South Africa

South Africa, Op-eds, Economy

The exclusivity of inclusive growth (Part 1) — to those that hath shall always be given

27 Mar 2025

The neoliberal ideologues and their economic hatchet people still persist with the fiction of markets being level playing fields. Worse still, is that most of us believe them. This is Part 1 in a two-part series.

When the finance minister delivered his postponed Budget speech on 13 March, it is probable that the modern-day Greek tragedy of his originally scheduled speech went unnoticed.

Lost in the brouhaha of the unprecedented last-moment cancelling of the speech were the good intentions of President Cyril Ramaphosa and his finance minister, Enoch Godongwana, being powerless before the angry gods of the market. It is the currently unfolding South African version of this ageless human drama that is the connecting theme of this article.

Much media attention was given to what Business Day’s Natasha Marrian called “the deep political potholes” facing the GNU before its second attempt to “refashion the Budget”.

For Daily Maverick’s Ferial Haffajee, the challenge was much more immediate: how to contain the “shambles” of the cancelled Budget speech, which, rather than being an opportunity to “showcase South Africa’s GNU and the budgeting system at the heart of a well-admired system of fiscal governance, [went] splat, just as SA needs all the global kudos it can get”.

Right hand snatching back what was given by left hand

Pledges to “our people” were a theme of Ramaphosa’s State of the Nation (Sona) speech in February. This one is typical: “While we may differ on many issues, we agree on one thing: that we need to build a better South Africa and improve the wellbeing of our people.”

Forming the GNU, he said with a straight face, was supposedly implementing the “wishes of the people”. The absence of a majority party was the conscious outcome of a sophisticated strategy by the few people who actually voted in last year’s national election. They chose the coalition between the ANC and DA by making both of them minority parties able to form a government only by sharing a matrimonial bed.

Also drawing on the current Medium Term Development Plan, “inclusive growth” was another of his recurring themes.

Like: “Our economy was starved of the potential of its people. And that is why we need to transform our economy and make it more inclusive.”

Ramaphosa concluded his Sona speech on the related theme of equity: “The principles that guide our Presidency of the G20 this year… [are] solidarity, equality and sustainable development.”

The Budget speech that wasn’t provided evidence of what was intended. Hence:

A total additional amount of R23.3-billion was allocated to social grants over the next three years;

National Treasury proposed to continue the Covid-19 Social Relief of Distress Grant for another year at a cost of R35.2-billion;

R23.4-billion was made available for the 5.5% increase in public service wages over the next three years;

The Budgets for basic education, health and police were projected to grow by 5.9%, 5.9% and 5.2%, respectively;

The South African Revenue Service was to receive an additional R3.5-billion and Home Affairs R8-billion; and

The social wage was to account for 61% of non-interest spending over the next three years.

Then came the uncaring reality of the callous gods – the market – along with its big “BUT”. To pay for the largesse, unexpected in a time of allegedly unavoidable austerity, VAT – the most regressive of taxes – would have to be increased by 2%. This meant that a decidedly unequal burden would, as usual, fall on workers, the unemployed and the otherwise poor – of whom South Africa is unduly but richly endowed.

Read more: What a 2 percentage point VAT increase would actually cost SA households

Most mainstream economists reserved their loudest howls of protest for what would have been Godongwana’s “swelling” of the wage bill to over R700-billion. This “huge impediment” to stabilising public finance would have directly ignored the “iron-clad” fiscal rules of neoliberalism.

Reminding us that these “iron-clad” rules are hardly unique to South Africa, the term comes from an article in the UK’s The Guardian and is its unintended notification to its readers that, while Britain’s equivalent of our finance minister was recently elected in a free and fair national election, it’s the gods of the so-called market that economists want us to believe unavoidably decide macro-economic policy.

The US provides another reminder that, in the now growingly selective world of neoliberalism, the plan of House Republicans to cut Medicaid – their equivalent of our public health service – is to pay for tax cuts to the rich while slashing incomes for the bottom 40% of the population. (For more on neoliberalism, read here).

While Haffajee wasn’t too concerned about the 2% VAT increase, which, she claimed, was low by international standards, the ANC’s pathos over wanting to keep the cake it was eating cut no ice with the DA’s neoliberalism.

