New South African Review 1. Anthony Butler
literature which has sought to address the nature of South Africa’s democratisation, ranging from celebrations of a ‘miracle’ through to sharp criticisms of an ‘elite transition’. Suffice it to say here that what, in retrospect, needs emphasising is how the political transition (an agreement by the then white controlled government to concede a non-racial democracy backed up by assurances of the entrenchment of a ‘constitutional state’) was complemented by an economic deal, largely forged behind the scenes, in which business built political and economic alliances with elements of the incoming ANC elite (later to be formalised as Black Economic Empowerment or BEE), while the ANC committed itself to market economics and abandoned plans for nationalisation. This had the makings of what Scott Taylor (2007) terms a ‘reform coalition’.
Taylor refers to reform coalitions as alliances of public and private sector interests that are found in developed and developing contexts and which take joint action to exploit a complementarity of interest via economic reform. They are best institutionally organised in forums which bring business and the state together, and are sites of negotiation and bargaining in which private and public partners may be of highly unequal strength. Where they work, they require give and take, for just as the state is not necessarily capable of taking wise decisions about the economy, business is likely to be more concerned with its immediate interests than the general welfare of society. Reform coalitions thus occur when the interests of business and state converge to enact, modify or implement growth-promoting policies that both parties expect will foster investment and increases in productivity, exemplifying what Peter Evans has referred to as the ‘embeddedness’ of state and society. By contrast, business-state relationships that privilege either a bureaucratic state bourgeoisie and/or particular corporate elites at the expense of growth-producing policies fall outside the definition of a reform coalition. For instance, where state power is relatively unconstrained, policies and practices may be implemented that negate the conditions which business requires for investment; or where business backs budget deficits which drastically reduce social welfare expenditure without making provision for alternative safety nets, the outcome can be debilitating in economic as well as social and moral terms.
Taylor and others argue that these characteristics have been substantially lacking in most sub-Saharan African countries (Brautigam et al 2002). Typically, the private sector has remained weak due to colonial inheritance, post-colonial policy and an outsized economic role for the state; business associations have been weak; and personalised rule has resulted in state predation, facade-like bureaucracies, clientelism and corruption. In post-apartheid South Africa, however, a reform coalition underpinned the political transition. Critically, fearing nationalisation, key business actors (notably from the mining and financial sectors) combined to convince leading elements of the ANC to adopt a liberalising economic framework which, they argued, was the only sure way to attract investment, spur growth and create jobs. This culminated in the ANC leadership’s adoption of the Growth, Employment and Redistribution (GEAR) strategy even though it was contrary to the party’s election manifesto (the Redistribution and Development Programme), and even though it was at cost of the exclusion from policy-making of both smaller business interests and the party’s partners, the Congress of South African Trade Unions (Cosatu) and the South African Communist Party (SACP) (Bassett 2008). Although this clearly privileged the interests of big business, Taylor (2007: 189) opines that ‘it is not at all clear that alternative coalitions would have produced wider social and economic benefit for South Africa and prevented wider political instability during a very fragile period ... Business and the emergent ANC-state needed each other; each conferred legitimacy upon the other’. Broadly, the coalition that emerged endured because it continued to provide utility to either side: ‘profitability, new trade opportunities, public-private partnerships, the preservation of ANC political dominance, and not insignificantly, the enrichment of erstwhile ANC elites through BEE’ (Taylor 2007: 190).
Taylor acknowledges that investment and employment levels and overall economic performance (‘low but positive’) were to fall far short of neoliberal expectations, and admits the need for a wider dialogue between business and the state which would lead to adoption of a more comprehensive range of strategies productive of more socially inclusive growth. Nonetheless, he insists that business remains ‘indispensable to South Africa’s future’, and argues that as long as the state can ‘placate labour and the left, it will continue its relationship with predominantly white capital while witnessing the steady expansion of black empowerment companies’ (Taylor 2007: 191).
An immediate critique of Taylor is that he systematically underplays the important role which organised labour (Cosatu) played in facilitating the forging and functioning of the reform coalition. Nonetheless, his overall projection of South Africa’s ‘low but positive’ growth as an outcome of balance between business and the state after 1994 is broadly convincing, not least because the counterfactual cannot be determined. However, although it is also arguable that the conditions for the viability of the reform coalition are changing for the worse, to argue this is to necessitate an exploration of the wider context of any such coalition. This, it is proposed, was constituted in South Africa of three major dimensions.
The first aspect of this wider context was agreement not only that the government would pursue market economics, but that the capital market would be progressively internationalised. The key literature places heavy emphasis upon the manner in which successful ‘growth coalitions’ have centred around business-government relations which cohere around reform projects embracing trade liberalisation, export-friendly policies, engagement with the global economy and macroeconomic policies which will attract foreign capital and backing by international financial institutions such as the International Monetary Fund (IMF) and World Bank (WB). This has been replicated in most surveys of the reform project in South Africa. Thus although it is recognised that, given its racial profile, direct pressure by business had contradictory effects, the ANC leadership became exposed to a wide variety of international and domestic influences which pushed it towards the adoption of conservative measures designed to shore up local and international business confidence. It was not just that the ANC elite became convinced of the need to accommodate the international investment market, but also that it had to do so in the face of the ‘dismal record of economic governance’ elsewhere on the continent. ‘In a post-Cold War world, there appeared to be few alternatives to the fiscal rectitude and other policies endorsed by Washington’ (Handley 2005: 222).
The second dimension was the ANC’s determination, expressed at its Mopani summit with black business in October 1993, that its assumption of control over the state would be complemented by processes of BEE. At the time of the transition, big business was uncomfortably aware of the need to narrow the huge political gulf that was separating it from the incoming government by indicating a willingness to alter its racial profile. The South Africa Foundation (SAF) – the grouping of the sixty-plus largest and most influential companies, domestic and international, whose principal purpose was to represent the interests of the private sector to government – was a ‘bastion of traditional white capital’, and was urgently aware of the need for firms to recruit black executives, and for business as a whole to show itself ‘proactive on the issues of particular political importance to the ANC, such as black empowerment and, more narrowly, jobs and wealth creation’ (Taylor 2007: 171–2). Initially, BEE was unpro-grammatic and took the form of the direct recruitment of individuals, usually with strong links to the ANC, to high positions in large firms or on to boards of directors as well as the sale of aspects of their operations to black entrepreneurs. Subsequently, after the delivery of the Black Economic Empowerment Commission (which was largely driven by the demands of black business) to government in 2001, BEE became a major plank in the Mbeki administration’s programme, culminating in the passage of the BEE Act of 2003 (Southall