Reflections on crisis in Eastern Cape

1. Some reflections on the crisis in the Eastern Cape
Causes, consequences and cures
Presentation to Chris Hani Institute Workshop, Hogsback, February 2013

2. ECSECC: Some background
Our strategic objectives include the following:
• Facilitate and coordinate the implementation of development
programmes between all key stakeholders in the Province of
the Eastern Cape
• Facilitate development by providing an avenue for formal
inputs into the policy-making process of government
• Support government in advancing efficient service delivery
• To empower communities and the grassroots structures of
civil society to engage in development and
• Assist the provincial government in developing policies and
strategies that will facilitate the growth of the provincial
economy.
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3. A post-Marikana era3

4. Introduction: This presentation
• We are living in a post-Marikana era
• 20 years into democracy extreme police
violence to ensure exploitation of
migrant workers (many from here)
persists
• Political class is mostly silent on this
• COSATU is increasingly in a state of
paralysis, support for it is declining
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5. A post-Marikana era
• Hegemony of Alliance organisations in
working class communities is increasingly
in doubt:
–Disconnected from traditional support
base?
–Implications for the future?
–How did this happen and what can be done
about it?
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6. The current state of the post apartheid
transformation project and how it got this way
Five factors that led to mission drift
1. Failure to adequately theorise and
direct transition
2. Struggle de-ideologised
3. Rise of populism
4. Unity is no longer sacrosanct
5. Alliance dis-embedded
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7. 1. Failure to adequately theorise and
direct transition
• Transformation reduced to capture of the state
• Lack of clear programme of transformation
around which progressive forces could cohere
• Movement reduced to vehicle for capture of state
– often for advantage of patronage networks
• Stakes for capture of state higher in marginalised
regions (EC) leading to cruder factional jockeying
• Political power as end in itself
• Developmental goals obscured
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8. 2. Struggle de-ideologised
• Factions don’t follow ideological lines
• Cults of personality
• Tactical labelling to discredit opposing factions
• Lack of theory and political debate
• Abuse of corruption accusations
• Intellectual and strategic capability devalued
as requirements for leadership
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9. 3. Rise of populism
• Rapid development of populist tendencies
• Rise of short-term consensus politics
• Lack of long-term transformation agenda
• Loss of legitimacy of movement among the
grassroots
• Leaders selected on basis of voting blocs they
can mobilise not leadership and strategic
capacity
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10. 4. Unity no longer sacrosanct
• Destroyed by factional power struggles
• Factions aligned to personalities and
patronage networks
• Slate voting blocs
• Divided political movement leads to divided
society
• Growth of authoritarian measures to maintain
control
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11. 5. Alliance dis-embedded
• Community and worker militancy growing
outside of organised Alliance structures
• “Ticking time-bomb” of growing mass protest
• Fuelled by economic crisis, poor delivery, fiscal
squeeze and growing social distance of
leadership from masses
• Use of coercion will make things worse
• “Liberation dividend” rapidly disappearing
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12. The consequences of
this disintegration for
the state and society
in general

13. Erosion of capacity of political
leadership
• Seasoned leadership marginalised by
factionalism
• Leads to loss of broader support that these
people bring
• Inexperienced cadres deployed to key
positions as a reward for factional support
• Hollowing out of leadership capacity
• This crisis of leadership is a crisis for society as
a whole
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14. Labour movement in crisis
• Growth of white collar unions and decline of those in
industry; impacts on politics of the federation
• Loss of grass roots organisational capacity and growth
of dependence on employers for many traditional
functions
• Negative impact of union investment arms
• Unions as Alliance political conveyor belt: decline of
independence
• Impact of ‘corporatism’
• Traditional unionism impotent in face of crisis
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15. Erosion of state capacity
• Deployment in bureaucracy on basis of
factional loyalty
• Political factional fights infect organs of state
• Leads to conflicts in bureaucracy and between
politicians and bureaucrats
• Governance is undermined and service
delivery paralysed (see the case of Nelson
Mandela Metro)
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16. Erosion of state capacity
• Rise of risk aversion and the evasion of
responsibility; decision-making at arm’s length
• Tendency to outsource state’s authority -
excessive use of consultants to deliver
• State has become very short-termist and one-
sidedly tactical - far too subject to political
calculations
• Few politicians are e.g. prepared to say that the
public sector will have to be cut back massively
although this is likely.
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17. Erosion of state capacity
• Decline of a public-sector ethos
• It guided state actions in the past: professed neutrality,
objectivity, disinterestedness and professionalism
• Civil servants are always moving on - few have an
espirit de corps that is essential to any institution if it is
to be effective
• You need a fairly conservative state institution in order
to be experimentative - stable foundation on which to
build or difficult to be innovative because you are
constantly having to redo the things you did before.
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18. Erosion of state capacity
• Constantly setting up quasi-state organisations
whose mission is to innovate, to provide ‘blue-
sky’ thinking
• Yet most of these do not say or propose
anything risky or interesting
• Instead they merely create more posts and
churn out the same jargon and ideas time and
time again.
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19. Socio-economic
transformation is stalled
Seen on the door of government
offices, Lady Frere

