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Marxist at the gates

May 07 2017 06:10

Chris Malikane seems genuinely exasperated by the extreme reaction to his appointment as an adviser to Finance Minister Malusi Gigaba.

Ideas he and much of the left have professed for years are suddenly front-page news and the bookish Marxist economist has become a national villain or hero, depending which side you are on, in what he has called the economic “civil war”.

Malikane also laughs at the suggestion that he is now somehow in charge of economic policy in South Africa.

The DA’s David Maynier has compared him to an economic hand grenade thrown into National Treasury, while many commentators assume his appointment signals a hard left in economic policy.

“I am there by invitation. I am a technical adviser. There are other advisers as well, more powerful than me,” he told City Press last Friday shortly after returning from the International Monetary Fund’s Spring Meeting in the US where he accompanied Gigaba on his first big engagement in his new portfolio.

He said that he and the minister have not yet sat down for him to provide advice on anything in particular.

“It is the ‘how’ part, that is where I would come in. If the minister for instance sees interest rates going up, he can ask me what is happening.

“But let’s say there is a policy proposal I disagree with. He could say, Chris, I don’t agree with you, and move on.”

The closest he would come to driving the policy agenda is by pushing existing ANC policy, Malikane said.

“What is interesting, if you go to ANC policy statements, is that there is a lot of stuff that has not been implemented. I can ask the minister, ‘Where is this’? If he says we are postponing it, that’s fine.

“If all ANC policies had been implemented we would be in a much better position.”

The storm around Malikane sprung from an eight-page essay he wrote early last month called “concerning the current situation”.

In it, he advocated nationalising land, mines and the SA Reserve Bank – things he admits are fairly standard left demands you would find in most Cosatu resolutions.

More importantly for someone who has just seemingly become a Treasury insider, Malikane also identified Treasury as the “cornerstone of the ownership and control of the state by white monopoly capital”.

“I wrote that thing as an activist, not as an academic,” Malikane said about the now-famous essay.

It also wasn’t meant as a policy blueprint for his new boss in Treasury, he said.

Mostly, it was a call to ideologically divided factions on the left to at least unite around a “minimum programme” of key economic demands they all profess anyway.

Malikane said he only circulated it among his friends, but then Gigaba appointed him and, before long, he got calls from Sunday newspapers.

Within two weeks, he was easily the most controversial economist in the country.

WHAT DOES HE ACTUALLY PROPOSE?

“For me, what has not been agreed in South Africa is the extent to which the state should play a role in which sectors. We talk about it, but it is not resolved.

“There are certain areas where, if you raise the idea of state participation and say ‘state bank’, for instance, people jump up and down. There is no honest intellectual debate on it.

“I don’t think the state should be running restaurants. It can do research and development, but it should not manufacture everything. It should be involved only in strategic parts of the economy.

“You say these things here and you get blown out of the water, because people do not read. That is what frustrates me. In New Zealand they have nationalised coal mines for energy security.

“For me, that is a sector that is not supposed to be owned by the private sector, black or white. It is supposed to be owned by all of us, the people.

“For me there are certain basic services that should be 100% state-run. I don’t support the private sector encroaching on those, just like people would argue there are some places where the state should not get involved.

"We know the state has weaknesses, but you have to sort out the state.”

THE PROBLEM WITH TREASURY

There are a number of favoured Treasury policies Malikane, and most of the left, definitely object to.

He has been a critic of the youth wage subsidy, which is now enormously popular in the organised business sector and costs several billion rands a year.

He is also not a fan of the growing push towards public-private partnerships for everything, another policy championed by the CEO initiative that coalesced around former finance minister Pravin Gordhan.

Before Gordhan’s removal, there was talk of packaging all manner of public infrastructure as private investment opportunities.

“I think it is a soft way of privatising,” says Malikane.

“It may help fund infrastructure, but it will have an impact on ordinary people when it comes to the pricing of services.

“You will also find there is a foreign ownership of the claims on that infrastructure and these revenues are going out of your current account.”

Gigaba this week indicated this project is on track in a speech at the World Economic Forum (WEF).

He also indicated that the Youth Employment Service project promoted by the CEO Initiative, which hinges on the youth wage subsidy, is going ahead.

If Malikane has caused a policy U-turn, it is not immediately apparent.

“Around the world, the treasury is never the most popular department,” he told City Press.

“But the problem with [our] Treasury is that it fails to engage honestly in an intellectual discussion with alternative policy proposals. It is so locked up in a neoliberal type of economics.

“If you come up with a proposal, you either get ignored or told no, that isn’t proper economics.

“Treasury is not just responsible for managing the state’s resources. It is responsible for managing the financial system,” said Malikane.

“It must make sure the nation’s resources are directed through retirement regulations, central bank policies and all those things.

“If you look at the behaviour of the financial sector since the 1990s, it has not been developmental at all.”

That is why a state bank is needed, says Malikane.

It should consolidate all the existing state-owned development financiers into one entity in order to better direct state resources under a single, focused mandate.

