The curse of South Africa

Mineral wealth has distorted the economy for generations. Moeletsi Mbeki, brother of South Africa's

The conference of the African National Congress that was held last month was billed as a heavyweight contest between the party's president, Thabo Mbeki, and its deputy president, Jacob Zuma. The conference turned out to be much more than that. It was a complete rout, not only of the president, but also of his cabinet, the sitting national executive committee, and of Mbeki's economy team.

The December conference saw the ANC swing from the centre towards the left, if one believes the rhetoric. Jacob Zuma, the new president of the ANC, mobilised the support of the Congress of South African Trade Unions (Cosatu) and the South African Communist Party (SACP) in order to fight for leadership of the ANC.

The ANC is caught in a quandary. On the one hand, its members and leaders want to preserve the economic system inherited from the apart heid era so that they, too, can benefit from it through, for example, Black Economic Empowerment (an affirmative-action programme, initially designed by South Africa's big corporations, that favours the new black elite) and social grants from the government aimed at alleviating poverty. On the other hand, they hanker for change that will ameliorate the growing inequalities and pauperisation among black South Africans. They blame individuals within the organisation for not bringing about the socio-economic changes they would like to see, but do not dare to initiate themselves.

Much of the impetus behind the emerging instability in the ANC, however, is financial rather than ideological. The only solution would be for a leadership to emerge, from either within or outside the ANC, that has meaningful policies for building a more inclusive society in South Africa. Black Economic Empowerment and social welfare programmes do not fundamentally lead to such social inclusiveness. If anything, they entrench the inequalities inherited from the past and exacerbate new inequalities among the blacks.

The undoing of Pre sident Mbeki and his cabinet was that they failed to understand that, with Zuma's rise, a new phenomenon of populism had entered the ANC. They also failed to understand the potential of populism to appeal to the black working class, the black poor in general, and a wide array of disgruntled people associated with the ANC who felt excluded from the inside track.

Their mistake was to see Zuma as a paranoiac who didn't deserve to be taken seriously. Mbeki compounded this error by standing against the populist Zuma but refusing to engage with him in public debate. He thereby appeared to be afraid of Zuma. This encouraged Zuma and his supporters to press ahead with their campaign and, paradoxically, Mbeki's silence persuaded many ANC members that Zuma's claim of persecution was valid.

Placating the poor

South Africa is able to undertake both Black Economic Empowerment and large social welfare expenditures because of its vast natural resources, which are now selling at a premium due to the rapid industrialisation of the large countries of Asia. South Africa's fabulous mineral wealth has been seen as a blessing since the discovery of diamonds and gold in the 19th century. What gets overlooked is the curse that goes with vast natural-resource endowment.

Since the current commodities boom started in the late 1990s, the ANC government has been ratcheting up public spending on the welfare of the poor. Why? Out of the goodness of its heart, reply ANC leaders. Not so, say doubters: rather to placate the poor so that they do not rebel, but most importantly to buy their vote.

In his address to the ANC conference, President Mbeki went to great lengths to explain the good things the ANC government has done for South Africa's poor. He noted that the number of South Africans living below the poverty line fell from 51.4 per cent in 2001 to 43.2 per cent in 2006 and that the number of people receiving social grants increased from 2.6 million in 1999 to more than 12 million in 2006.

But are South Africa's poor happy and grateful to the ANC government? In theory they should be, given the largesse they are receiving. But judging by the support that Zuma and his communist and trade union allies have been able to mobilise among the poor against the mainstream ANC which runs the government, it appears South Africa's poor are very far from happy. This is where the resource curse comes in.

A country develops when it is able to harness the energies of its people and put them to productive use. There are, of course, exceptions to this rule. Oil-producing countries are one. For very little effort, petroleum-producing countries pump crude oil from the ground and sell it for fabulous prices to foreigners.

South Africa is similar to oil-producing countries in that it, too, has natural resources - gold, platinum, diamonds, coal, iron ore, and so on - that are valuable to foreigners, who are willing to pay South Africa top dollar for them. While it takes more people to dig out South Africa's minerals compared to those employed to pump up crude oil, mining is still a small employer. Despite employing very few people, mining, however, makes a huge contribution to the country's wealth, in that it accounts for more than half of export earnings. The value that the few people employed in mining produce far exceeds their income. The government, therefore, has large revenues from mining activity that it can redistribute to the rest of society that does not work in the mines. This is what is called a resource curse - governments of resource-rich countries think their people need not work and will be happy living off social grants.

That is precisely the trap into which the ANC government has fallen. At least a quarter of the South African population receives social grants that would not be possible if South Africa were not mineral-rich. Without mineral wealth to redistribute, the government would have to work harder and be more creative to find solutions to unemployment and poverty.

Resource wealth makes it possible for the government not to have to put an effort into redeveloping the economy to create more jobs, and instead it sustains the unemployed and their dependants with social grants.

But do such grants make people happy as the ANC government expects? Paradoxically, while social grants contribute to putting food on the table, at a broader level they make the recipients more insecure because they do not know when the government will withdraw or reduce the size of their grants. Second, the grants accentuate the humiliation that unemployed people feel from being dependent and unable to look after themselves and their families. Every time they collect their social grants, recipients are subjected to all manner of humiliations by the government officials who administer the system. The rest of society stigmatises recipients as idle, worthless and parasitic.

What do South Africa's subsidised and marginalised people do to regain their self-respect? They support demagogues who claim that they, too, are marginalised, and therefore want to replace the ruling elites with people-friendly governments. This, in a nutshell, is what happened at the ANC conference and in the months leading up to it.

Zuma, with the support of Cosatu, the SACP and the ANC Youth League, ran a campaign that told ANC members, most of whom are poor, that he, like them, is despised and marginalised by the elite who run the party and its government. Zuma argued there was a conspiracy by the elite to ensure that he, and poor people like him, are kept away from power and therefore do not benefit from their struggle against apartheid.

Zuma's message resonated with many trade unionists, such as the general secretary of Co satu, Zwelinzima Vavi, who grew up as a farm labourer and worked his way up to where he is today by fighting against discrimination and humiliation under apartheid.

Winners and losers

Did all the passion and recrimination at the ANC conference produce winners and losers? Leaving aside the rather tarnished image of the party, a few bruised egos and what will turn out to be short-lived elation by others, the conference, viewed in the context of the country's future, reproduced the stalemate into which the ANC has been locked since 1994. January 2008 is, therefore, the month in which the country has gone back to business as usual.

As for Zuma - in reality, his was a pyrrhic victory in a phoney war. In the coming months he will be back in court facing corruption charges that could lead to his being imprisoned for many years to come. The case is scheduled to start in August.

The giant trade union federation, Cosatu, which devoted so much of its energy and resources to Zuma's campaign, has come out of the melee a loser. Its leaders are at each other's throats and there were no changes made to the ANC's conservative economic policies, such as the independence of the Reserve Bank, about which Cosatu has been unhappy for many years.

Cosatu ended up as cannon fodder at the hands of disgruntled ANC and SACP politicians who used it as a proxy to fight their battles. Ultimately, under a populist regime, the masses are the main losers.

Moeletsi Mbeki is a deputy chairman of the South African Institute of International Affairs, an independent think tank based at the University of Witwatersrand in Johannesburg