The “iron-clad” fiscal rules made it easy for its leader, John Steenhuisen, to announce that “we simply cannot fund every spending demand in this coming Budget. The R60-billion additional spending contemplated is largely a choice, not an obligation. We can and must be prepared to just say no.”

Saying “NO” doesn’t answer the conundrum now facing the GNU. A gaping hole awaits filling by the rejection of Godongwana’s answer that VAT was the least-bad option in the face of a very high debt-to-GDP ratio and the erosion of front-line services, particularly in education and health that couldn’t be cut further.

By 4 March, consensus seemed a long way off. Reassuring the markets of the integrity of our fiscal prudence still means having to find the money – from somewhere.

But what? How?

Ideological straitjacket ANC still chooses to wear

A recent banner headline on the front page of the Mail & Guardian unknowingly reminded us of the still largely unrecognised 21st century Greek tragedy to which we are still witness: that of the virtuous intentions of the ANC falling foul of its chosen god of neoliberalism.

Thus, the co-authors of the article, Emsie Ferreira and Aarti Bhana, report that the neoliberalist Treasury remained unable to offer alternative ways of raising revenue to a marathon Cabinet meeting.

The result was “only the trite brief that [Cabinet] does so in a way that supports growth, respects fiscal constraints and shields the poor and middle income groups”.

Adding to the ANC’s pathos is that the smaller VAT increase of 0.5% (staggered so it is actually 1% over two years) is seen in political and financial circles as the DA being the true defender of the poor, as it “trumpeted” after Godongwana’s humiliation of having to abort his first Budget speech.

According to the DA’s finance spokesperson, Mark Burke, “we don’t have a revenue problem. We need to fix our inefficient spending and grow the economy.”

By denying a revenue problem and focusing on VAT, the DA hopes to divert attention away from the fact it also doesn’t want any increase in corporate taxation. Indeed, this is the general view within the GNU.

The GNU is unanimous in its recognition that spending cuts – borne by our people – are unavoidable. Its consensus view is best articulated by Steenhuisen in his headlined press release of 24 February 2025: “A growth and jobs budget is the only path to success for South Africa.”

While nothing like a detailed critique of this consensus – which is also the mainstream one – is possible here, Steenhuisen’s mathematics, in an earlier press release, would appear to be sound. An expected growth rate of only 0.3% in 2023 against a population growth rate of about 1.2%, he argued, meant South Africans would continue getting poorer on average, as they have been since 2014.

However, this equation between growth and positive social spin-offs is a fairytale, albeit an essential one for adults to believe. Debunking these fabrications include:

Investment

Having rejected any tax increases, the DA leader is now eager to protect both education and health from further budget cuts. But – he warns – this won’t happen unless there is a concerted effort to push growth.

Not recognised in these ideological recipes is that private investment is growth’s main ingredient. And social need has nothing to do with private investment – or, with what the market has to offer, Business Day unwittingly informs us.

Africa, synonymous with poverty and starvation, is now a “key growth market for global luxury brands” eager to tap into its growing purchasing power. As traditional markets like China experience stagnation, Africa is stepping into the spotlight.

And with good reason. In 2025, the global luxury goods market is projected to generate $495-billion in revenue, growing annually at about 4% from 2025 to 2029. In South Africa, the luxury goods market is forecast to generate $958-million (R17.4-billion) in revenue in 2025, growing at an annual rate of 3.82%.

Necessarily driving investments and the market everywhere is the singular imperative of profit maximisation. Regardless of what the demand might be, investment never takes place without a high probability of sales.

Lack of demand – primarily too many poor people in the domestic market – is the first reason for lack of investment.

Five examples should suffice:

Nedbank’s projected investment survey for 2024, which tends to be a lead indicator for the direction of fixed investment in South Africa, noted that investment had collapsed since 2015 and was then below 15% of GDP – down from 23% at peak in 2008, and well below the 30% target set in the National Development Plan. The survey found that investment needed to triple if there was to be any hope of growth;

The importance attached to mining is well captured by Gwede Mantashe in his defence of starving out the desperate miners trapped underground, for, in his concern about “our people”, illegal mining was nothing less than a crime against the economy. And there is no shortage of economists who agree with him. However, according to a Business Day article (GDP data reveals mining investment “horror show”, says Minerals Council) the real villain behind the investment horror show was disappearing mining profits. They “plummeted” for the second consecutive year by 18.5% in 2023 and a further 1% in 2024;

