" Africa Under Creative Destruction"-See Two U Tube video embedded in abstract

AfricaUnder Creative Destruction

The missing African classes

Themba Mdlalose

Second Draft

September/October

Africa under creative destruction

2010

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Preface

The missing African classesThere is some truth in the observation that organisms [i.e.living things] behave as if they spend most of their timeplotting to terminate lives of other organisms. Someorganisms, called herbivores, eat plants, others, calledcarnivores, eat animals and yet others, called omnivores,eat both. There are some organisms which, if theycould speak, would, with some justification, claim thatthey are harmless to all life and live by the maxim ‘liveand let live’. These are plants which feed on chemicalnutrients they absorb from the soil. However, on closerexamination, even these plants survive in the wild onlybecause the nutrients in the soil are replenished bymanure consisting of dead animal and plant matter. Sothese plants are really scavengers. It seems that deathis necessary to sustain life. Nature has its own versionof ‘creative destruction’.Since humans are members of the animal kingdom it shouldnot be surprising that a lot of our habits can be tracedback to animal behaviour. Where there is life, whether itbe in the jungle, in the savannah or in the deep bluesee, there is a perpetual struggle associated withcompetition for resources necessary to sustain life. Eachspecies has its particular way of making a living forwhich it has developed physical attributes and aninstinct governing behaviour, all of which enable it toexploit its particular niche area in the economy of thewilds. As evolutionary biologists would put it, thecapacity to exploit the niche area is genetically coded,i.e. it is etched in the genes of the species.Animals ‘produce’ food by hunting and gathering1. Theinputs [factors] which animals require to produce foodare energy, naturally occurring materials and ‘pseudoknowledge’ by which I mean the genetic blueprint whichdetermines the physiological design of the animal andwhich guides its behaviour in exploiting its niche area.In other words the factors of [food] production for

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animals are energy, natural materials and the geneticblueprint. An example of the energy which is being referredto here is what a lion needs to sprint, pounce on itsprey and overcome it. It is a basic and self evidenteconomic principle that the only viable way of foodproduction is that the amount of energy gained from thefood must be at least as large as the energy expended inits procurement. The higher the energy gained incomparison to the energy expended the higher theproductivity of the food procurement process. It was the higher primates which first improved theproductivity of food procurement by using tools, apractice which required intelligence in order to gobeyond the limits of genetically coded pseudo knowledge.I shall refer to this particular form of intelligencebased knowledge as technical knowledge2. An example of earlyuse of tools by humans was the use of sticks to killanimals. More advanced tools included traps to disableanimals without much effort. The first forms of life weresimple and higher forms evolved gradually over millionsof years. Up to the stage of higher primates animalsdeveloped by genetic evolution. It was cultural3 evolutionwhich catapulted one species of higher apes to the levelof primitive human beings and beyond to a level where wehad the capacity to create great civilizations. Forhuman beings the factors of production are energy,natural materials and technical knowledge. As technical knowledge increased man domesticated plantsand animals and took charge of their genetic evolutioninto more useful forms through selective breeding. Asproductivity in food production gradually increased, foodgradually seized to be the main focus of human activity.More and more energies were shifted away from thesatisfaction of needs to the satisfaction of wants whichenhanced human comforts. A lot of technical knowledgebecame increasingly embodied in production tools whichwere designed to maximize productivity, the output ofproducts for a given input of resources. Greaterproductivity required greater sophistication of tools. There are periods in history, such as the industrialrevolution, when accumulated technical knowledge has

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stimulated the invention of production tools at anaccelerated pace. It is production tools which are thereal capital stock of modern economies. With theaccumulation of this capital stock, over the centuries,productivity improved relentlessly freeing more hands toengage in specialized occupations. Division of labour wasa function of capital stock which, in turn, embodiedaccumulated technical knowledge.Despite the huge gap of technical knowledge whichseparates modern humans from the rest of the animalkingdom, competition for natural resources is still amajor feature of the life struggles of all includinghumans. A major historical phenomenon which reflected andstill reflects these life struggles is colonialism. Thestrength of nations is determined by the extent to whichthey have accumulated technical knowledge and theassociated capital stock. Stronger nations have alwaysbeen tempted to subdue weaker nations in order toconfiscate their land and extort their labour for thepurpose of exploiting the natural resources for theirown benefit. Centers of imperial power have developed in only a fewplaces around the globe so that most peoples of theworld have in fact been victims of colonialism at varioustimes in history. Colonial conquests were eitherpermanent or temporary. In the former case the colonizedwould either be annihilated, assimilated or subjected toa little bit of both. Of course no colonized people couldpossibly be immune to the cultural influences of thecolonial power. But, many nations have prospered afterthrowing away the yoke of colonialism.The only part of the world which has persistently moanedabout neo colonialism is Sub Saharan Africa. This bookwas motivated by a desire to understand why. It is aparadox that, despite the racial discrimination ofcolonial days, which sparked liberation wars, it wouldappear that the process of assimilation coupled withsubordination reached a tipping point beyond whichAfricans no longer had the desire and the will to make iton their own. On liberation day they did not even havesocial structures which were independently viable,

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especially in the new environment of the post colonialworld. Africa lacked social classes capable of utilizing toolsleft by colonialists, let alone to competently mastertechnical knowledge and transform it into productiontools. Up to the end of colonialism these functions wereperformed by exclusive European classes within colonialstructures. Let me now refine the crude observation which I made asmy opening remark. All organisms behave as if theyregarded the purpose of their lives as the propagation oftheir own genes4 to the next generation throughreproduction. All other instincts, such as selfpreservation, are subordinate to this fundamental goal.This principle also applies to humans, as members of theanimal kingdom. However, cultural knowledge enableshumans to control and repress some of their animalinstincts when they threaten to take control ininappropriate circumstances. As leaders of functional‘economic units’, the elites of winning nations act asnurturers and protectors of the wealth of their nations.They behave as if they regarded the purpose of theirbeing as a) the accumulation of technical knowledge andthe associated capital stock and b) the transmission ofthese assets to the next generation through thrift andeducation. Knowledge is to the current generations of a nation whatgenes are to an organism. All of this is of course notincompatible with accumulation of personal wealth. When a nation is dysfunctional as an ‘economic unit’ itmay not function as a unit or team at all. The elites mayoperate in a predatory manner as a collection ofindividuals. They may behave as if they regarded thepurpose of their lives as the accumulation of as muchpersonal wealth as possible, by hook or by crook, at theexpense of the rest of society. Unfortunately wealthwhich is not based on technical knowledge is onlyephemeral. Generally this is how the nations of SubSaharan Africa function. They are run by delinquentpretenders to the throne standing vacant as a result ofmissing classes. There is evidence that, since theirascension to power, the usurpers have worked hard toprevent the missing classes from coming into existence.

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All cultures socialize individuals belonging to variouscategories of the family unit to fulfill particularroles within the family. Similarly people belonging tovarious categories of society are socialized tocontribute in particular ways to society. Nations whichindependently reached the critical economic stage ofdivision of labour developed all the classes which arerequired to sustain such an economy. They also developedcultural mechanisms in the form of customs and norms tosustain the critical classes by socializing peoplebelonging to various classes for specific roles. Withoutthese informal means of transmitting and instillingcultural knowledge no formal educational system cansucceed. In South Africa this fact is most starklydemonstrated by the sharp contrast between educationoutcomes for blacks and whites which prevail even withinracially integrated educational institutions. What I amsaying has nothing to do with elitism. In an egalitariansociety walls between classes should be permeable in bothdirections but one hopes most of the traffic will benorth bound. As already mentioned, nature endowed every organism withgenes which encode the physiological architectural planof the organism and its behavioural patterns. Takinglessons from nature, all elders who have served as theleading minds in every civilization have alwaysrecognized the effectiveness of regulating the behaviourof individuals in society by encoding acceptablebehaviour in tribal customs. The customs provided everyindividual in society with the desired ‘instinct’ whichthe elders felt would lead to behaviour which wasbeneficial to society. Where there were social classes,which was almost always the case, each class had its ownelders with their peculiar wisdom.The customs of societies included rights,responsibilities and obligations of various sectors ofsociety or classes under a variety of circumstances. Theyalso included religious and other cultural practices suchas social taboos. These customs, which were part ofcultural knowledge, had a much stronger influence onbehaviour than formal laws because they were internalized

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and therefore determined the identity and sense ofbelonging of members of society. Formal legalinstitutions which were later developed to regulatebehaviour were only effective to the extent that theyreinforced recognized customs. What I am suggesting hereis that legal sanctions may be ineffective in a societywhich has lost all customs which provided it withinstinct for acceptable behaviour. For example if Africanelites belonged to social classes in which dishonesty wasshunned and dishonest people were despised the possibleostracism by these classes would act as a far moreeffective deterrent to corruption than possibleconviction in a court of law. When I say Africa hasmissing classes I do not mean that it is a classlesssociety. In fact, despite the popularity of dishonest,vote winning, socialist rhetoric, Africa has such anexcessive preoccupation with class that it is all butfeudal. The main problem is that the higher classes lackthe legitimacy of superficially similar classes, in othersocieties, which were formed to fulfill constructiveroles. The pretenders in certain classes are little morethan a bunch of incompetent and grossly conceitednarcissists. In post colonial Africa, no serious efforts have beenmade to address these problems but instead we have beensocializing our youth into predatory roles in adespicable culture of rent seeking and conspicuousconsumption. It is tantamount to passing on to themfatally flawed [knowledge] ‘genes’ which set the nationup for a subordinate role in perpetuity. We have thuschosen for ourselves a dishonourable economic niche areaanalogous to scavenging. We are past masters at blamingothers for our problems. We have no inclination toproduce anything with our abundant resources but insteadwe complain ceaselessly that those who wish to producethings of value with our resources are exploiting us.This makes us sound like the only wimps in the jungleand this ought to concern all Africans. Yes indeed, colonialism never gave Sub Saharan Africa anopportunity to develop cultures designed to inculcatedesirable behaviour in a commercial milieu. But after

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colonialism, the liberation movements shirked theirresponsibility and missed the golden opportunity to do sousing their pre liberation disciplinary structures. As aresult it may well be inevitable that forces of ‘naturalselection’ will ensure the dominance of others who arefitter as a result of having the advantage of suchcultures. Advocates of unfettered free markets insistthat one essential mechanism by which markets ensureoptimum allocation of resources is ‘creative destruction’ interms of which inefficient businesses tend to fail andget displaced by more efficient operations. If theAfrican elites are not equal to the task of runningAfrican economies maybe neo colonialism is merely amanifestation of creative destruction.

