The South African Civil Society Information Service

The Silence of the Lambs: What Has Happened to the 'Developmental State'?

By Leonard Gentle · 20 Feb 2010

Picture: JP-Flanigan

I have vivid memories of Budget Day as a child. Everyone in the house, particularly noisy children, had to be quiet when the radio broadcasted the budget speech (there was of course no TV then). Maybe it was because my parents were schoolteachers and the matters of teachers’ salaries and tax rates in the budget were crucial to their livelihoods. But they were not alone in this regard. In the build-up, every newspaper and every radio station would alert readers and listeners to the forthcoming budget. Newspapers, not the so-called “business media” of which there were also almost nothing, would devote “special editions” to the budget and at least a pull-out section with diagrams and summaries.

At high school there would inevitably be an assignment during budget -- maybe a comprehension test in English or a begripstoets in Afrikaans. But, remember that this was under apartheid. We were not regarded as citizens having any say in government or the budget. Still, even though we had no democracy, the budget gave us a sense of what the state would do with regard to public services and what it would cost us in the form of taxes. And, our teachers regarded it as vital to our education that we were aware of what would impact on our lives in the future.

Later, as anti-apartheid activists, we would share this focus on the budget because it would give us a sense of the strategic direction that the apartheid regime was taking at the time. In the 1970s – the period of the reforms of the Vorster and Botha regimes – and the 1980s, under Botha and De Klerk, Budget Day gave financial expression to the Verligtes versus Verkramptes broedertwis, the “Total Onslaught,” the “Consociational Democracy” and all the vicissitudes of reformed apartheid of the 1970s and 1980s. The budget would give expression to the balance between reform and repression. When Botha announced the commercialisation of Eskom and Transnet together with the bans on the UDF (United Democratic Front), the state enterprises budget was cut, while the military and police budget was hiked. After De Klerk made his February 2 unbanning speech, security was substantially increased in the budget that followed a few weeks later.

In the aftermath of the democratic victory in 1994, public interest in the budget multiplied as the majority of South Africans, for the first time, had a say in government. For many activists the anticipation of a post-apartheid budget was informed by the sense that this budget would be central to the new order’s vision; giving financial flesh to the skeletal bones of the RDP promises, and, possibly, even the long struggles for equality and social justice, which marked the years of struggle against apartheid.

Of course from the side of most of the media the main interest was in seeing whether the ANC’s commitment to the RDP, the Presidential Lead Projects and so on would bankrupt the country, as all the conservative economists had warned at the time. So Budget Day became even more of an attention-grabber, an event awaited with bated breath. Of course, as we discovered, first under Chris Liebenberg and then under Manuel, all the conservative fears of a “populist budget” proved to be false. Manuel even outdid himself by achieving a balanced budget, and then even a fiscal surplus in 2008.

And so to Pravin Gordhan in 2010… What did the budget tell us about the programme and vision of the current government?

Firstly, Budget Day 2010 did not evoke the responses and interest of yesteryear. In the print media the attention was muted. Only the special business newspapers carried full details and special supplements. There were no campaigns and meetings on the Women’s Budget and the People’s Budget. Across the country there was little build up and speculation and the shushing of rowdy children in households across the country at budget speech time is a thing of the past.

Everyone says the balance is “balanced,” as indeed every budget for the past 15 years has been declared “balanced.” Business Day stuck its nose out and declared the budget “market friendly.” Strangely enough, the same media that criticised Zuma’s State of the Nation speech for being an uninspiring repetition of past promises is happy with Gordhan’s uninspiring budget, which gives financial expression to the same policies that informed the State of the Nation speech.

Why has Budget Day become so boring and bland?

One possible reason is that the tradition started by Manuel of having 3-year Medium Term Expenditure Frameworks kind of takes the spotlight off the budget. The commitment to an expenditure framework means that the budget is now more a matter of a little fine-tuning in the light of updated GDP figures and income projections rather than a strategic expression of a policy change. And, Pravin Gordhan already had his day in the limelight in 2009 and committed himself to the policies of his predecessors.