Investment never takes place without a (virtual) guarantee of freedom to move the profit out of the country from which the profit is extracted. This is the essential precondition of the free movement of capital. Via legal, quasi-legal and illegal tax evasion – which will be dealt with later – more investment leaves South Africa than enters;

What tends to be overlooked in the focus on South Africa being the world’s most unequal country, is that unthinkable inequality is a global feature and it’s getting worse. The wealth of the world’s richest has doubled over the past decade, with the total wealth of billionaires having increased by 121% from 2015 to 2024. Another metric of this inequality is that almost half of the world’s wealth, 47.5% or $213-trillion, is held by just 58 million US dollar millionaires, or 1.5% of the global adult population;

So, while there is no shortage of money, national minimum wages – even where they exist, let alone are enforced – are knowingly set well below whatever the living wage of each country might be. Insufficient demand, in other words, is a political choice, not the economic necessity it is claimed to be. The economic reality is really very simple: low wages for most = high profits for some.

GDP

This essential neoliberal marker is itself an ideological metric. The largest single contributor to GDP in South Africa – and elsewhere – is the nexus of industries built on and feeding off crime. This includes the entire statutory criminal justice system, the private security industry that dwarfs the statutory one, including all the electronic alarms and surveillance, bookkeepers and auditors, much of the insurance industry and the army of people engaged in one way or another in limiting fraud in all its many forms in both the public and private sectors. Not to be excluded is the extensive media industry based on crime, both fictional and non-fictional.

Competition

Competition is the essential lubricant to growth. Without competition, monopolies become the monoculture, the strangling weed of market efficiency.

Yet monopoly is the natural state of mature capitalism everywhere. This is why it was declared a public enemy in the late 19th/early 20th century, with state institutions established to break them up. Many of these institutions still exist, but only after a substantial moving of the goalposts – which includes their formal recognition, even in their most blatant international form, like Opec.

National monopolies are now implicitly accepted as the norm. All that has changed is that the battle between them has been internationalised by allowing two national oligopolies to merge and thereby become internationally competitive.

Current examples include the merger between two Chinese giants, Huawei and SAIC, to make even smarter EVs, and the plan for Honda/Nissan. The 1991 merger between Australia’s largest resources group, BHP, and London-listed Billiton, to create the world’s second-biggest minerals and metals giant, is an instance of foreign companies merging for the same reason.

In the name of efficiency and saving jobs, mergers and acquisitions by and among former competitors are still now supposedly subject to some form of judicial control.

Nevertheless, Amazon, the US multinational technology company engaged in e-commerce, cloud computing, online advertising, digital streaming and artificial intelligence (and also the owner of film studio MGM), has legally extended its media monopoly by gaining creative control of the James Bond franchise.

And then there’s Google. A Daily Maverick headline: “Big tech monopoly blamed for media downturn”, followed by another Daily Maverick article, “Competition Commission inquiry — SA media companies welcome smackdown for Big Tech” - both articles alert us to the big money the best lawyers for sale will be making as Google presents itself as being whiter than snow.

The priority enjoyed by the need to keep local industry competitive extends beyond the blind eye with which monopolies are viewed globally. In South Africa, for instance, this protection extends to the fiction of a supposed carbon tax on heavy polluters, notwithstanding the daily realities of climate change and the extensive media coverage it now receives.

Trump triumphant

And all this precedes Donald Trump as the new US president. By February 2025, he had already become an advocate against tech regulation, not only in the EU but the world.

Despite the above, the neoliberal ideologues and their economic hatchet people still persist with the fiction of markets being level playing fields. Worse still, is that most of us believe them.

Holding truth to power

Inspired by Arundhati Roy [The Architecture of Modern Empire (2024:62)], I, like her, seek to challenge the fact that “much of the time the establishment depends on the fact that people don’t understand. I want to… puncture that – to deal with all their arguments, to deal with their facts and figures, to counter them in a way ordinary people can understand”.

Part 2 of this article will extend this endeavour to cover the jobs that supposedly follow growth, and the transformation claimed to provide empowerment to all the black victims of apartheid. It will conclude with an outline of readily available alternative financing that, moreover, is actually consistent with inclusivity and equity. DM

This article is a joint publication with Amandla.

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