Delivering his Christmas message, South Africa’s newly elected African National Congress (ANC) President Cyril Ramaphosa vowed to build an inclusive South African economy – unwittingly admitting the failure of his own party.
Despite having been in power for the past 23 years, the ANC has failed to break free of the tentacles of apartheid that continue to lock the country into an economic system of racial inequality.
The apartheid system was abolished in 1994, and while the lacklustre performance of the ANC government since is attributable to various factors, a key contributor to continuing inequality is the role of big corporations as major players in the economy.
The worry for many people is that the election of Ramaphosa, a wealthy businessman, strengthens the neoliberalism’s hold on the country; little change is expected for the majority of people unless radical economic transformation is implemented under his administration.
Corporate South Africa
In recent times, there has been furore over the Steinhoff Scandal which wiped out billions of Rand in pension funds. In another case, the Gupta family (a wealthy family which has secured lucrative government contracts on the back of its political links), along with KPMG, McKinsey and SAP, have been implicated in a web of corruption allegations.
Given the contemporary corporate scandals in South Africa it is easy to assume it is a recent problem. An examination of corporate South Africa brings to the fore how corporations have been exploiting the country since the colonial era.
A system of resource exploitation with near-monopolies in the extractive sector of the South African economy dates back to the 1800s in gold and diamond mining. It is indisputable that there are monopoly private corporations in South Africa which exert significant influence over various sectors of the economy, and monopoly capital has dominated discourse throughout much of the ANC’s history in South African politics.
In a capitalist system, he who pays the piper calls the tune. On the advent of democracy in South Africa there were minimal changes to the ownership of capital. In fact, to further entrench their power, South African corporations roped a small group of African elites into the game.
This was done through the black economic empowerment (BEE) scheme, a top down wealth distribution approach which was implemented by the ANC to eliminate poverty.
The BEE was founded on the theory of trickle down economics. The supposed assumption was that, by making a few black people wealthy, it would translate into prosperity for the majority. The result was social strife, salary inequalities on racial lines and unemployment.
Whilst most South Africans have had to endure poverty, black elites and other owners of capital have seen a rise in their fortunes. For instance, the ANC’s recently elected President, Cyril Ramaphosa, a former trade unionist, has a reported net worth of $450m.
A neoliberal economic system has often been criticised as a game in which the dice are loaded in favour of those who already hold capital. To strengthen their position, the holders of capital rely on other players who are supposedly meant to be regulators and gatekeepers.
Who abets plunder of the masses?
KPMG South Africa was rocked by a corruption scandal involving the Gupta family in September 2017. Eight KPMG officials resigned in the aftermath of the scandal. This was viewed in some quarters as the audit and assurance profession being a mere tool for corporations to gain a veneer of authenticity in business.
In South Africa and worldwide, the accountancy and audit profession is dominated by the “Big Four” firms: Deloitte, PriceWaterhouseCoopers (PWC), Ernst and Young (EY) and KPMG. Together they run a near-monopoly of providing audit and assurance services to the biggest corporations in South Africa.
Clients are shuffled between these firms and because companies pay audit firms for their services, conflicts of interest are hard to avoid. Moreover, while most people regard a “clean audit” as a measure of corporate responsibility and clean business conduct, the fact remains that audits are not meant to benefit the public but rather the owners of capital.
The role of accountants as allies of corporations in abetting the plunder of the masses in South Africa cannot be underestimated, and proof of this lies in audit reports. The wording of audit reports is often flimsy and superficial on matters such as corruption.
Credit rating agencies crown the system
Since neoliberalism supports unfettered globalisation in pursuit of blanket deregulation, certain tools are needed to keep this system in motion, and South Africa provides an interesting case study.
In November 2017, the Rainbow Nation had its rating downgraded to junk status in the credit market. Credit is the lifeblood of business and regulating it from a distance is crucial for increasing profits.
The majority of rating agencies are foreign entities, and with South Africa downgraded, corporations are compelled to pay more interest owing to the elevated ‘risk’ in the eyes of the rating agencies. The result of this is erosion of pension investments, with the general citizenry emerging as the major victims.
On the other hand, the providers of capital have the most to gain. With the cost of credit and capital increasing after a credit downgrades, those lending money, often foreign investors and banks, will see their dividends rising.
Towards an inclusive economic order
Breaking the mould of a neoliberal economic order dominated by big corporations will be no easy feat. Already some analysts are describing Cyril Ramaphosa as a darling of the market.
The ANC’s new leader is a staunch capitalist who has become wealthy via the current status quo; its unlikely he will change a system from which he has benefited so much, and an inclusive economy needs to unshackle the formidable chains of private capital in South Africa.
Is there a way of transforming South Africa’s economy without ruffling feathers of the corporate giants? Perhaps the major players in South Africa’s economy need to sign a new social contract with the government playing a major role in levelling the economic playing field.
However, as new scandals emerge and the average family continues to bear the brunt of high-level irresponsibility, support may further shift to emergent opposition party the Economic Freedom Fighters (EFF), which is advocating for radical change in the economic system.
It is rare for those in positions of privilege to give it up easily. Since South Africa’s independence, there have been ongoing modifications to the capitalist system to make it appear more acceptable to modern onlookers – albeit with no meaningful benefits for the majority. Unless that changes, it will only encourage further radicalism.