/ 19 November 2010

Frugality rules in the real world

So, the ANC Youth League doesn’t want the question of mine nationalisation “depoliticised” by the kind of academic study ordered by the ANC’s national executive committee.

No doubt that is because it is only through the distorting mirror of the league’s funhouse politics that the idea looks remotely plausible.

The youth league’s communist adversaries, in turn, are anxious about a politics deficit at Cosatu, with SACP deputy secretary general Jeremy Cronin railing against the union federation’s dalliance with civil society as “anti-politics politics”. Of course, what unites the two organisations is a ­distaste for the way reality keeps interfering with their programmes.

Cosatu general secretary Zwelinzima Vavi realises that concern about corruption and government performance is no longer an elite phenomenon, but increasingly the defining issue for unemployed and working-class voters. And he knows that no amount of rhetoric is going to change their sense that their political representatives have failed them.

That is a challenging proposition for the ANC, and indeed for the SACP, which has not succeeded in building the kind of base in poor communities that the more effective civil society organisations have. Pointing this out and trying to manage the consequences within a broadly progressive framework has nothing to do with playing into the hands of the “right”, as Cronin suggests. It is a recognition of reality.

The anxiety occasioned by this new reality seems to have been what provoked the ANC’s hyperbolic reaction to Cosatu’s conference with civil society. At least SACP chairperson Gwede Mantashe and Cronin can see that the ground is shifting under their feet.

The youth league’s proposals come against the backdrop of a much more dramatic and concrete set of changes in the world economy and it seems utterly incapable of recognising these changes.

In the immediate aftermath of the collapse of the Western banking system, many on the left argued that the crisis of financial capitalism offered an opportunity to overturn economic orthodoxy and strike out boldly towards a new socialism.

Two years into the reconstruction effort the world certainly looks very different, but the scope for bold new approaches of any kind has narrowed since the collapse of Lehman brothers, rather than widened.

The sovereign debt crisis in Europe, which has seen Greece and Ireland teetering on the brink of bankruptcy, with Portugal and Spain not far behind, provides a stark lesson about the limits of what governments can do right now. Fierce austerity is not just the fiscal fashion, it is the only thing keeping European finances from collapse.

Meanwhile, the desperate attempts of the United States Federal Reserve to jump-start growth by printing money, and the countervailing efforts of the Chinese to maintain employment creation by holding down the value of the yuan, leave the rest of us caught in the awkward middle, with soaring currencies and declining competitiveness.

Whatever we think of the politics of nationalisation, there is no way it will fly in this new world. There is simply no money for it. But the ANCYL isn’t the only group in denial.

The muddle in Cabinet over whether Eskom would get a R20-billion cash injection from government through asset sales or simply through expanded state debt is a telling lesson in the challenges facing Finance Minister Pravin Gordhan and his officials as they try to teach reality to their colleagues.

Clearly, the recapitalisation of Eskom and securing South Africa’s energy future is a crucial strategic priority. Jitters over power are already hurting investment in key job-creating sectors of the economy, such as mining and manufacturing. But there simply aren’t pots of tax revenue lying around to fund new power stations.

Much of the “fiscal space” won by years of careful spending has been consumed by excessive public sector wage increases.

In the new, austere, world, loading up on even more debt than we’ve taken on so far simply isn’t an option. We are at full stretch.

So we have to make choices. Government can put more cash into Eskom, but only if it gets rid of some luxuries.

As we report this week, the sale of shares in Vodacom could net R15-billion and Telkom R7-billion more.

This would annoy the unions and deprive the state of some notional leverage of the telecoms sector, but the unions would be more annoyed if fresh power cuts compounded the brutal job losses wrought by the global recession.

And government’s shareholder leverage over the cost and quality of telecoms has yielded no measurable benefit. On the contrary, it has held back reform.

Then there is the cash on the balance sheet of PetroSA.

The state-owned fuel company is hanging on to R10-billion, no doubt intending to put it towards project Mthombo, the giant oil refinery it wants to build at Coega. The rationale for this mega-project is a mixture of resource nationalism — “African oil should be refined in African facilities” — and dubious concerns about fuel security.

There is a global excess of refinery capacity at present and it is likely to last for decades. Meanwhile, Transnet is already spending billions on a new pipeline to move the imported product from Durban to the Highveld. Another pipeline from Coega would likely be underutilised and highly inefficient.

Either way, electricity is clearly a more urgent energy priority than liquid fuels. After all, you cannot move electricity around the world by ship. It’s not a question of reducing the state’s role, but of re-allocating resources.

If we expect to have a state-led power sector we need some state asset sales. The clear-eyed politics of reality need to trump the blind politics of nationalisation in mining, telecoms and energy. The ANC and SACP might want to consider taking a similar approach to the politics of corruption and service delivery.