********************In ancient times education was accessible to a very smallelite. Reading and writing, in particular, were very rareskills which conferred considerable power to those whopossessed them. The masses took what was written down tobe the absolute truth which could not be challenged. Forwhat was written could only have been written by men [Yeshigh learning was the preserve of males] ‘of greatwisdom’.A person only needed to declare that ‘it is written’ andthat would settle all argument about whether ‘it’ wastrue or not. People would not even bother to verify if itwas indeed written. They would know that they were notgoing to understand the writings anyway. Instead theywould immediately shrug their shoulders in resignationand earnestly nod their heads in agreement as theyapologetically muttered: ‘Oh so it is written!’ These days reading and writing are common skills but men‘of great wisdom’, whom we call experts’, are still withus and exercising considerable power over us. Modernexperts no longer use mere reading and writing skills tobrowbeat us but they use something similar: technicaljargon. We tend to assume that people are experts whenthey use technical jargon and defer to them on thegrounds that they necessarily have ‘great wisdom’ whichis inaccessible to us mere mortals.

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Economics pervades all aspects of our lives. Indeed lifeis about ways and means to satisfy our needs and wantswhich is precisely what economics is all about. Everyinteresting historical tale about humans is ultimatelyabout economics. Certainly, the great sub Saharanpopulation migration which bequeathed Southern Africa tothe Bantu was an economic phenomenon. Likewisecolonialism was driven by economics. Happiness ordiscontent of humanity has always been determined byeconomics. In any economic tale it is unavoidable tomention one or two concepts which have some numbersassociated with them. In writing this book I had in mind an intelligentgeneral reader. I do not expect the reader to benumerate and therefore I went out of my way to avoidtechnical material which adds no value to straightforward explanations of things. It would be preposterousto consider any mention of quantities, in this book, asamounting to mathematics. If any statements made in thebook can be accused of being mathematical at all, the‘math content’ is nothing more profound than statingwhich numbers are added to arrive at a particular total,as in: I have five children: two boys and three girls.

****************This book is ultimately about Sub Saharan Africa ingeneral even though most examples refer to the SouthAfrican situation. For all practical purposes SouthAfrica was a colony of Britain up to the electoralvictory of the Afrikaner nationalists in 1948. ThereafterAfrikaners colonized the indigenous people internally.After 1994 the indigenous people of South Africa relatedto the Afrikaners, or the South African whites ingeneral, in exactly the same manner in which otherAfrican states related to the former colonial powersafter the end of colonialism. The proximity of theformerly colonized and the former colonial power makesSouth Africa a particularly interesting case study. Myreflections in this book will hopefully make acontribution, however humble, towards reclaiming controlof the destiny of Africa for the Africans.

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Chapter summaries

Chapter 1, ‘UBuntu and Jericho’, This is a brief overviewof the genesis of the colonial problem, the colonial eraand what transpired after its end. The overview includesthe global context of post great depression capitalismduring which colonialism came to an end. The chapter alsointroduces the African elites who have been thearchitects of the fortunes and misfortunes of thecontinent since the beginning of the decline ofcolonialism.Chapter 2, ‘The Bantu Odyssey’, This chapter traces theeconomic development of the Bantu from their roots inCameroon to their settlement in Southern Africa wherethey later encountered European colonialists before theBantu reached the economic stage of division of labour.This is followed by a discussion of conditions for thedivision of labour and the European experience in thisregard including a brief history of guilds.Chapter 3, ‘Battle for colonial souls’, The role of colonialismin initiating a limited division of labour in SouthernAfrica is discussed and the spiritual roots of theAfrican elites, a colonial creation, are traced. Theimpact of African colonialism, and of Indian colonialismon the respective native social classes and religioussupport structures are compared. The chapter ends with astudy of the religion Afrikaners invented to deal withtheir own colonial experience. Chapter 4, ‘The pedigree of the Company’, This chapter recallsthe dire food supply situation in Europe during theeighteenth century and how colonialism helped to addressthe problem. Most significant was the continual rise inthe agricultural yields in the US which were achievedthrough scientific innovation and consolidation.Agribusiness and huge multinationals in the sector wereborn. The WTO bolstered the power of these and othermultinationals to dictate terms of trade to the thirdworld and to effectively reestablish colonial relations.

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Chapter 5, ‘Spiritual roots of ‘the new world order’’, The militancyof OPEC during the seventies was the main cause of theinflation of that decade which helped bring British andAmerican conservatives into power. In the US they werealso assisted by an ultra right religion which wasadvocated by televangelists. The conservatives led therestructuring of the global economy which brought about aneo liberal ‘new world order’. It was a system which gaveextra ordinary power to unregulated financial marketswhich nearly brought the global economy to a grindinghalt in 2008/2009. The ANC was invited to join theCompany at the height of this new world order. Chapter 6, ‘The great leap forward’, The architect of neoliberal economic restructuring in South Africa from 1994to 2008 was Thabo Mbeki. This restructuring was part ofa suite which included a fiendishly complexqualifications framework which brought real education andtraining activities to a halt. At the core of therestructuring process was the neo liberal inspiredphilosophy of specialization which prescribed outsourcingto an extreme degree. This outsourcing dovetailed neatlywith a policy of Black Economic Empowerment [BEE] whichfavoured ‘empowered’ businesses in procurement by statecontrolled organizations. It all opened a Pandora’s boxof corrupt get rich quick schemes which considerablyincreased the cost to the state of service delivery.Chapter 7, ‘The elixir of discrimination’, Towards the end of thestruggle era two developments of vital importance toeducation took place. Firstly, critical supervisorystructures in the black education system were overthrown.Secondly, the only existing apprentice system which onlyserved whites was discontinued. This was the situationwhich obtained when the great leap forward in educationwas taken in the form of the introduction of OutcomesBased Education [OBE] which turned out to be the lastnail in the coffin of black education. White studentswere sustained by more disciplined, better qualified andmore committed teachers and by informal structures intheir communities which transmitted cultural knowledge.Chapter 8, ‘Deregulation of immigration’, As part of its WCsuite of policies the government threw open its borders

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and allowed in an endless flood of economic refugees fromall over the world but mostly prom sub Saharan Africa.This aggravated an existing backlog of basic services topoor communities. Tensions with the local community werealso caused by the fact that the foreigners tended toaccept much lower wages. Competition for resources led toperfectly predictable animosity and sporadic violencebetween the groupsChapter 9, ‘The Nongqawuse promise’, To create a bufferbetween the rich white community and the poor blackcommunity the white oligarchs systematically creamed offthe elite of the ruling party, the ‘champions’, andgave them shares making them junior partners in whiteowned and white run companies. And so a whole lot of rich‘businessmen’ were created who spent their time siphoningdividends through their ‘investment companies’. Ordinaryblacks were financed by banks to obtain over pricedshares through special purpose vehicles so conceived asto benefit the banks. They accumulated more liabilitiesthan assets. Chapter 10, ‘Peacocks beget Peacocks’, The publicly declaredruling party policy of cadre deployment was exploited bycomrades to monopolize all positions which involved powerin all government tender processes. Some of the comradeswere either semi literate or otherwise completelyunqualified for their positions. It was the narrowestpossible interpretation of affirmative action whichexcluded the majority of black people with no partyconnections. These comrades used this power to exploitevery opportunity of self enrichment. The culture whichwas cultivated placed no value whatsoever on knowledgebut glorified conspicuous consumption. A pandemic of theNarcissistic Personality Disorder [NPD] engulfed thecountry feeding a parallel nonproductive NPD economy. Chapter 11, ‘Stilling the Incessant Demons’ This chapter sumsup the crises of democracy in Africa against thebackground of a tendency to misconstrue wastefulnarcissism on the part of the ruling elites as anexpression of national dignity. The chapter ends with asummary of the priority areas for cultural innovation inorder to arrest the rot in South Africa.

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Chapter 12, ‘Annexures’ 1. Annexure 1: Contribution of savings to economic

growth (Chapter 1)2. Annexure 2: Features of transformational OBE

(Chapter 7)3. Annexure 3: Numerical examples of how BEE deals

work (Chapter 9)Themba MdlaloseOctober2010

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Chapter 1UBuntu in Jericho

“African nationalism was a movement of the small, westernized black elite…Its fight was always for inclusion…”

Moeletsi Mbeki in ‘Architects of Poverty’1 Be fruitful and multiply

When the June 16, 1976 generation of students weregrowing up, the skewed distribution of resources was thenatural order of things. To be sure, it was unacceptableand deeply resented but it was what one might expectheartless victors to inflict on the vanquished. It wasstraight forward for the elders to explain these thingsto the youth. But the youth of 2010 are born frees5 whohave only known black government. It is rapidly becomingimpossible for elders to explain to them honestly andwith conviction the reasons for the skewed distributionof resources without inadvertently denting their faith inbeing African. The fact that the economies of the rest ofthe African continent are not doing very well does nothelp. It compounds the questions posed by the Africanyouth and it intensifies the concomitant discomfiture ofthe elder African. Bearing in mind that, though thetruth is not always palatable it liberates, the challengeis to provide candid answers. This is more likely toinspire solutions from younger and fresher minds, than toinduce despair and Afro pessimism.Honest debate in South Africa is bedeviled by twocomplementary conditions which really represent two sides

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of the same coin. For want of better labels to attach tothem I shall use the terms neo racism and Afro-myopia:

Neo-racism is a condition which induces condescensionin whites and causes them to use lower standards tojudge black leadership in public discourse.Ineptitude is swept under a rainbow coloured carpet,so to speak, in the name of racial sensitivity.Public comment is muted and characterized byeloquent knowing glances and smiles. The resultantfrustration in only released in privateconversations where a kaffir is called a kaffir.

Afro-myopia is a condition which causes Africans toattempt to evade accountability and to avoid beingchallenged on their incompetent leadership bylabeling such a challenge as Afro-pessimism. A veilof false optimism is pulled over incompetence. Thedesire to protect incompetence by concealment isdignified by the euphemism of Afro-optimism.