20. Socio-economic transformation is
stalled due to:
• Inability to articulate a clear transformation
programme
• Inability to take bold steps on economic
transformation and adequately resource change
processes
• Inability to build responsive, effective state
bureaucracy to implement
• Malaise in organised labour which reduces mass
pressure for change
• Is NDP really an effective national development
agenda?
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21. Consequences: Ongoing economic and
social malaise in the Eastern Cape

22. The population of the Eastern Cape
• Now stands at 6 562 053
• Increased by 283 402 (4.5%) since 2001
• This compares to an increase of 3 093 390
(33.7%) in Gauteng, the fastest growing
province
• As indicated by the diagram below, the
Eastern Cape has experienced major outflows
of population to other regions.
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23. Eastern Cape migration flows
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24. This population loss has some serious
implications including:
• A reduction in the existing provincial skills base,
particularly where those departing are
professionals or technicians
• A relative shrinkage in the size of the domestic
market which lowers demand for goods and
services, impacting negatively on production and
GDP growth
• Reduction in the allocation of equitable share to
the Eastern Cape. This is of particular importance,
given the dependence of the province on the
state sector.
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25. Census figures impact negatively on
EC equitable share
MEC Masualle said when he presented
his Adjustments Budget in November
2012:
–Equitable share allocations would
decrease by R720.9 million in 2013/14
–R1.5 billion in 2014/15 and
–R2.9 billion in 2015/16.
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26. Census results indicate that:
• The former apartheid structure of the country and province
have not changed sufficiently - social infrastructure deficit has
not been addressed at the scale required
• The current growth path is not adequately addressing
unemployment and inequality and this is worsened by the
ongoing global economic crisis
• South Africa remains an economy dominated by mining and
finance (centred mostly in Gauteng)
• The Eastern Cape is still a surplus labour economy (labour
reservoir)
• There has been insufficient state investment in logistics
infrastructure to make the province more competitive
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27. Growth patterns in the Eastern Cape:
decline of productive sector
• The Eastern Cape has developed on the periphery of
the national economy, and has, with the exception of
Coega, seen little new economic infrastructure
investment over the past 30 years.
• Over the past decade, as factories closed and
agriculture stagnated, so has the finance sector
burgeoned on the back of property- and debt-driven
consumption
– Crisis has expedited the collapse of industries
– Encouraged companies to move ahead with restructuring,
retooling and consolidation plans
– Has, in most cases, led to job loss and this is expected to
continue for the short to medium-term .
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28. The province developed historically as
a labour surplus economy
• Today has higher levels of poverty and unemployment than
South Africa as a whole
• More than half of households do not have a wage-earner
(compared to 37% for SA as a whole)
• More than half of our households (57%) are dependent on
social grants
• At just over R30 000, GDP per capita is only around 56% of
the figure for SA as a whole
• Total fixed capital stock per person is also half the SA figure.
• Economy is dominated by public services, trade and finance
• The two pillars of the productive economy – manufacturing
and agriculture – have been stagnant or in decline.
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29. ECPC Preliminary diagnostic findings
• A fragmented province
– Small metros
– Commercial farming sector
– Former Bantustans
• Very low per capita capital expenditure
• People leaving the EC – slow population growth
• Declining capacity of state entities, institutions
and municipalities
– Vicious cycle of insufficient funding, new and weak
municipalities, merged institutions and poor spending
capacity
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30. The Eastern Cape auto sector
• Continues to be important in providing a solid
platform for job creation
• Is the highest contributor to manufacturing
employment
• Government (DEDEAT) is developing a cluster
approach to support the sector
• But consistent decline in auto sector employment
and this is probably a key reason for growing
unemployment experienced in both Metros
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31. Other sectors are also facing problems
• Food and beverages are in slow decline
• Light engineering, chemicals etc are
affected by a relatively fragile auto
supply chain
• Once significant clothing and textile
sector is in dire straits
• Electronics, medical etc are also in
trouble.
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32. The decline in industry means a smaller tax base for the two
metros. They are consequently in financial difficulty and this has
three main consequences:
1. High tariff and rates increases compared to
other metros
2. Reduced capex (also contrary to other metros)
3. Declining liquidity:
– Consequently are forced charge higher than average
amounts for utilities
– Increasingly unaffordable increases have the
unintended consequence of reducing revenues
– This further reduces their ability to support local
industry.
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33. Key challenges identified by industrialists during
tours organised by ECSECC are summarised here:
• Lack of beneficiation of raw materials/ unfettered imports/dumping
– Raw materials (wool, leather) exported semi-processed
– Exports of scrap metal
– Foreign imports subsidised at source
• Inadequate logistics
– High port costs; poor efficiencies
– Transport links
• Weak agro-production sector
– Wool/mohair in decline; farmer insecurity; production decline
– Leather exported semi-processed; sector decline
– Milk products uncompetitive
• Inefficient local government services
– Electricity price increases
– Water/sanitation, waste disposal
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34. Some
solutions?
How to
restore our
capacity to
transform
society?