But a state-owned bank also needs to be a competitor to the retail banks, because it would better direct private savings, he said.

“You need competition in that oligopolistic structure.

“You can have other private banks emerging, but I do not think they will behave differently.”

South Africa cannot maintain its current “hands-off approach” where “we save and the money goes to wherever”, said Malikane.

“You can’t have industrialisation if you do not sort out the financial system.”

THE LAND

Malikane’s proposal for land reform would give much less weight to specific historical claims rooted in dispossession.

“The resolution that I think is the most consistent and democratic is to make all land state-owned. Just the land, not the structures above the land.”

“Then, as South Africans, we need to put our bids to the state, say, here is my business model. Then the guy with the best plan leases the land. It is fine if that ends up being capital-intensive commercial agriculture.

"The point is not to suppress technology. It is to share the benefits of the natural resource.”

“Some of the profits in agriculture are not profit, it is rent. My view is the state must pocket the rent.

“The same thing goes with the mines. So private ownership of certain assets I do not support.”

TENDERS: ‘TRANSFORMATION HAS A COST’

The Preferential Public Procurement Framework Act (PPPFA) has always emphasised price over black ownership in scoring tenders, which has made it the target of sustained attacks from black business lobby groups.

“I am studying the PPPFA now,” said Malikane.

“There is a bias towards pricing. No effort is made to make sure there is local procurement by the guys that win the tenders. You might provide cheaper goods and services to government simply because you are importing,” he said.

“I think there is more that can be done to sharpen it. But, of course, if you want to transform the economy, it comes with costs. You can’t say it comes for free.

“The country either has to agree that we support local manufacturing and we will stomach the cost – and in the long run, deliver more employment, more capacity and economies of scale domestically.

"Or you sit with high unemployment and a brewing social crisis, but have cheap goods now.”

Malikane’s essay advocated an alliance between workers and, among other things, “tender-based black capitalists”. Some commentators have called his essay a defence of corruption and, given the dominant narrative in South Africa politics today, an implicit defence of the Gupta family in particular.

Malikane objects.

“Insofar as the Guptas perpetuate the super-exploitation of the African working class, they cannot be supported.

Insofar as they do not advance the ability of African people to control the productive forces in the country, they cannot be supported.

“What has to be supported is a capitalist class that will nationalise. I am talking about nationalisation in the sense of creating South African ownership, not just state ownership.”

Black capitalists who make their fortune on black economic empowerment rely on white monopoly capital and cannot be considered part of the ANC’s historic united front any more, goes Malikane’s argument.

“They did not advance transformation at all.

“The black capitalists that remain would be relying on state contracts and my argument is that not all of them would be corrupt. That class has to be encouraged because it has a great beef with white monopoly capital,” said Malikane.

YOU-KNOW-WHO CAPITAL

White monopoly capital is not a new invention dreamt up by pro-Zuma propagandists, protests Malikane. “It’s not in the mainstream, but among the left it is a standard concept.”

Monopoly capitalism traditionally refers to economies in which key developments are directed by a small elite who control an inordinate share of corporate investment.

They tend to direct this in a way that clashes with what a more rational planned development path would deliver.

It has historically gone hand in hand with identifying “complexes” that wield this kind of power, aided by their governments. The military-industrial and prison-industrial complexes are famous US examples.

In South Africa, this kind of thinking has centred on the mineral energy complex comprising the large mining conglomerates and Eskom under apartheid.

“The big problem here is that white monopoly capital is still addicted to minerals and energy. There is no meaningful broad-based industrialisation, in which I include agriculture,” said Malikane.

The jargon is divisive, but the underlying problem being described is hardly from the fringes of economics.

Even the World Bank, in a report released in January, criticised South Africa’s over-incentivisation of mining investment and the “misallocation” of investment this creates in the capital-intensive sector.

At a breakfast event at the WEF this week, Martyn Davies, managing director of Deloitte, made the point that the development of Europe and Asia was underpinned by industrialisation and that it is “difficult to have inclusion in a resource-based economy”.

“The rents are captured by an elite,” he said.

Malikane’s recent academic work tries to measure long-term profit rates on fixed investment in South Africa in order to predict crises according to how they are conceived of in Marxist economics. The prescription that emerges is familiar.

“You have to invest in sectors that are less capital-intensive. Either that or you have to reduce working hours without reducing earnings so that capital intensity does not lead to unemployment,” he told City Press.

“For me, who leads capitalism in South Africa is a section of the white population who own and control decisive value chains in sectors of the South African economy,” said Malikane. “I am thinking of [white monopoly capital] as a class, not as individuals.

“The argument we have always had is that, with the minerals we have, we can diversify.

“For that to happen, the pricing of the raw minerals has to be affordable for domestic producers, which means to reduce mining profits. Once you do that, you privilege manufacturing capital over mining capital. That is where the resistance is.”

Most of South Africa’s manufacturers are small and even though they are overwhelmingly white-owned, they also have an enemy in white monopoly capital, suggests Malikane.

“The big firms, Mittal and Sasol, are now foreign owned. They are not orientated inwardly.”

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