The effect of neo racism and its cousin, Afro-myopia, isto encourage us to build our country on false foundationsof contrived consensus, unity and contentment. We arerapidly mastering the art of pretending we are talkingacross racial lines when all we are doing is exchangingmeaningless compliments we do not really mean. In publicwe condemn the extremists of the ANCYL and the AWB whilewe applaud them in private for saying things we areprevented by racial sensitivity to say. Since time immemorial all cultures have used religiousfables and myths to respond to incessant questioning bycurious and innocent young minds. In this book I shallargue that the religion which African leadership haschosen to address questions regarding economicinequality is conspicuous consumption. This paradoxicalsituation was only made possible by the extraordinarycapacity of South Africans to embrace contradictorybeliefs. I shall come back again and again to this majortheme but for now let me go back to the very beginning ofthe African narrative. It is a rather charming peculiarity of South Africathat, despite the fact that South Africans are among the

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most religious people on earth, it is not customary forthe religious and scientific communities to engage indebating contests. On the contrary us South Africans,including the most devout among us, generally acceptwith pride that our country is the cradle of human kind.I shall take a whirlwind layman’s tour of the exquisitebody of scientific and historical knowledge which wethereby, admirably, take for granted. The claim to be the cradle of humankind is based on ageneral consensus among scientists that humans aredescendents of African apes6 which split about sevenmillion years ago into three species: the moderngorillas, the modern chimps and proto humans. The protohumans lived in Africa where they evolved, graduallyapproaching the physiological form of modern man. Aboutone to two million years ago proto humans had morphedinto what scientists call Homo erectus, creatures whichwalked more or less erect on two legs. It is Homo erectuswhich first ventured beyond the African continent.However Homo erectus was still a long way from evolvinginto modern man both in terms of physiology andabilities. The critical transformation into modern man, the trueancestors of humanity, is thought to have occurred inAfrica about 50 000 years ago. Over a period of millenniasome of these ancestors crossed into southwest Asiathrough the land bridge which the present day Suez Canalbreaches. Beyond the Suez some of them gradually movedin a northwesterly direction into western Europe whileothers proceeded eastwards to southeast Asia where therewas a further split with one group heading towardsnortheast Asia. Over the millennia the sea levels havevaried considerably so that the degree of isolation ofthe New World [the Americas and Australia] from the OldWorld [Africa and Eurasia] has varied accordingly. At some stage conditions were favourable for crossingsinto the New World. The group of our ancestors who endedup in northeast Asia crossed into North Americathrough Alaska. Some of those who reached southeast Asialater acquired the skills to build vessels to enablethem, when the conditions were favourable, to reach the

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Indonesian islands, Australia, New Zealand and finallythe numerous Polynesian islands. This is briefly how thefirst wave of colonialism in human history unfolded. Itis those original colonialists who are today callednatives of various lands. My devout countrymen would sayit is all written and in accordance with God’s [Gen 9:1-3] injunction: “Be fruitful and multiply and fill the earth!...Every movingthing that lives shall be food for you. And as I give you the green plants, I giveyou everything.”Since the most fundamental economic need of man hasalways been food, the initial mode of existence for allthe native communities was that of hunter gatherers, astrenuous full time activity. It made better economicsense to domesticate edible and useful plants andanimals. But the various native lands around the globewere neither equally nor similarly endowed with usefulanimals and plants. In some parts of the world there wasan abundance of domesticable plants and animals while inothers there were a few or none.Factors which limited the number of plant candidates fordomestication included the requirements that they had tobe edible and contain useful nutrition, give high yields,be easily grown by being sown or planted, be quick togrow so that they could be harvested within a few monthsof planting, be easy to store after harvesting. There areparallels between these requirements and the factorswhich limited the number of animal candidates fordomestication. They had to, be easy to feed, growquickly, breed easily in captivity, not have a nastydisposition, be easy to confine to an enclosure and beherd animals with a hierarchical social structure inorder to predispose them to control by a human [or evendog] herder.Humans evolved from apes because particularcharacteristics which particular apes happened to have,by chance, gave them advantages in nature. In other wordsnature selected apes which had certain advantageouscharacteristics. Thus humans evolved by naturalselection. But in the process of domestication of plantshumans artificially selected those plants which haddesirable characteristics as food, such as size and

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taste. The selective planting and replanting of suchplants exploited the biological laws of heredity andresulted in accelerated evolutionary development ofplants in which the desirable characteristics wereenhanced. Similar techniques were also applied to theselective breeding of domestic animalsEarly civilizations were made possible by the emergenceof agriculture and significant improvements in itsproductivity which released a substantial amount ofmanpower from food production and procurement to variousother specialized occupations. Who would waste timescribbling letters without knowing where they were goingto get their supper? It is therefore not surprising thatearly centers of civilization were in those parts of theworld where agriculture was facilitated by theavailability of crucial domesticable plants and animals.The most prominent of these centers was of course the[formerly] Fertile Crescent in southwest Asia which isbordered by Jordan, Southeastern Turkey and Iran.Mesopotamia, the world’s oldest civilization, was locatedin this region which was also the source of three of theworld’s major religions. On the Eurasian landmass thereare of course other early centers of civilization whicharose in east Asia. Important plants and animals which were only availablein North Africa and/or Eurasia where they weredomesticated include wheat, oats, barley and chickens,sheep, goats, cattle, donkeys, horses, camels and pigs.The latter constitutes the overwhelming majority of theworld’s most useful domestic animals. European and NorthAfrican agriculture and culture benefited substantiallyfrom its proximity to the Fertile Crescent. Despite thediversity of plants and animals which are indigenous toAfrica almost none of them are domesticable. For examplezebras and the African buffalos, our indigenous versionsof horses and cattle, respectively, are incredibly nastyand absolutely impossible to domesticate. All the domesticable animals reached the rest of Africafrom North Africa and/or Eurasia. Amongst the fewdomesticable plants which were indigenous to Sub SaharanAfrica and which were domesticated on the continent was

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sorghum which reached southern Africa from the Sahelthrough the migration of the Bantu. Maize, which isnowadays the principal staple food of southern Africa,was actually indigenous to the Americas where it wasdomesticated. It only reached Africa towards the end ofthe middle ages after the European explorers had‘discovered’ the Americas.Great ideas which changed the course of history includedadvances in metallurgy and the invention of techniques totame and manipulate animals in order to make use of theirmuscle power. This paved the way for the invention of ananimal drawn plough which drastically improvedagricultural productivity and freed manpower for otheractivities as I have already stated. Animal power and thewheel made it possible to establish contact and tradeacross great distances. During the middle ages, longbefore the beginning of the colonial era, Europe[including north Africa] was already benefiting fromintra European trade and the exchange of ideas, theprecursor of what came to be known as globalization. To alesser extent such trade and cultural contacts also tookplace between Europe and Asia across the Eurasian landmass.

2 A leadership test

2.1 Capital stock on liberation day

Apart from these interactions most of the Africancontinent and the New World were isolated fromdevelopments in Eurasia. By the end of the middle ages[about 1500 AD], when sea travel ushered in the era ofcolonialism, all isolated regions of the world haddeveloped as fast and as far as their indigenous naturalresources could allow. But there was a huge knowledgeand skills gap between Eurasia and the rest of the world.There was stagnation in the isolated parts of the worldand the injection of fresh ideas and resources was longoverdue. The natural resources which Africa needed mosturgently were more domesticated plant and animal speciesand the skills and knowledge which were of criticalimportance were (a) the technology to harness animalpower for agricultural production in order to releasemanpower to master the trades which underpinned

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manufacturing, especially metal work, masonry, woodworkand textiles and (b) to learn reading, writing andarithmetic [the three Rs] as a means mainly to developadministrative capacity to facilitate manufacturing andtrade.The agenda of the European colonialists had, however,nothing to do with what the Africans needed. Thecolonialists were only interested in mineral resources,especially precious metals, and agricultural productionto serve Europe where land had reached the limit of itscapacity to feed its large population. As innovationsincreased agricultural productivity, populations grewand overtook the capacity of agriculture to provide forthem and this resulted in cycles of innovations andfamines. To boost agriculture and mining in the coloniesthe colonial powers needed more than just raw animalpower, they had solved that problem centuries before.What they needed was intelligent animal power7. Onlyenslaved humans could serve that purpose and the ‘savagenatives’ provided plenty of material for that. Theresult was slave trade, which was only officially endedin the middle of the nineteenth century, and racialfeudalism which lasted up to the end of the colonial eratowards the end of the twentieth century.The colonialists created a new African elite, to helpthem advance their African agenda, by introducingreligion and theoretical education [one plus three Rs].The effect of a foreign religion was to inculcate, in theminds of the new African elite, the idea of a heavenwhich they, the special ones [amagqobhoka or amakholwa],would share, as Christians, with the colonialists to theexclusion of the rest of the pagan [amaqaba] African riffraff. The education which the Africans were given had apredominantly cultural content which transformed Africansinto black Europeans. The exclusion of Africans from the trades and the factthat manufacturing predominantly took place in Europeensured that the African elite had no experience of anindependently functioning modern economy. To them therewould always be the ‘mother country’ to supplymanufactured goods. Indeed the African colonies were

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officially considered as mere provinces of the mothercountry. The only ambition which the African elite hadwas to join the colonialists in enjoying the fruits ofcheap African pagan labour. Their idea of a properlyfunctioning economy was limited to that sort ofexploitation and their only gripe was that thecolonialists excluded them from the gravy train. Thus, bythe end of the colonial period the African elite had aneducation, such as it was, which inculcated dependenceon the colonialists. The traditional African ruling class consisted ofaristocrats who derived their high social status andinfluence from their association with royalty. Loss ofpower to the colonialists had the effect of annihilatingthis class and the introduction of western education hadthe effect of replacing it with a new educated elitewhich derived its social status and influence from itsassociation with the colonialists. The missionaries werequick to commit the bible to writing in the Africanlanguages but these languages were never developed foruse in academic discourse. The result was that wheneverthe African elite had something serious to say, they wereobliged to revert to European languages. Africans tendedto equate high learning with European languages. Any onewho spoke a European language fluently was necessarilyeducated and anyone who was educated had to be able tospeak a European language fluently. This was just a symptom of a deeper psychological scarin African society which predisposed Africans to devalueeverything African and to value everything European.Unlike elites in the rest of the world, the new Africanelites never saw it as their responsibility to inventways to express modern knowledge in their own languages.Instead, long after ‘liberation’, they continued blamingthe colonialists for the fact that their languages werenot developed for academic use. This situation impressedupon the minds of the people that deep thought and indeedthinking itself was exclusively associated with Europe.Africans had been conditioned to aspire to be European.This aspiration predisposed the African elite to bealways looking up to genuine Europeans for leadership.