35. Fixing the economy?
• Social and economic crises are directly linked to
way economy is structured (around MEC and
finance)
• Policies have failed to generate levels and types
of growth to transform economy and enable
higher level of economic participation
• Surplus mainly used to effect redistribution
through social grants, develop bureaucratic
middle class and for social spend
• Not used to drive industrialisation to change
accumulation path or apartheid social relations
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36. Fixing the state?
• Use the fiscus to sharply raise productive investment in real
economy (logistics, energy infrastructure, skills, industrial
policy)
• Take more risks to massively scale up industrial policy to
grow sectors that can compete and create jobs
• Develop new fiscal instruments (linked to minerals tax?) to
ensure more resources for productive capacity in former
bantustans
• Regulate finance for more capital allocation for
infrastructure, productive sector, new entrants to economy
• Radically scale up social economy programmes linked not
only to infrastructure but also value-adding production
• Don’t try to save the economy – restructure it!
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37. Fixing the state?
• Need a democratic developmental state
• End political micro-management of state
institutions
• Professionalise the bureaucracy
• Strengthen strategic centres of government and
M&E systems
• Break the short-term decision cycle of the state –
ensure institutional stability and planning
continuity
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38. Fixing organised labour?
• Reassert the idea of workers’ control ?
• Revitalise and rebuild union structures, some of which have
been badly damaged by loss of membership and in some
sectors, of key organisers
• Rebuild democracy at local level through assemblies based on
democratically-run enterprises, community organisations and
unions
• Organise social economy projects and campaign for genuine
counter-crisis and social safety net measures
• Create forums for networking between worker-controlled
enterprises
• Start to develop a charter of popular demands with
organised workers and communities as the basis for the
struggle for a thoroughgoing democracy.
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39. Growing the
economy: some
big ideas...
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40. Growing the economy: some big
ideas...
• Think big
– The country can benefit from millions of innovating brains.
It’s a moment to broaden horizons, expect much more,
and expand every kind of ambition.
• Transcend the post-apartheid legacy
– Get over our hang-ups about apartheid: we badly need a
wave of new industries, radically new means of
production. Special pleading for particular interest groups
has become an obstacle to change
• Government support for technical innovation
– Innovation is based on new knowledge, or it is nothing.
Government must support technical innovation
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41. Growing the economy
• Hard work
– Thomas Edison famously said of genius – that it is one per cent
inspiration and 99 per cent perspiration – remains largely true of
innovation. Let’s recreate an ethos of hard work!
• Take risks
– Risk aversion has become all-pervasive at all levels in society. On
the contrary we need to take real risks to achieve real change
– Today the state isn’t interested in innovation, but in making the
future more predictable and more stable, in avoiding risks,
restraining events, and imposing moral codes. By contrast
serious innovators, whether they like it or not, tend to make
things less predictable and less stable. They tend to take risks
and let events take their course. It is not in their interest to,
dampen things down.
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42. Growing the economy
• Leadership
– Distinct and distinctive leaders are required not only
to get innovation moving, but also to set aspirations,
create goals that people can believe in, and take
responsibility for failures. Innovation is a human
process; because it includes failure and chance, it
must be led by men and women who can take people
from their ‘comfort zones’ into a different place
altogether.
– Innovation demands not further empathy, trust or Key
Performance Indicators, but vision, commitment,
brains and, yes, a little personal heroism too.
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