10 February 2016

South Africa: The Harsh Realities About South Africa That the World Bank Dare Not Speak

analysis

Sometimes silences speak volumes.

In his seminal book The Anti-Politics Machine Stanford University anthropologist James Ferguson criticised the World Bank's 1980s understanding of Lesotho as a "traditional subsistence peasant society." Apartheid's migrant labour system was explicitly ignored by the bank, yet remittances from Basotho workers toiling in mines, factories and farms across the Caledon River accounted for 60% of rural people's income:

Acknowledging the extent of Lesotho's long-standing involvement in the modern capitalist economy of South Africa would not provide a convincing justification for the "development" agencies to "introduce" roads, markets and credit.

Using Michel Foucault's discourse theory, Ferguson showed why some things cannot be named. To do so would violate the bank's foundational dogma, that the central problems of poverty can be solved by applying market logic. Yet the most important of Lesotho's market relationships - exploited labour - was what caused so much misery.

Three decades on, not much has changed. Today, the bank's main South Africa research team reveals a similar 'Voldemort' problem.

Like the wicked villain whose name Harry Potter dared not utter, some hard-to-hear facts evaporate into pregnant silences within the bank's new South African Poverty and Inequality Assessment Discussion Note. Bank staff and consultants are resorting to extreme evasion tactics worthy of Harry, Ron and Hermione.

The bank's point of view

From the bank's viewpoint:

South Africa spent more than other countries on its social programs, with this expenditure successfully lifting around 3.6 million individuals out of poverty (based on US$2.5 a day on a purchasing power parity basis) and reducing the Gini coefficient from 0.76 to 0.596 in 2011.

This is worth unpacking.

1) "Spent more than other countries"? Of the world's 40 largest countries, only four - South Korea, China, Mexico and India - had lower social spending than South Africa, measured in 2011 as a share of Gross Domestic Product (GDP).

2) "Millions lifted out of poverty?" In fact many millions have been pushed down into poverty since 1994. Unmentioned is poverty that can be traced to neoliberal policies such as the failed 1996-2001 Growth, Employment and Distribution plan co-authored by two bank economists. This made South Africa far more vulnerable to global capitalist crises.

The bank's South Africa poverty line is $2.5/day, which was R15.75/day (R473/month) in 2011, the date of the last poverty census. In contrast, StatsSA found that food plus survival essentials cost R779/month that year, and the percentage of South Africans below that line was 53%. University of Cape Town economists led by Josh Budlender argue that StatsSA was too conservative and the ratio of poor South Africans is actually 63%.

For a net 3.6 million people, more than 7% of South Africans, to have been "lifted out of poverty" is plausible only if the bank's much lower R473/month line is used. But by local standards, the number of poor people has soared by around 10 million given the 15 million population rise since 1994.

3) The bank adjusts the Gini Coefficient (measuring income inequality on a 0-to-1 scale) "from 0.76 to 0.596" by including state social spending that benefits poor households. But here another silence screams out. The bank dare not calculate pro-corporate subsidies and other state spending that raise rich people's effective income through capital gains.

Such wealth accruing through rising corporate share prices is enjoyed mainly by richer people when companies benefit from new, state-built infrastructure in their vicinity. Also ignored by the bank, radically lower corporate taxes mainly benefit the rich in the same way. South Africa's after-tax profits have been among the world's highest, according to the International Monetary Fund in 2013.

Indeed the Treasury's single biggest fiscal policy choice has been to condone "illicit financial flows." These escape through bogus invoicing and other tax avoidance strategies. The Washington NGO Global Financial Integrity estimates they cost South Africa an annual $21 billion from 2004-13, peaking in 2009 at $29 billion. The bank dare not mention these flows or the resulting capital gains enjoyed by South African shareholders.

4) The Bank was most impressed by government's provision of free basic services (mainly water, sanitation, electricity, and refuse removal), and social protection mainly in the form of social grants, primary health care, education (specifically no-fee paying schools), enhancing access to productive assets by the poor (e.g. housing and land), as well as job creation through the Expanded Public Works Program.

But the bank evades vital details, such as how "free basic water" was piloted in Durban in 1999 before becoming national policy in 2001. After a tokenistic 6 free kiloliters (kl) per month, the price of the second block of the water within the tariff increased dramatically. Overall by 2004 the price had doubled. In response, the lowest-income third of households lowered monthly consumption from 22kl to 15kl, while the highest-income third cut back by just 3kl/month, from 35kl to 32kl.

5) Another unmentionable concerns the bank's largest-ever project loan: $3.75 billion granted in 2010 for the corruption-riddled, oft-delayed Medupi coal-fired power plant. Eskom's repayment of that loan plus other financing has hiked the price of electricity to poor people by more than 250% since 2007. But neither the loan, the borrower, the project nor the soaring price of electricity are mentioned. Nor are Eskom's special pricing agreements with BHP Billiton and Anglo that lower electricity prices to a tenth as much as poor households pay.

6) The bank applauds a grant that now reaches 11.7 million children. Grant payments have risen from 2.9% of GDP and now amount to 3.1%.

But a meagre 0.2% of GDP suggests the amounts provided are tokenistic. The child grant of just R340/month is about a third of today's StatsSA after-inflation poverty line.

The South Africans who cannot be named

The bank endorses government's "apparently sound policy" on redistribution because its researchers cannot grapple with the core problem that best explains why South African capitalism causes poverty and inequality: extreme exploitation systems amplified after apartheid by neoliberal policies. The most cited scholarly research about post-apartheid exploitation is by local political economists like Sampie Terreblanche, Hein Marais, William Gumede and Gillian Hart - but the bank dare not reference these books.

To truly tackle poverty and inequality, only one force in society has unequivocally succeeded since 1994. That force is the social activist. Their successes include raising life expectancy from 52 to 62 over the past decade, reversing municipal services privatisation, cutting pollution and raising apartheid wages. But the organisations responsible - such as the Treatment Action Campaign, Anti-Privatisation Forum, South Durban Community Environmental Alliance and trade unions - are also, from the bank's viewpoint, South Africans who cannot be named.

Disclosure statement

Patrick Bond is affiliated with the National Union of Metalworkers Research and Policy Institute as a volunteer advisory board member. Through April 2016 he also directs the University of KwaZulu-Natal Centre for Civil Society.

South Africa

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