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But even if the African elite had demonstratedwillingness to lead, instead of deferring to Europeans,the association of all that is thoughtful or intelligentwith Europe, in the eyes of the masses, was always goingto undermine the authority of African leadership. Thusthe African elite never really replaced the originalAfrican aristocrats as leaders of Africa. The former wereraised to consider the destiny of Africa to be inEuropean hands while the latter saw themselves as theanointed custodians of the African heritage. Theannihilation of the African aristocrats, as a class,marked the end of genuine African leadership and Africanself determination.The transformation of the African leadership hierarchies,by colonialism, into vassal structures was analogous tothe selective breeding of animals to transform them intospecimens with characteristics which are desirable to thefarmer. The only elites who were allowed to flourishwere those who exhibited gratifying levels of deferenceto colonial social and cultural norms. But the fact oftheir flourishing advertised their behaviour as thesource of their success. It was such advertisementswhich enabled these elites to reproduce themselvescopiously in black society. Similarly the behaviourswhich guaranteed success became more and more enhanced.It was effectively a self reinforcing process in terms ofwhich ‘success’ bred more ‘success’. Colonial education might have succeeded beyond the dreamsof those who devised it, in turning the African eliteinto black white men, but there was a downside to thissuccess. When they had mastered European culture theAfrican elite could not understand why they were stillnot given full membership of European society. So theyestablished African gentlemen’s clubs which sought toimprove relations and extend contacts and interactionwith Europeans. It was only when these gestures were repeatedly rebuffedthat the African elites instigated wars which weremisconstrued as wars against colonialism. In reality theywere little more than petulant tantrums of the Africanelite who were peeved because the Europeans kept them at

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arm’s length and failed to acknowledge the extent oftheir transformation into black white men. Whencolonialism ended and the colonies got their‘independence’ the African elite had neither theconfidence nor the education, skills and experiencewhich equipped them to run anything as they faced thechallenge to select and implement one of the followingdevelopmental paths:

Industrialization: To transform their economiesfrom the colonial mode of supplying the colonialmother countries with raw materials to theindustrial mode of supplying international marketswith goods produced by adding value to the rawmaterials.

Mastering resource exploitation: To master, refineand improve the technique of exploiting rawmaterials with acceptable standards of safety to theworkers and the environment and bringing themprofitably to international markets.

Extracting and shipping: To extract and shipresources to the colonial mother country by thecheapest method available irrespective of safety tothe workers and the environment. This was thecolonial agenda.

Bribery and rent seeking: To sit back and invitemultinationals to extract and ship raw materials asrecklessly as they wish in return for bribes and alittle rent to the African elite.

Obviously a country requires capital in order to grow itseconomy or, what amounts to the same thing, to generatewealth. In general, the higher the value of capital acountry possesses, for a given population, the higher thecapacity to generate wealth and therefore the higher theper capita wealth generation or productivity of thecitizens. By capital I mean the usual:

Human capital: Healthy human beings with sufficientbasic education to have capacity to acquire newknowledge and skills.

Knowledge capital: The scientific, technologicaland professional know-how that raises productivity

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in business output and contributes to the promotionand improvement of all the other kinds of capital

Natural capital: Arable land, biodiversity and wellfunctioning ecosystems. In addition some countriesare endowed with valuable minerals.

Infrastructure: Roads, power, water and sanitation,airports and sea ports and telecommunicationsystems all of which are critical inputs intobusiness activity.

Business capital: The specific machinery requiredfor the production of goods and services.

Public institutional capital: Institutions which aregenerally responsible for promoting the commoninterest and which are guarantors of peaceful andorderly conduct such as government services,policing and the judicial system.

The crucial bullets are the first and the second. Bulletsfour to six are merely an embodiment of the technical andcultural knowledge and skills possessed by the humancapital. Evidently money is required to acquire all theseforms of capital and we can therefore assume that theycan, in principle, be assigned an aggregate monetaryvalue. There is continual depreciation of the capital,for instance, people get ill or die and potholes developin roads. One can add to the capital by, for instance,building a new road or reverse depreciation by repairingan old one. Of course it takes specific amounts of moneyto carry out these activities.

2.2Available choices on liberation day

IndustrializationAs already mentioned, capital stock can be used as ameasure of the capacity of a nation to generate wealth.However, it is important to note that even when valuabletotal assets are in place, without a competentgovernment and administration and a talentedentrepreneurial class , a nation may not actuallygenerate the wealth it has the potential to generate.Mere possession of appropriate assets is like possession

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of computer hardware without software to enable thehardware to carry out specific useful tasks.Software is analogous to capacity to (a) formulate[government] and (b) implement [administration]appropriate economic policies and also talent to (c)conceive and implement ideas to generate wealth[entrepreneurship]. Without this capacity, existingcapital assets will not be used efficiently orreplenished and they can only depreciate without anysignificant economic progress taking place. There aremany formerly colonized countries which were in anenviable position, with regard to capital assets, onliberation day. On the African continent no country hasever found its way to the highway of growth and progressto actually convincingly look as if it might join theranks of developed nations. To put it bluntly, theAfrican elite has not come anywhere near operating ashigh quality software.

Mastering resource exploitationIn a resource rich country a more modest choice thanindustrialization might be to developed skilled man powerto master efficient scientific, engineering, technicaland managerial skills to extract raw materials safely andmarket them profitably. Mastering resource exploitationand industrialization need not be mutually exclusive. Infact it is likely that the less ambitious approach maybe the best way to go, initially, as a first step towardsindustrialization. The only country in sub Saharan Africa which masteredresource exploitation is South Africa. Indeed, to thisday, South Africa is a world leader in many extractiontechnologies including deep mining. Even in this case itis the white elite which won these achievements. Briefly,this came about because the majority tribe, within thewhite community, were the Afrikaners most of whomconsidered themselves South African. They exploited themineral wealth primarily for their own benefit and notfor the benefit of any colonial power especially after1948.

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However the Afrikaners were less successful in making thetransition to industrialization. It did not help that bythe time they consolidated resource exploitation thesanctions noose was tightening around the neck of SouthAfrica because of their policy of Apartheid.

Extracting and shippingThis is the squandering of resources which took placeduring colonial days when the avoidance of waste was nota consideration. Mining amounted to asset stripping. Themother country simply wanted the resources as cheaply aspossible irrespective of safety to people and theenvironment. Indeed these activities continued for a fewyears after the end of colonialism. But in most formercolonies things soon descended to bribery and rentseeking.

Bribery and rent seekingThis is the default condition of a state which is runningvery low on good governance and public institutionalcapital. The extreme manifestation of this condition is afailed state such as Somalia which has no government orZimbabwe. When a state is in this condition civilservants have been known to:

Use their positions to unlawfully sell state assetsor services.

Refuse to provide services they are paid to provideunless they are offered bribes.

Confiscate perfectly legal and legitimate licenses,permits or passports in order to extort bribes.

3 Understanding the African elite

3.1 No nationalism but inclusion

After the demise of the original African aristocrats thenew African elites emerged from the first Africancommunities to abandon resistance to colonialencroachment. They were the first students of thecolonialists who were converted to Christianity andtaught how to read, write and count so that they couldread the bible and also be of assistance to the colonial

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administration, the mission of which was to extort blacklabour to exploit the natural resources of the coloniesfor the benefit of the mother country. However these elites later redeemed themselves. Mbeki8

credits them for leading resistance to colonialism. Buthe also makes the unflattering observation that theseelites were creatures of colonialism. Their ambition wasnot to transform the system but to be included in it sothat they too could enjoy its benefits at the expense ofthe masses. Hence, according to Mbeki, after liberation,they either joined or replaced the former whiteelites. For future reference I shall call thecorresponding passage:The Mbeki ‘No nationalism but inclusion’ hypothesis:

Nationalism in Africa has always paraded itself as a movement of thepeople fighting for their liberation. The reality is, in fact, rather different.African nationalism was a movement of the small, westernized blackelite…Its fight was always for inclusion…

This is reminiscent of Frantz Fanon’s observationregarding “an oppressed person whose permanent dream isto become the persecutor9”. Although not entirely originalMbeki’s hypothesis must rank as one of the most profoundobservations which have ever been made about postcolonial Africa. It is a basis upon which a wide rangeof otherwise puzzling political and economic developmentscan be effortlessly explained. In this book I shallendeavor to show that this is the principle which drivesthe political economy of post colonial Africa. The fundamental problem is that the new African eliteswere no born to rule. There were no cultural processeswhich socialized them into that role. As I said earlier,they owed their positions to their association withEuropeans. Their positions were not underpinned by anytechnical or cultural knowledge which was of anyeconomic value. To get anything to work in theireconomies they had to run back to their former colonialmasters. Therefore, given our peculiar history of racialfeudalism, it is quite natural that cynics would, Godforbid, suggest an even more fundamental principleunderlying the Mbeki hypothesis:

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The knowledge gap (or stronger form of the Mbeki)hypothesis:

The African elites never had the confidence that the knowledge gapbetween Africa and the first world could ever be closed. Consequentlythey decided that nationalism, which presupposes self reliance, was aluxury they could not afford. Hence they settled for joining the colonialistsas junior partners.

This may be viewed as a stronger form of the Mbekihypothesis. On the basis of this principle cynics wouldconclude that it makes sense that the African elitewould see it as a waste of resources to provide decenteducation to the masses. Such an education could only bejustified for the off spring of the elite, not to raisethem to the same technical level as the brood of thecolonialists, for that would contradict the hypothesis,but to afford them the services of a finishing school topolish up their European etiquette and to fine tune theiraccents in preparation for joining the elevated socialcircles of the colonialists. In any event, joining couldnot be very profitable if the number of those who joinedwas too large. I have followed this repugnant idea to itsabsurd logical conclusion in order to illustrate thedangers of the attitudes of the African elites which musthave led Mbeki to his hypothesis in the first place.The path of industrialization requires dedication,eagerness to learn and capacity to wait for delayedgratification. Asian elites demonstrated how this can bedone in several countries which were once dirt poor butwhich are today approaching first world standards ofliving. Now since the common interest of the Africanelites were merely to be included in the colonial systemof exploitation it follows that, once included, the basisfor unity within this small group – let alone theirartificial unity with the masses ─ would lapse. Theywould then operate independently as self servingindividuals within the system of exploitation unless anexternal threat forced them to cooperate to defend theiroriginal common interest. It has always taken considerable resources to fight a warof liberation. The history of African liberationmovements shows that they have always received generous

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sponsorship from apparently progressive elements of thecolonial white economic oligarchy. These oligarchsinvariably remain after liberation and play an even moredominant role in the economy than before. It is theseoligarchs who usually co opt the African elite andintroduce them to the good life. As already explained,once ensconced in opulence, they operate asindividuals and forget their pre-liberation promises tothe masses.All of this always leaves the lower strata of the Africanelite out in the cold. So while the upper echelons of theAfrican elite invariably choose, on the basis of instantself enrichment opportunities – for delayed gratificationis not one of the strong points of the African elite -the ‘Extracting and shipping’ option on liberation day,the only available options for the lower strata are thelegal straight and narrow road of doing an honest day’swork - without any extraordinary rewards to match the newfound opulence of their seniors - or the illegal buthighly lucrative ‘Bribery and rent seeking’. The eliteshave to allow opportunities for this to happen. Otherwisethere are many cases where the lower ranking elites,usually within the armed forces, have found it necessaryto seize power and replace their higher rankingcounterparts in order to remove restraint to bribery andrent seeking. This is the stage at which publicinstitutional capital begins in earnest to be eroded. In the whole of this scheme there is no place for theintelligentsia. Mismanagement by the ‘bribery and rentseeking’ mob began with the squandering of limited humancapital by marginalizing their meager skilled indigenousmanpower in favour of patronage networks. This denudedthe continent of skilled manpower as it rapidly becamecustomary for the brightest to seek greener pastures inother continents. Commenting on this situation, in a1998 speech10 Deputy President Thabo Mbeki said:

In our world in which the generation of new knowledge and its applicationto change the human condition is the engine which moves society furtheraway from barbarism, do we not have need to recall Africa’s hundreds ofthousands of intellectuals back from their places of emigration in Western

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Europe and North America, to rejoin those who remain still within ourshores!

