector for infrastructure development through
Increased reliance on
The gradual imposing of labour-market flexibility, that is, deregulating the labour market to decrease the cost of labour for employers (weaken collective bargaining, lower minimum wage requirements and reduce employment benefits).
What we are witnessing is the exploitation of crises — specifically the crises of unemployment, economic stagnation and state incapacity — to justify the enforcement of policies that have failed to deliver desired outcomes in both developed and developing countries across the world for the past 50 years.
The most important element of the GNU's structural reform agenda is the drive for private financing of public infrastructure development through public-private partnerships. Global institutional investors — be it the World Bank or multinational investment banks — are using the burden of sovereign debt (which limits fiscal space for domestic resource mobilisation and state-driven investment), alongside the justification of meeting
In the past several years this has largely occurred through
Because infrastructure projects, especially for natural monopolies such as electricity or water provision, require immense capital investment and come with a series of risks (design defects, project delays, foreign exchange volatility, land acquisition, labour protections and so forth), governments have to ensure infrastructure development is
This is done to make infrastructure projects investable and profitable. The state takes on risk through providing private investors credit guarantees, enforcing cost-reflective tariffs, providing subsidies or tax breaks. Through these de-risking mechanisms, risk is transferred onto the government's balance sheet, coming at the cost of public investment, which a country like South Africa needs to eradicate unemployment, poverty and inequality.
In countries such as Spain, Mexico, India, Peru, Nepal, Scotland and Liberia the commercialisation or partial privatisation of public utility and services through public-private partnerships
Moreover, democratic accountability and the need for transparency in the provision of public goods has been undermined when crucial infrastructure is handed over to private hands. In developing countries such as South Africa, the growing reliance on private companies to deliver public services and build public infrastructure
The government has retained a commitment to neoliberalism for decades, whether through the Growth, Employment and Redistribution, the Accelerated and Shared Growth Initiatives for South Africa, the National Development Plan or the Reconstruction and Recovery Plan.
We keep trying the same things while expecting different results. About 12.7 million are unemployed and half the population of the country lives in poverty. Such conditions are unsustainable and explosive. New, politically imaginative and effective policy solutions are needed.
Andile Zulu is with the Alternative Information and Development Centre in Cape Town.