A deeper reason is of course that in the era of globalisation, finance ministers and their budgets do not so much speak to citizens or even the disenfranchised beneficiaries of an authoritarian state -- like those people gathered around radios in the past. They are speaking to the “markets,” to the speculators, the hedge funds, the movers and shakers of money. And the message that the markets want to hear from a country like South Africa is clear. They want certainty, low fiscal deficits, low inflation, no government “dis-saving,” no or little financial regulation. Anything that hints at deficits - unless you’re the USA and you need to bail out the banks - or financial uncertainty and you get punished. Witness the plight of Greece as speculators bet on Greece defaulting on its debt.

So this domination in the world of financialisation, of speculators and money capital over real production, has seen finance ministers all over the world routinely trot out budgets that seek to provide that certainty.

For which economists and business, not to mention the Democratic Alliance, have been exceedingly grateful whilst pronouncing Manuel to be the best Finance Minister in South Africa’s history.

But this was not supposed to be such an ordinary neoliberal budget! Two major, quite earth-shattering, events shaped the immediate environment: the global economic crisis and the leadership coups in the African National Congress (ANC).

Over 2008 and 2009, South Africa, along with the rest of world, slipped into recession whilst banks collapsed or had to be bailed out. The scale of the global crisis, known variously as the “credit crunch,” the “financial crisis” and so on, prompted comparisons with the Great Depression. South Africa suffered its biggest slump in 40 years, whilst one million jobs were lost. While many countries have emerged from the recession, this crisis is by no means over. Witness the threat of a Greek debt default alongside soaring Portugal, Italy and Spain deficits, which threaten the Euro and the very existence of the European Union as a project.

These events have prompted governments from Obama to Brown to Sarkozy to speak about more financial regulation to reign in the bankers, whilst their central banks keep interest rates near zero. At this stage, all talk of stopping state support for economic recovery is declared heresy because there are signs that the recovery is too fragile. Yet amongst all the boring bits of Gordhan’s budget is talk, as he declared in his November 2009 speech, of further exchange control relaxation.

But an even more significant context than the global situation - if one could somehow separate these things so easily - is the specific South African political context after Polokwane.

The whole country stood enthralled while the battle for the soul of the ANC took place. We all gathered around televisions and radios and newspapers riveted by the ebbs and flows of the factional dispute in the ANC. The biggest trade union federation in the country allied with the SACP and the ANC Youth League led a successful campaign against the pro-business Thabo Mbeki, against over-centralisation and so on. A sitting president was forced to resign by his party a few months before he would have been able to retire with some shred of dignity. The change in the leadership of the ANC was deemed to be so important and the immediacy so urgent that nothing could wait.

Since then we have had the tussle over the National Planning Commission and the apparent tension between Trevor Manuel and COSATU over the future of economic policy. We have key COSATU and South African Communist Party heavyweights in the cabinet and in key portfolios like Trade and Industry. We have the new Zuma government declaring itself a “developmental state.”

Well, what does this notion of a developmental state mean? We may never quite know because its ideologues are so modest in spelling it out except to refer to the case of the pre-1997 Asian tigers. If so, minimally, we can infer that it means a greater role for the state and its parastatals in carving out a path for investment in infrastructure and that a budget would reflect this public sector investment increase. Together with this would go greater regulation over investment and a directing of investment towards developmental objectives. In other words, again minimally, to put a damper on the kind of speculative “hot” investment, which characterises South Africa, and the relaxation that encouraged South Africa’s biggest companies to list offshore.

So, this should have been the budget that put financial flesh to the bones of the “developmental state.” It should have been the stuff of heated debate and heightened public interest. It should have generated the range of emotions from indignant critique to, just maybe, dancing in the street.

Instead we have Pravin Gordhan railing against the parastatals - supposedly the backbone of the developmental state - and saying that they are wasteful. And now with most of the expenditure on the World Cup either over or already committed, which featured largely in Manuel’s last budget of 2009, there is no more talk of heightened state investment. Instead, Gordhan will in time bring the budget deficit down by cutting wasteful expenditure on Eskom, Transnet and so on.

Any talk of financial regulation after the financial crisis? No, instead the Reserve bank remains privatised and exchange controls will be further relaxed.

Quietly the developmental state has been buried along with any talk of a new pro-poor order. What then informed the furore in the ANC pre and post-Polokwane? Why did we ditch the cold Machiavellian Mbeki for the great listener, people’s person Zuma? Perhaps the most articulate voices for democracy, engagement and development lie not in parliament and in the Zuma-camp but in ongoing protests nationwide -- about which Gordhan’s budget is completely silent.

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