I dream of the day when these, the African mathematicians and computerspecialists in Washington and New York, the Africn physicists, engineers,doctors, business managers and economists, will return from London andManchester and Paris and Brussels to add to the African pool of brainpower, to enquire into and find solutions to Africa’s problems andchallenges, to open the African door to the world of knowledge, to elevateAfrica’s place within the universe of research of new knowledge, educationand information.

The man made shortage of skilled manpower ensured thatthere was no one to repair or augment the rapidlydepreciating physical infrastructure even if the willand the money was available to do so. In most casesneither was available. The elite were often too busyengaged in corruption and petty squabbles to even noticethat the infrastructure was collapsing. When they paidattention to these problems it was only to use them as anexcuse to seek foreign aid from the first world. Ofcourse the financial aid always disappeared into secretbank accounts of the elite in places like Switzerland. Itis estimated that, since the dawn of the post colonialera, $ 1 trillion has disappeared into this bottomlesspit of boundless corruption. At some stage even the favoured white oligarchs who hadsponsored liberation movements had to flee from the chaosand transfer their capital back to the mother country.Thereafter there wasn’t even an attempt to maintain theold colonial system in terms of which the colonialauthorities efficiently managed the orderly stripping ofresources and their shipping to the mother country. Theformer colonies assumed the character of the wild west inwhich shady characters representing multinationalssought the right members of the African elite to bribein order to gain mining rights and to start operationswhich exploited the cheap labour of the masses withouteven the lowest standards of safety health andenvironmental protection11. Indeed where such laws existedthe multinationals often sought their repeal as acondition for investment.

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3.2 The death of uBuntu in Jericho

I have already pointed out that colonialism was amanifestation of competition for natural resources. Themissionaries, who usually worked under the protection ofcolonial authorities, would probably argue that theirswas a spiritual mission which had nothing to do with thematerialistic aims of the colonialists. What no one candispute is that there was built-in tension between theactivities of the two groups. The newly converted nativeswould have asked their colonial pastors what crimescolonized nations commit to deserve losing sovereigntyand their natural wealth to the colonial powers. Iimagine the pastors would be reminded of an explanationthe good Lord once gave to his chosen people when theyasked the same question under similar circumstances Hisprophet, Hosea12, said “My people are destroyed for lackof knowledge”.As a template for what, in terms of this creed, isperfectly permissible to do to those who have themisfortune to ‘lack knowledge’ recall the odyssey ofMoses and the chosen nation which he led through thewilderness from years of slavery in Egypt. After hisdeath the Lord chose Joshua13 to lead the Hebrews. Thefirst mandate which Joshua was given by the Lord was tocross the river Jordan and capture the vast amount ofland specified in Joshua 1: 4 - 5 as follows:

From the wilderness and this Lebanon as far as the great river, the riverEuphrates, all the land of the Hittites to the great sea toward the goingdown of the sun shall be your territory. No man shall be able to standbefore you all the days of your life.

Clearly the Hittites were ‘non people’, as Mrs de Klerkinfamously referred to people of colour. Their name wassignificant only to the extent that it defined theirland. Anyway, to kick off his divinely mandated career14,Joshua sent two spies to reconnoiter Jericho. In Jerichothe spies found lodging in the house of a prostitutenamed Rahab. The King of Jericho got to know about thisand sent men to arrest them. But the prostitute hid thespies on the roof of her house which was built into thecity wall. She then lied to the messengers of the Kingand claimed that the spies had already left the city.

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Thus the King’s messengers were sent on a wild goosechase.After the messengers had left, the prostitute extractedan undertaking from the spies that when Joshua’s armycame to attack Jericho she and her family would bespared. She was granted the promise and advised to tie ascarlet chord in the window for easy identification. Thenshe helped the spies descend by rope from the roof of herhouse to the ground just outside the city wall.When his army was facing Jericho, ready to attack,Joshua said to the people:

“Shout for the Lord has given you the city. And the city and all that iswithin it shall be devoted to the Lord for destruction…”. Then theydevoted all in the city to destruction, both men and women, young andold, oxen, sheep, and donkeys, with the edge of the sword…

And they burned the city with fire and everything in it. Only the silver andgold and the vessels of bronze and of iron, they put into the treasury ofthe house of the Lord…

But Rahab the prostitute and her father’s household and all whobelonged to her, Joshua saved alive. And she has lived in Israel to thisday, because she hid the messengers whom Joshua sent to spy outJericho.

I have said, the African elite are the direct descendentsof the first Africans to be ‘converted’ to Christianityduring the early years of colonialism. In terms of thevalues of uBuntu on which these first converts had beenbrought up they ought to have empathized with theinnocent people of Jericho whose misfortunes were clearlyidentical to those of their own people. A non Christianwould argue that their morality was subverted and theiruBuntu was lost the day they were taught to identify withthose who were responsible for the cold blooded‘destruction’ of the innocent ‘at the edge of the sword’and proudly dedicating the massacre to the Lord. So the chosen ones looted the wealth of the city and thendestroyed everyone and everything but spared the traitorprostitute and her family. As a reward for selling herpeople the prostitute and her family were not only sparedin the Jericho genocide but they were also rewarded interms of a long life of enjoying the “milk and honey” of

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the promised land: ‘She has lived in Israel to this day’.This sums up the prevailing morality, or lack thereof ininternational trade.Deputy President, Mbeki was thinking of the Rahabs ofAfrica when he spoke15 of:

The thieves and their accomplices, the givers of the bribes and therecipients are as African as you and I. We are the corrupter and the harlotwho act together to demean our Continent and ourselves.

4 The international context of neocolonialism

4.1 Post great depression capitalism

The great depression followed the American stock marketcrash of 1929. When America went into depression itpulled the rest of the world with it, sparking a ‘war oftariffs’ as countries protected their domesticindustries. Of course this only served to exacerbatematters. The most influential of the economics guruswho came to the rescue of the world was, of course,Milton Keynes who suggested what later became thestandard remedy to mitigate the effects of recession:counter cyclical measures which entail (a) easing lendingrestrictions and (b) stimulating demand by raisinggovernment spending. The reasons for the crash sound familiar after the creditcrunch of 2008/2009. It all had to do with poor ornonexistent banking regulations which were subsequentlybeefed up. The sum total of the circumstances surroundingthe 1929 crash led to the:

establishment in 1944 of the Breton WoodsInstitutions [BWIs] consisting of the InternationalMonetary Fund [IMF] and the World Bank [WB]. The IMFwas intended to provide affordable finance to stateswhich did not have resources to stimulate demand intheir economies [to alleviate recessions] while theWB was intended to make long term infrastructuralinvestments in such countries to pull them out ofpoverty.

transformation of the post war American economyinto a worker friendly welfare state. The principlesunderlying this transformation were known as ‘The

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New Deal’ which heralded what came to be known asthe Keynesian period which lasted until the end ofthe 1970s.

During the years preceding the war the United Statesgained enormous human capital in the form of a largenumber of top scientists who fled Europe. In desperatewar conditions creativity was inevitably enhanced. Theysubsequently helped initiate and carry out numerousresearch projects, to support the war effort. After thewar this intellectual capital was adapted for civilianapplications and led to a huge and prolonged boom in thepost war American economy which lasted until thebeginning of the 1970s. The turning point was the 1973‘Yom Kippur’ Arab Israel war which sparked a sharp risein oil prices which caused high inflation in the westernworld for the rest of the decade of the 1970s.

4.2The early post colonial period

Another major post war international development was therise of liberation movements in the colonies. India gotits independence before the end of the 1940s. A few morecountries were liberated during the 1950s but the bulk ofthe colonies gained their statehood during the early1960s. It is therefore convenient to take 1965 as the endof the colonial period even though a few countries wereliberated later.Between the end of the colonial era and the beginningof the decade of high inflation in 1975 the formercolonies, which were now officially classified asdeveloping countries, took on a lot of debt from the 1st

world. The trouble with the contracts was that theborrowers bore the entire risk of a possible rise ininterest rates in the lender countries. These loans weretaken at a time when the organization of petroleumexporting countries [OPEC] was already relentlesslystepping up the sort of pressure which was bound toeventually destabilize global inflation and interestrates.Countries which were not even sure that they needed toborrow would be persuaded by lenders to do so. They wouldbe told that it was necessary to borrow, in order to

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establish a credit rating, even if they did not reallyneed the money. Stiglitz16 recalls an example of thiswhich he personally witnessed:

I saw this firsthand in Vietnam, which had borrowed extensively from theWorld Bank, the Asian Development Bank, and other official sources butwas reluctant to borrow from private sources. For years, foreign bankerstold the country to issue a Eurobond as a benchmark, and for years theVietnamese resisted doing so; eventually they gave in.

