Kiss NHI good-bye

UNLESS we include striking miners and the 25% unemployed in our economic debates, South Africa risks losing its ability to pay for National Health Insurance. The rise of radical political formations in the form of AMCU, EFF, DLF, WASP and PAC and the decline of the ANC centrist administration, amidst scandals and corruption, could very well see the collapse of GEAR and the NDP, as welfare benefits become a thing of the past.

While Liberal parties such as DA and Agang are competing with the ANC for votes, these parties may fare no better than the ruling party at the polls. The reason is the eminent collapse of the democratic revolution, or rather, its realignment with ultra-leftist political formations that share none of the centrist dogma of the ANC. Any alternative to this picture would need to speak to the continuity of struggle for human rights with tangible policies for realising the demands of the electorate.

Although the ANC election campaign has focused on telling a good story, the prevailing image of a corrupt and inept post-Mbeki administration tarnished by the Marikana Massacre and Nkandla, is the one being reproduced across local and international media.

How did we get into a corner, in which NHI pilot projects are only being rolled out 20 years after the promise of health-care for all?

Why does South Africa have a welfare system skewed towards non-productive labour, in which demands for a Social Wage that include all citizens, are ignored?

In 1994 South Africa embarked on a duel economic path. In essence there were two separate and distinct South African economies. The first economy –  the market economy was opened up to trade liberalisation through economic policies such the Growth, Employment and Redistribution (GEAR) programme under the Mbeki administration. It resulted in the creation of black billionaires and the rise of a black middle class who now enjoy a standard of living on par with those living in the West.

The second economic paradigm, the dirigiste economy, was created by transforming the apartheid regime’s earlier volkscapitalisme and parastatal projects, in which state-enterprises maintained monopolies in certain key areas, such as arms manufacturing, telephony, oil production, energy, postal services, rail transport and harbours. These enterprises were allowed for the most part to continue. In other areas, parastatals were allowed to compete with the private sector (and vice versa), in some instances, state enterprises were listed on the stock market where private capital could take an interest as partners alongside the state.

In one isolated example, ISCOR the apartheid-era steel monopoly was privatised and sold to ArcelorMittal which no longer represents a monopoly in the steel market, allowing junior miners and steel producers to come to the fore.

The history of South Africa’s economic transformation, in particular the role played by the parastatal sector deserves a lot more attention than one article, since it represents the socialised side of the economy, in an experiment in which both capitalism and socialism are competing for the attention of the electorate.

As previously argued on medialternatives,  with the rise of the market economy, South Africa’s state-run enterprises have increasingly became irrelevant in terms of creating value and generating profit. While they may have once represented a form of directed national development and state-aided economic activity geared towards providing sheltered employment, the sector, aside from Denel and Transnet (the only parastatals to show a profit in 2013) is a startling testimony to maladministration and mismanagement.

Government bail-outs of parastatals are in the region of R25bn per year and mounting. Massive public debt underpinning a credit bubble which shows no signs of abating, present clear challenges for the economy. challenges which a radical restructuring, including nationalisation of industry as proposed by the EFF and its coalition partner will only serve to exacerbate.

EFF polices signalling a return to volkscapitalisme under apartheid, could seriously trip up the macro-economic drivers and low interest rates which have thus far saved South Africa from the ups and downs of the global economy. South Africa, along with emerging markets, escaped much of the fallout from the 2009 meltdown. While its stock market took a knock, the bourse quickly rebounded into double digit growth and with inflation in check, consumers have by and large benefited at the cost of labour.

A social wage given to all citizens as an unconditional basic income, rather than an inflexible wage demand, would be a lot cheaper in the long run*. Forcing businesses to pay inflated salaries to mineworkers in an industrial strike which is now in its third month, when there are other options on the table such as a citizen’s dividend which includes National Health Insurance, needs urgent and serious attention.

Despite South Africa’s current trade surplus, booming stock market, cheap Rand and diversification into the African continent, real growth in human terms has been skewed towards the middle class, alienating workers and a sizable proportion who do not directly benefit from the supposed trickle-down economics punted by neoliberals and who do not possess any material reason, except an emotional connection, to believe in the great society of Mandela.

South Africa relies mainly on foreign investment in stocks and bonds to help finance its current account deficit. Risk factors such as, a potential meltdown if interest rates are affected by a drastic change in power and governance, are bound to weigh heavily on foreign perception of local risk, as this negative picture painted by a Forbes blogger aptly demonstrates.  The country is by no means out of the rough so far as its emergence from isolation to a developing nation is concerned. The only solution is to include all citizens in the economic life of the country, either via a social wage, or by other means, such as government bonds awarded to all citizens as a mechanism for redistribution of wealth and investment in our nation’s future.

* it will take between 15 and 22 years for workers to recover what they have already lost in wages – estimated by the employers as R4.8-billion to date

South Africa can afford a basic income

SWISS residents will soon vote on an initiative that would guarantee a basic monthly income of 2,500 Swiss franks ($2,800 pm or $33,6k/yr) for all working adults in the country to combat income inequality across the nation. The initiative collected the 100,000 signatures needed for a referendum on the proposal, and to mark this historic initiative, a truck in the city of Bern unloaded 8 million five-cent coins, on Friday to represent Switzerland’s 8 million citizens. The parliamentary vote has not yet been scheduled, but it could take place before the end of the year.

This proposal is reigniting South Africa’s own Basic Income Grant (BIG) proposals. If you remember, opposition parties and civil society groups called for a BIG in a campaign that appears to have been put on the back burner because of concerns over the tax burden. With elections coming up in 2014 and calls by far-left groups to end private ownership of property, the time for resurrecting the BIG is now. As a stop-gap measure, medialternatives has suggested an annual or bi-annual benefit based upon a co-ownership model in which citizens take ownership of the sovereign wealth of the country, receiving dividends like any normal shareholder.

South Africa can definitely afford to pay its citizens an annual benefit, since it has 80% of the world’s platinum supply and 50% of the gold reserves, more mineral wealth than is sitting in the bank vaults of Switzerland. A guaranteed monthly income is not out of the bounds of possibility and would not necessarily impact on the tax burden, since it could be drawn from direct investment in the economy.

South Africa’s Public Investment Corporation (PIC) is one of the largest investment managers in Africa today, managing assets of over R1.4 trillion. The nation’s sovereign wealth can be seen actively invested in a number of  Johannesburg Stock Exchange listed companies,

Instead of allowing wealth to flow out of the country or into the pockets of the politically connected, South Africans can act to force our government to take a more active role in seeing to the needs of its people. Co-ownership benefits and a BIG could be the impetus needed, since the country is confronted with a similar dilemma as any oil-rich nation facing potential ruin when the oil runs dry.

Industry pundits have placed the actual working life of the countries gold mines at no more than another 10-15 years — the cost of getting the ore out of the ground is becoming too expensive, as these reserves are depleted forcing miners to dig deeper.  Diversification of the development of our country for the benefit of future generations — growing the sovereign wealth of the country so that all may benefit — could be the solution.

The country  has a  window of opportunity to reap rewards from its global investments over the past decade and to repatriate these profits in the form of a BIG or a Citizen Co-ownership Benefit.  With the JSE becoming a hub of international commerce, public investments are already showing sign of a pay off as our mineral wealth is diversified into global commerce, time to remind the politicians that these investments are meant to benefit all citizens not simply politicians.