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ECONOMY-SOUTH AFRICA: A Tale of Two Trevors

Gumisai Mutume

WASHINGTON, Jun 8 2000 (IPS) - Two men named Trevor came to Washington this spring with opposing missions, one to challenge the World Bank and International Monetary Fund (IMF) and the other to enhance his country’s relationship with the Bretton Woods institutions.

As members of the now-ruling African National Congress (ANC), both men come from the apartheid struggle where they fought policies that deprived South Africa’s Black majority of decent housing, good education and the right to vote.

But this spring, Trevor Ngwane, a councillor in the impoverished, former Blacks-only township of Soweto was on the cold streets of Washington DC toyi toyiing (doing the struggle dance) against policies that are still perpetuating the gap between the rich and poor in South Africa. He wants immediate debt forgiveness and the closure of the international financial institutions.

On the other hand, Trevor Manuel who has now risen to the position of finance minister in South Africa was chairing the board of governors of the Bank and Fund, a position he holds until the end of the year.

He was also improving relations with the Bretton Woods bodies which he says is necessary for sustainable development for his country.

Ngwane, however, traces the austere measures of his government to the halls of H Street, the headquarters of the Bank and Fund. Since 1996 South Africa’s government has embarked on cost-recovery measures that are hitting Soweto residents hard.

“You find people struggling to keep up with their rent and bills … an authoritarian mode of collecting money is being used. There are families who have stayed for a whole year without electricity (because they could not pay),” Ngwane says in a documentary titled ‘Two Trevors’ which made its Washington premiere recently.

The two men epitomise two radically differing economic approaches to their country’s situation – the left leaning Reconstruction and Development Programme (RDP) and the neo-liberal Growth Employment and Redistribution strategy (GEAR).

The RDP was introduced by the government of President Nelson Mandela in 1994 and contained measures such as free health care for pregnant mothers and children under six years of age. It also sought to aid poor Black families, discriminated against during apartheid. However, the RDP was abruptly replaced by GEAR in June 1996.

GEAR focuses on attracting investment, trade liberalisation, deficit reduction, abolishing exchange controls and, says Ben Cashdan who produced the documentary, “all of the formula that we’ve come to know as being part of structural adjustment programmes from the IMF and World Bank.”

The policy was not imposed upon South Africa, but two World Bank economists helped formulate GEAR.

The relationship between the new South African government and the Bretton Woods institutions blossomed in the early 1990s as the government of President Mandela sought a formula to attract the ever elusive foreign investment.

Conditions attached to an IMF loan in 1993 urged the government to reduce the budget deficit to six percent of GDP even though the IMF accepted that the deficit could exceed these targets.

The IMF “merely urged that the ratio should be reduced in the direction of six percent”, and in a 1993 document, the World Bank was even more accommodating, notes a policy critique by the Cape Town-based Alternative Information and Development Centre (AIDC). The Bank approved a deficit of 10 percent for the rest of the decade.

But eager to appease foreign capital, GEAR set a target deficit of just three percent by 1999. Manuel has stuck to it and the deficit is currently at 2.7 percent, down from 10 percent in 1993.

“The new government surprised many by its readiness to open the domestic market to (unequal) foreign competition as required by the World Trade Organisation (WTO),” notes AIDC. “The government’s actual practice has been to remove import tariffs at a rate even faster than required by the WTO.”

Even then, foreign direct investment has still not embraced South Africa. In 1992 about 3.7 billion rand (one dollar equals 7 rand)left the country, the figure increased by 440 percent the following year to 16.3 billion rand, notes AIDC.

While GEAR has stabilised the South African economy and made it a prime destination for foreign investment, it has failed to create the 100,000 to 200,000 jobs in the formal economy each year. Instead, South Africa has lost 500,000 jobs since GEAR was adopted.

“The legacy, the history of the World Bank and IMF in Africa, in Asia in South America in the Third World has been shameful and the best thing we can do is close them down,” Ngwane says in the documentary.

“That doesn’t help,” responds Manuel in ‘Two Trevors’ filmed by the South African Broadcasting Corporation during the Spring meetings of the Bank.

“As South Africa we can raise taxes, we have a capital market in this country we can borrow. But if you are Mozambique or Tanzania you can’t go to global capital markets, you need a source of financing that’s cheap,” and this is where the World Bank comes in.

Ngwane was recently suspended from his party position for criticising the effects of ANC economic policies such as privatisation of state enterprises and cost recovery. In the spring he was one of the 6,000 demonstrators that descended on Washington protesting against the Bank and Fund.

During apartheid Manuel was repeatedly detained without trial or placed under house arrest, spending a total of 35 months in detention for fighting against the system. And during those times, the IMF, the Bank and other international financial institutions were also players in the equation, fuelling the South African economy with loans that sustained it.

Money lent not only by international financial institutions but also by the private sector around the world went either to finance Pretoria’s own apartheid programmes or to deal with the destabilising effect of apartheid in the region.

Today some 400 billion rand, enough to build a house for every single southern African is owed by the governments of southern Africa to the international financiers and Ngwane calls this “odious debt”, because the people are being made to pay twice for apartheid.

Post-apartheid South Africa inherited a foreign debt of 19 billion dollars but the dominant view amongst economists and politicians is that this sum presents no special problem.

Manuel who was selected by the World Economic Forum as a ‘Global Leader for Tomorrow’ in 1994 remains hopeful.

“We have committed to creating an open economy. It seems clear that countries that have been more open to the world economy have prospered more than those that have been less open.”

He says South Africa remains committed to “the principles of macroeconomic policy as established in GEAR, that I believe have set South Africa on a steady course despite the turbulence we might experience.

 
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