The lenders would wine and dine senior governmentofficials who were responsible for financial decisions,encouraging them to increase their indebtedness. Theywould be told why this was a good time to borrow or to‘restructure’ their debt. The government officials didnot always yield out of ignorance. There were sometimeskickbacks in loans or in the projects that they wereintended to finance.Western banking regulations encouraged short term lendingbecause these regulations allowed banks to lend a limitedamount of money depending on the amount of reserve fundsor capital which they had. However these requirementswere less stringent for short term [often payable ondemand] than for long term loans since, in the formercase, the bank could quickly demand its money back at thefirst sign of an economic downturn. Thus if, as is oftenthe case, a country had loans from several banks, therewas a built in trigger for a panic withdrawal of funds intimes of economic need precisely when the country neededloans the most.It was the credit rating agencies which operated the‘panic button’, so to speak, because they continuallymonitored the economic performance of countries anddetermined their credit ratings on which financialinstitutions relied when making lending or investmentdecisions. For example purveyors of portfolio‘investments’ such as mutual and pension funds werecompelled to withdraw their funds once a country’s ratingfell below ‘investment grade’.It will be recalled that the very reason for the creationof the IMF, towards the end of the Second World War, wasto provide nations with funds in times of need in order

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to promote economic stability. But, when the developingnations emerged, after the colonial era the IMF appearsto have unilaterally changed its mandate. The fund oftenseemed more concerned with protecting the interests ofprivate banks than stabilizing economies.As soon as the interest rates increased substantially,during the inflationary decade of the 1970s, theeconomies of developing countries had trouble coping withloan repayments. At the first sign of these problemsthere was a stampede as lenders called back their shortterm loans. Many developing countries had to resort tothe IMF which stepped in, not to stabilize theireconomies, but to lend money to enable these countries torepay private bank loans.The IMF was, in effect, indemnifying the private banksfrom the adverse consequences of their irresponsiblelending practices. Of course the condition for IMF‘assistance’ was to rewrite economic policy andlegislation on the basis of the stipulations of the WC[see the next subsection for an explanation of WC].Indeed a country might even be instructed to quickly passa piece of legislation to reform social security,bankruptcy, or other financial system in order to receiveaid. Of course this opened the developing economies tofurther financial destabilization. IMF behaviour createdclassic conditions for the ‘moral hazard’ problem whicharises when a party does not bear all the risksassociated with its actions and as a result does not doeverything it can to avoid risk.

4.3 The new colonialism

The U.S. post war mass production economy grew by leapsand bounds without any serious competition in anenvironment where other developed economies were stillrebuilding after the devastation of the war. Americaflooded the whole world with its products. For instancethe big three Detroit car manufacturers dominated theinternational auto market with their Fords, Chevroletsand Chryslers.American companies were making steady profits. Industrywas driven by cutting edge technology, productivity was

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constantly rising and companies could therefore affordrising wages. Only the most churlish of Americantaxpayers could complain about the high taxes which werelevied to finance President Lyndon Johnson’s ‘GreatSociety’ program which included Medicare, Medicaid andwelfare. The middle class grew dramatically in tandemwith the explosive growth of the post war economy.When productivity began to lag, towards the end of the1960s, it was not a catastrophe at first because, withoutserious competition, the costs could always be passed onto the consumer. But the good times could not lastforever. US companies began to experience competitionfrom Asian low cost producers. India17 and China, inparticular, had recently introduced free market reformswhich unleashed the productive capacity of almost halfthe world’s workers. Their low wage economies began toengage the U.S. in fierce competition.By the late 1970s a flood of cheap imports began tocapture a significant market share in textiles, shoes,electronics and even cars. Some companies found ways toimprove productivity through innovation and automationwhile others suffered shrinking market share and becamevulnerable to takeovers. Most of the responses by the UScompanies had adverse consequences for the US labourmovement. Many companies embarked on brutal retrenchments andturned hostile towards unionization. Some US basedmultinationals relocated their production facilitiesoverseas partly to access foreign markets and also totake advantage of cheap labour. The ‘new deal’, or theKeynesian period, had run its course. The last presidentof that era was Jimmy Carter who lasted only one term inoffice.It was at the end of the inflationary 1970s when MrsMargaret Thatcher became the Prime Minister of Britain.Soon thereafter, Ronald Reagan swept into power in the USwith promises to create conditions to enable the Americanprivate sector to improve its competitiveness. Reagan’seconomic ideas, which are outlined below, are verysimilar to Thatcher’s ideas which both leaders

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simultaneously applied in their respective countries.This was no accident.Both leaders were devoted followers of the ultraconservative, Nobel Prize winning, University of Chicagoeconomist, Milton Friedman who was indeed the maininspiration behind Reaganomics. They believed, withtheir guru, in a dogma called monetarism in terms ofwhich the only antidote to inflation was to increasemoney supply at a fixed rate. Later, during the nineties,it became fashionable to control prices through inflationtargeting by means of a strict control of interest rates.Competitiveness was to be improved mainly by reducinggovernment which, in Reagan’s opinion had grown too big,complacent and bureaucratic. He charged that the welfarestate was responsible for the parlous state of theeconomy because it focused more on redistributing wealththan creating it; slicing the pie that growing it.Reagan’s prescription for improving private sectorcompetitiveness included a drastic reduction in corporatetaxes and in taxes for the rich which, in terms ofReaganomics, were an impediment to economic growth. Thistheory predicted that the tax cuts would result inincreased economic activity which would, at leastpartially, make up for lost revenue. The balance of theshortfall could always be made up for by reducinggovernment spending through, for example, cutting down onwelfare expenditure and by privatizing [outsourcing]every service that could be provided by the privatesector at a profit. This is how Reagan proposed to reducewhat he saw as ‘big government’.Reagan proposed not only the undoing of the welfare statebut he also urged the removal of the private sectorregulations which had been originally prompted by theneed to curb the power of harmful vested interests, topromote fair competition and to protect the consumerduring the great depression. The net effect of thedismantling of the welfare state, the neutering of thetrade unions and the removal of private sectorregulations was multifaceted.Within each sector of the economy, income was shiftedfrom workers to management. This trend eventually reached

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such obscene proportions that in a conversation which therichest man in the world, Warren Buffet, had with thefuture President Barack Obama18 in 2005, the billionaireremarked: “Though I’ve never used tax shelters or had atax planner, after including the payroll taxes we eachpay, I’ll pay a lower effective tax rate this year thanmy receptionist. In fact, I’m pretty sure I pay a lowerrate than the average American. And if the President[George Bush] had his way, I’d be paying even less”. Thecenterpiece of the Reagan revolution was thesubsidization of billionaires by starving workers.The need to relocate multinational corporations todeveloping countries brought about a desire to remove allthose barriers to international trade which limitedopportunities for multinationals to maximize profit. TheGeneral Agreement on Trade and Tariffs [Gatt] and laterthe World Trade Organization [WTO] were deployed to bullythird world countries to lower or remove tariffs withoutnecessarily rewarding them with reciprocal action. Theflood of cheap imports destroyed local industries andjobs. With third world countries desperate to create jobsfor their people, the colonial masters returned on theirterms through their multinational corporationsStiff competition in the manufacturing sector, the ‘realeconomy’, gave impetus to consolidation and globalizationwhich promised benefits from economies of scale. Thesqueezed profit margins in the ‘real economy’ promptedinvestors to look elsewhere for quick profits. Theremoval of financial regulations, which controlled freemovement of capital, had increased opportunities forspeculative investments. So investment shifted from themanufacturing to the financial sector in search of higherreturns. A set of ‘Reaganomics’ inspired economic prescriptionsknown as the Washington Consensus [WC] was now imposed,globally, by the US controlled Breton Woods Institutionsduring the era of Reaganomics which outlived theadministrations of Presidents Ronald Reagan, George BushSr., Bill Clinton and George Bush Jr. These prescriptionswere:

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Market liberalization: This required the reductionof rules and regulation governing trade to aminimum. For example this meant the removal offinancial regulations and restrictions on currencymovements

Privatization: The privatization of all serviceswhich the private sector can provide at a profit

Drastic tax cuts: The reduction of taxes to aminimum and the flattening of tax rates

Fiscal austerity: A drastic cut down on welfareservices

Now investment in the real economy is what is referred toas Foreign Direct Investment [FDI] which entails longterm commitment. By contrast, investment in the financialsector speculatively seeks maximum returns by takingadvantage of the freedom, in the absence of financialregulations, to quickly move in and out of portfolioinvestments across country borders. This freedom was soonused to devastating effect. The financial institutions ofthe first world, in collaboration with the BWIs, wreakedhavoc on several developing countries byopportunistically destabilizing and then looting theireconomies. A prime example of this criminal behaviour isthe Asian Tiger crisis of 1997 which is discussedelsewhere.

4.4 The end of the years of American triumphalism

The deregulation of markets, especially the financialmarkets, which was advocated by proponents of marketfundamentalism was responsible for the worst globalfinancial crisis since the great depression. This crisishit the world in 2008/2009 leading to the collapse of anumber of large western financial institutions. LehmanBrothers filed for bankruptcy in September 2008. It wasthe largest bankruptcy filing in US history involvingassets worth over $600 billion. Joseph Stiglitz haslabeled the period from the fall of the Berlin wall in1989 to the collapse of Lehman Brothers as the years ofAmerican triumphalism. Less developed countries hopedthat the lessons learned from the crisis would help bring

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back sensible regulation of financial markets and thustake the wind out of the sails of rampant neo-colonialism

5 The post 1994 economic trajectory of South Africa

5.1 The internal colonial power

The Union of South Africa was a direct result of thepolitical settlement which ended the Anglo-Boerconflict. From 1910 to 1948 the country was led byAfrikaners who had allowed themselves to be assimilatedby the English colonialists. In that sense, during thisperiod, South Africa was like any other third worldBritish colony. Things changed qualitatively in 1948 whenthe country was taken over by a nationalist faction ofthe Afrikaner community who defined themselves as anAfrican tribe. One could no longer describe SouthAfrica as a colony of some external power.While normal colonialism was about exploiting theresources of a colony, for the benefit of the colonialpower, after 1948 the emphasis was on exploiting theresources of the black community, especially theirlabour, for the benefit of the internal white community.It was in this sense that the South Africa situation, inliberation movement circles, was designated ascolonialism of a special type. This standpoint wasmodified after the transition of 1994 when people likePresident Mbeki started talking of South Africa asconsisting of two nations living side by side: apredominantly black and poor third world nation and apredominantly white and rich first world nation.Like all colonialists, the internal colonialists alwaysneeded political power for the specific economic purposeof seizing land from the natives and extorting theirlabour to exploit the natural resources. The rise of thepower of international capital in the post cold war neoliberal world order, which enforced the WashingtonConsensus, created the possibility of harnessing thepower of ‘the markets’ to advance the internal neocolonial agenda where the apartheid state once enforcedinternal colonialism. ‘The markets’ had rendered theapartheid state redundant as a means of sustaining

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exploitative power relations. This, of course, is whatfacilitated the transfer of political power in 1994.

5.2South African choices on liberation day

In the preface and at the beginning of the chapter Iemphasized the centrality of the knowledge gap in thedefeat of the Africans at the beginning of colonialism. Ifurther lamented the persistence of this gap even afterthe end of colonialism and identified it as what made itpossible for colonialism to mutate and rear its ugly headagain as neocolonialism. South Africa had the benefit ofbeing the last country to shed colonialism in 1994. Wetherefore had a rare opportunity to learn what not to dofrom the mistakes of others. Sadly there is no evidencethat we used this golden opportunity. Given the centrality of the knowledge gap, choices madewith regard to the transformation of the education systemwere always going to be crucial in determining the longterm economic trajectory of the country. The economictransformation which was urgently needed to ensure futurepolitical stability was clear. Even more dangerous thanthe apartheid legacy of widespread and extreme povertywas the magnitude of inequalities which were largelydetermined by race. The operative word was that theeconomy needed to be deracialized and this had to be donequickly. Measures which were open to the government to address thesituation ranged from what could be described asexpedient palliatives to transformative initiatives allof which required a balancing act to optimize the use oflimited resources. I classify the options of the SouthAfrican government on liberation day as follows:Welfare relief: The government could not neglect its responsibility toprovide relief aid to the desperately poor but thismeasure belonged to the category of expedientpalliatives. It was unsustainable in that it consumedgovernment resources without any investment in thereduction of poverty. The poverty of a person is notreduced by receipt of welfare to merely stay alive. Itcould only be justified as a short term measure.

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The trouble with welfare is that it is insidious. Itstarts with children under the age of six. Then the agelimit rises gradually all the way up to eighteen afterwhich it jumps without limit with every unemployed persondemanding a grant. Before you know the welfarerecipients are toyi-toying every year demanding hugeincrements to their grants and threatening to invadesupermarkets if their demands are not met.Catapulting a few ‘friends and associates’ into theranks of the superrich: This manufacture of instant millionaires is one of asuite of measures called Black Economic Empowerment. Itlooks deceptively like a transformative measure if bythis we mean that which contributes towards thederacialization of the economy. After all, blacks needcapital in order to get a foot hold in big business whichwould ensure that all race groups are represented at alllevels in the economic hierarchy. Unfortunately the creation of instant millionaires is nota concerted effort to nurture black entrepreneurship toseriously build black capital. At this front developmentsseem to be confirming Mbeki’s no nationalism butinclusion hypothesis. What is worse, the black eliteseems more interested in conspicuous consumption thanbuilding anything to be proud of. Thus the whole project destroys capital and is morewasteful of national resources and more unsustainablethan welfare relief and it sends a very dangerous messageindeed to the starving masses out there. At least welfareis short term insurance against class conflict. Closing the knowledge gap:The indispensable first step towards a sustainable andeffective way to deracialize the economy was to kickstart, on liberation day, a serious and urgent programto close the knowledge gap by reforming the education andtraining system. All the other dreams such as the muchvaunted developmental state depended on a successfulimplementation of this first step.For centuries the colonialists thought they needed hardpolitical power buttressed by military power to sustain

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exploitative power relations with the natives. But sincethe colonialists were the architects of Bantu Education,or its equivalents on the continent, they must have beenthe first to recognize the most fatal weakness of theAfricans: the knowledge gap. In fact there is strongcircumstantial evidence indicating that the SouthAfrican black ghettoes were systematically andmaliciously booby trapped with educational and skillstime bombs from the time it became clear that theeventual transfer of political power was inevitable. With the rise of a rapidly globalizing knowledgeeconomy, the colonialists clearly realized that theycould sustain the same power relations, with formercolonies, more efficiently and effectively through softknowledge power. With neocolonialism we are thus backwhere we started, with the first world using its superiorknowledge to lord it over Africans who learned nothingfrom the first phase of colonialism. In South Africanterms, post 1994 neocolonialism manifests itself in atacit surrender by blacks to the whites of ultimatecontrol of anything and everything that is worthcontrolling in the country.

5.3The most fatal own goal

The persisting skewed distribution of wealthoverwhelmingly in favour of whites is used by somepolitical observers to support their assertion that theANC was out negotiated by the Nationalist Party [NP] atCODESA in the arena of economic policy. For instance vander Westhuizen19 [ibid] writes:

The NP was among those who ensured that the outcome [of negotiations]would place obstacles in the way of redistribution of wealth to address thecountry’s extreme levels of inequality…The entrenchment of neo-liberalcapitalism during the transition translated into the continuation ofapartheid and colonialism’s legacy of extreme inequality, consequentlywhites could hold on to their pre democracy gains.

While there may be some truth in this view it overlooksthe fact that the most important guarantee to ensure theperpetuation of inequality was the entrenchment ofconditions which sustained the knowledge gap. After 1994the black elites did nothing to address this critical

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situation but instead they adopted policies which landedthem with an education system that was worse than evenBantu education. It is precisely this situation which hasfavoured the emergence of a suite of policies calledBlack Economic Empowerment [BEE].Failure to make it the top priority of 1994 to seriouslyequip black youth with knowledge has created a vacuumwhich is likely to be increasingly filled by semiliterateyoung black demagogues whose idea of empowerment iswholesale nationalization of white owned businesses. Letme close this chapter by elaborating a little more onthese dangers.

5.4BEE is a disastrous alternative to closing the knowledge gap

The central message of this book, as a Jeremiad, is awarning against what I call the ‘BEE mentality’, atendency to depend disproportionately on white expertiseto attend to most of the serious matters while blacksengage in irresponsible behaviour of which corruption isthe prime example. The abdication of responsibility bythe black community often takes the form of failure toestablish black institutions and running down or atleast abandoning existing ones in favour of white ownedor white run institutions. I shall give several examplesof manifestations of this mentality which now permeatesall spheres of governance:The ‘BEE mentality’ takes its name from BEE deals interms of which the black elite are given handouts ofshares in white owned and white run businesses. Theseelites become ‘businessmen’ by virtue of running‘investment companies’ the sole purpose of which is toadminister share portfolios. They get financial benefitsfrom being junior partners in white firms the business ofwhich they have no understanding. Thus they abdicate theresponsibility to learn anything about running theeconomy except siphoning dividends to financeconspicuous consumption. It brings to mind the beginningof the first wave of colonialism when our forefatherswere given worthless shiny little trinkets to diverttheir attention while the oligarchs were setting up gold

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mines. In this sense BEE is a disastrous alternative toclosing the knowledge gap. Despite efforts by the government to recapitalize blackeducational institutions the black community has runthese institutions down to the extent that hardly anyeducation is taking place there anymore. There is ashortage of competent and committed teachers in blackareas. A tremendous stampede, by those who can afford it,is afoot to transfer black students from theseinstitutions to historically white or white runinstitutions often in far away predominantly whitesuburbs at great expense to the parents. The blackcommunity thus become junior share holders in the whiterun schools. The black ‘liberation’ of 1994 ironicallypresaged accelerated assimilation of black children whoare now under pressure to adopt minority culture insuburban schools where English has to be spoken ‘throughthe nose’.The ‘BEE mentality’ also entails a sense of entitlementto unearned riches which is the subliminal messageconveyed by the creation of instant millionaires who onlyexcel in flaunting their new found riches. It isdifficult to imagine a more effective way to create anatmosphere which is conducive to corruption. YetPresident Mbeki, the chief architect of BEE, seemed notto appreciate the origins of the progeny of his ownpolicies. The widespread corruption and ostentation ofthe newly rich once drove him to utter the following20

words in exasperation: Thus every day, and during every hour of our time beyond sleep, the

demons embedded in our society, that stalk us at every minute, seemalways to beckon each one of us towards a realizable dream andnightmare. With every passing second, they advise, with rhythmic andhypnotic regularity – get rich! get rich! get rich!...

It is perfectly obvious that many in our society, having absorbed thevalue system of the capitalist market, have come to the conclusion that,for them, personal success and fulfillment means personal enrichment atall costs, and the most theatrical and striking public display of thatwealth.

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In the same speech Mbeki recalled Mandela’s words aboutthe need for a Reconstruction and Development Program[RDP] of the soul. This Jeremiad is a humble contributiontowards that RDP. It is an attempt to find out what wentwrong with the once proud cadres of a legendaryliberation movement.

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Chapter 2The Bantu Odyssey

“Bigger fish swallow smaller fish and so proceed ad infinitum”Favourite cartoon scenario

1 The birth of commercial societies

In the preceding chapter I mentioned that it was theemergence of agriculture and improvements in itsproductivity which released manpower, in subsistenceeconomies, from food procurement to engage in a varietyof specialized trades. The disposition of humans tobarter and exchange also contributed in facilitating thedivision of labour because the former predates thelatter. What encouraged a tradesman to engage in aspecialized trade was the possibility to use his products‘to interest the self love of others in his favour’ andthus induce these others, whose products he desired, toexchange them for his products. Clearly a tradesman had to continually improve hiscraftsmanship in order to ensure that the desirability ofhis products could persuade others to part with theirs inbarter transactions. If the market for the products of atradesman was not large enough then the tradesman couldnot always exchange his products and therefore he couldnot afford to be too specialized. He had to rely on hisown hands to make those necessities he could not acquireby exchange. In this context Adam Smith21 wrote: “As it is thepower of exchanging that gives rise to the division of labour, so the extent ofthis division must always be limited by the extent of that power”. Now before exchange can take place there must be acriterion to establish the relative values of thecommodities to be exchanged. The obvious criterion was theamount of labour required to acquire each commodity. Aproduct which took two days to make was worth two times aproduct which took one day to make. If wild animal A tookone man to kill and wild animal B took five men to killthen B was worth five times A.


Of course allowances had to be made for the fact that twodifferent tasks may require vastly different skills levelsthough they take the same amount of time to perform.Clearly the estimation of relative amounts of labour wasa matter of judgment and therefore impossible todetermine with precision. These estimates provided generalguidance but, in the absence of precision, preciseexchange agreements were arrived at by bargaining.There were, of course, subjective factors among thefactors which determined the outcome of bargaining. Thereal price of any commodity to the one who wishes toacquire it is the ‘toil and trouble’ of acquiring it.Suppose tradesman Albert is in possession of a commodity Awhich he wishes to exchange for commodity B in TradesmanBenny’s possession. This means that Albert considers thevalue of commodity A to be equal to the price he isprepared to pay for commodity B. But the value ofcommodity A to Albert is equivalent to the ‘trouble andtoil’ it took to acquire or make it. Similarly the pricewhich Albert will be prepared to pay in order to acquirecommodity B is equivalent to the ‘trouble and toil’ itwill save him to acquire it from Benny instead of makingit himself. This is the price of commodity B in Albert’sopinion. In other words the barter deal is acceptable toAlbert only if

Value of A [to Albert] = Price of B [in Albert’s opinion]

If it is Albert who proposes the barter deal he will haveto persuade Benny that:

Value of B [to Benny] = Price of A [in Benny’s opinion]

This is the only bargaining outcome which makes the barterdeal possible. Therefore ‘labour is the real measure ofexchangeable value’. Adam Smith [ibid] further explainedthe situation as follows:

Labour was the first price, the original purchase money that was paid forall things. It was not by gold or by silver, but by labour, that all the wealthof the world was originally purchased; and its value, to those who possessit, and who want to exchange it for some new productions, is preciselyequal to the quantity of labour which it can enable them to purchase orcommand.

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Wealth…is power…The power which that possession immediately anddirectly conveys to him is the power of purchasing ; a certain commandover all the labour , or over all the produce of labour which is then in themarket. His fortune is greater or less, precisely in proportion to the extentof this power, or to the quantity either of other men’s labour, or, what isthe same thing, of the produce of other men ‘s labour, which it enableshim to purchase or command.

Barter trade was only practical at the beginning ofspecialization when exchange was not yet part of everydaylife. As specialization increased a point was reachedwhen barter trade became unsustainable. It simply becametoo inconvenient and impractical. If a tradesman A with asurplus of products of his trade wanted products he didnot produce he had to look for tradesman B who not onlyhad a surplus of what A wanted but who also wanted thesurplus of A. The representation of the value of a product of labour

by the corresponding quantum of labour was only ofpractical value for barter trade precisely because aquantum of labour is an abstract concept. To facilitatetrade, a tangible universal medium was required torepresent arbitrary quanta of labour. One could thenexchange this medium, which we call money, in order toacquire products of labour directly without having tobarter. Thus commercial societies were born.Many tradesmen who acquired specialized skills lacked:The capital to buy raw materials; the means of sustenancefrom the stage of production to the stage of marketing;or the means of marketing the products of their labour.Early entrepreneurs identified opportunities to procurethe necessary fixed and operating capital and to organizemanufacturing. In terms of this arrangement the tradesmenwould add value to the raw materials. The added valuecould be resolved into two parts of which one paid thewages and the other provided the entrepreneur with profit.This was a departure from the business of a sole tradesmanwhere the whole value added paid the wages of thetradesman. Thus the entrepreneur appropriated the surplusvalue added by the tradesmen. The tradesmen and theentrepreneurs belonged to what I shall call the workingand the merchant classes respectively.

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I have already discussed the Eurasian economicdevelopment which reached the stage of cycles ofagricultural innovation followed by population booms andfamines. Land became scarce and this increased its value.Now there are always strongmen in society to grab, byforce of arms if necessary, what is valuable for theirexclusive use. Adam Smith [ibid] made the followingobservation:

As soon as the land of any country has all become private property, thelandlords, like all other men, love to reap where they never sowed, anddemand a rent even for its natural produce. The wood of the forest, thegrass of the field, and all the natural fruits of the earth, which, when landwas in common, cost the labourer only the trouble of gathering them,come, even to him, to have an additional price fixed upon them. He mustgive up to the landlord a portion of what his labour either collects orproduces. This portion…constitutes the rent.

The landlords generally belonged to the aristocratic classof the idle rich, a parasite class above the much morevaluable entrepreneurs, the architects of wealth creation.Among the original entrepreneurs were farmers who wouldrent land from landlords, organize some of thelandlords’ tenants as farm workers and procure operatingcapital needed to run farms. The workers would also sharetheir wages with their landlord by paying him rent forliving on his land. So the landlord provided the humancapital [tenants or serfs] and the fixed capital [land]needed to farm and earned rent in return for each kind ofcapital. In post colonial Africa it is the corrupt Africanelites who masqueraded as the novo aristocrats andemulated these landlords.The increase in productivity, caused by specialization,and the emergence of the idle rich created a market forworks of art and thus encouraged artist to specialize inwhat they were good at. Increase in volumes and complexityof commerce brought about a need for a means to recordinformation such as inventories, transactions andagreements. Thus writing was invented to serve practicalpurposes but soon it became a form of art, in its ownright, and the basis for a new kind of work, intellectualwork. The brightest members of society also foundsponsors to enable them to produce philosophical works

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and to pass their knowledge to their students. At firstthe link between philosophy and technology was nonexistentor very tenuous indeed. It was only after ‘naturalphilosophy’, the precursor of modern day science, brokeout of its straight jacket of arriving at results ‘byreason alone’ that science became experimental and beganto influence and be influenced by technology. Subsequenteconomic advances were driven by technology which in turnwas nourished by science.

2 Pre colonial African economies

2.1The population of Southern Africa

The complete process of economic evolution fromsubsistence to fully commercial societies only happened inEurasia [and North Africa] as a direct result of theadvantages22 already stated which that land mass enjoyed interms of domesticable plants and animals. Sub SaharanAfrica successfully imported only the domesticatedanimals from North Africa. The domesticated plants of theFertile Crescent were only suitable for a winter rainfallMediterranean climate. In the summer rainfall climate ofSub Saharan Africa they were completely useless.In Africa there are three centers where food productionarose de novo: and they were the Sahel, West Africa andEthiopia. Between 9000 and 4000 BC the present day Saharadesert was humid grassland with a lot of game and severallakes. During this period people in this region tendedcattle sheep and goats and began to domesticate sorghumand millet. These pastoralists were part of a civilizationwhich was centered in the Sahel. By contrast, theearliest known date for stock and plant farming in Egyptis only 5200 BC. It is not clear what role this Saheliancivilization played in the domestication of animals sincewild ancestors of cattle, donkeys, pigs and cats werenative to both North Africa and Southwest Asia. There is also a package of crops, including West Africanyams, kola nuts and oil palm which were domesticated inthe wet West African region of present day SouthernNigeria and Western Cameroon, the original homeland of theBantu who were also cattle farmers. The fact thatagriculture was taking place to the north of the Bantu

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homeland and no agriculture was taking place in the southmeant that the inevitable population explosion whichaccompanied these agricultural innovations could only bemitigated by southward expansion or migration into thethe sparsely populated and heavily forested Congo basin. The expansion or migration I am going to discuss shouldnot be misconstrued as the movement of the wholepopulation in a specific direction such that all thesurvivors of the journey arrive at a particulardestination at a particular time. The expansion happenedmore like the diffusion of tiny particles of pollen in afluid. What happens over small time scales is thatindividual particles interact with one another and withthe fluid and get bounced in all sorts of directions. Butover longer time scales we observe the overall or grosseffect which is the diffusion of the pollen from regionsor higher density to regions of lower concentration. Theproximate causes of movements of individual particles ofpollen are interactions with other particles and with thefluid medium. But the ultimate cause of the diffusion isthe existence of regions of lower and of higher pollendensity. As the saying goes, nature abhors a vacuum. Similarly the proximate causes of movements of particularBantu clans might have been tribal politics such asclashes arising from disputes regarding succession ofsiblings to chiefdoms. But the overall effect was theexpansion of the Bantu into areas of lower populationdensity and the lowest densities were invariably in areaspopulated by hunter gatherers. The rate of expansion wouldhave been enhanced by the fact that, with unlimited land,it made economic sense to farm enough of it to be able toallow some of it to lie fallow for extended periods toreplace soil nutrients. The Bantu expansion began about3000BC and its main frontier moved in a south easterlydirection along the Congo basin. Of course, once parts ofthe Congo basin were settled they also produced numeroussmall southward population trickles which collectivelyformed a southward frontier spreading across the width ofthe continent. By 1000BC the main frontier of the Bantu was emergingfrom the eastern side of the forest into the open country

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in East Africa. They were evidently moving towards thesources of the Congo on the highlands and mountains ofthe Great Rift Valley as well as the Great Lakes. Duringtheir odyssey the cattle of the Bantu in the main frontierwere decimated by disease borne by tsetse flies and theywere reduced to fishing, and hunting, to supplement thenutrition they got from their crops.Unlike the Congo valley, where the Bantu had encounteredno farming communities, in East Africa they foundestablished farmers who grew millet and sorghum and raisedlive stock in the drier areas. The crops and animals ofthe East Africans had probably reached this part of Africafrom the Sahara along the Nile River. The Bantu werehowever able to avoid possible conflict by occupyingwetter areas which were unsuitable for the crops of theEast Africans. In these areas they planted the cropsadapted for wet areas which they had been farming sincetheir days in West Africa. In East Africa the Bantu reacquired cattle and adoptedmillet and sorghum. They had arrived in East Africa atabout the same time the technology of iron smeltingarrived there from the Sahel region, the center of thecivilization which had domesticated sorghum and millet inthe Sahara. Tilling the soil with much more superior irontools obviously had a tremendous impact on theagricultural productivity of the Bantu.With a portfolio of crops, livestock and their newlyacquired iron smelting technology, the Bantu moved swiftlyto the south where there was no competition from farmingcommunities and reached South Africa within a fewcenturies. As the Bantu moved to drier areas, they shiftedfrom their West African crops to the dry-climate cereals,especially sorghum. Indeed sorghum had such a specialplace in the lives of the Bantu that its name in Zulu is‘amabele’, a word which also refers to the breasts of afemale. The sustenance of the crop was to the nation whatthe milk of a mother is to her infant. To this day, whena person is alive and well you say he is still eating‘amabele’. In every traditional religious ceremony the mainoffering to the ancestors is sorghum beer and, of course,an animal for slaughter.

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Amongst the Bantu there was little information about thesparsely populated south and, naturally enough, there wassome fear associated with the unknown. To this day in theZulu language the word for ‘south’ is ‘ningizimu’, acompound word built from ‘ningi’ meaning many and ‘zimu’which refers to mythical giant human beings who werereputed to eat normal humans. It is therefore notsurprising that it was the better armed iron age Bantu whomoved swiftly to the south. Besides, tribal conflictswould have been that much sharper for people armed withiron weapons.Ethiopia, the third African center where food productionarose de novo, had a more localized impact than the othertwo. Many local plants such as the banana-like entete,the oily noog, the finger millet and a cereal called teffwere domesticated but they remained confined to Ethiopia.The prominent exception is coffee which was domesticatedthere and later became a major global industry. Of all thecrops which have ever been domesticated in Africa not asingle one of them is native to the region of Africa whichlies south of the equator.Lastly, there are also crops such as bananas, Asian yamsand taro which are indigenous to tropical South East Asiabut which were surprisingly already widespread on the eastcoast of sub Saharan Africa even before the era ofEuropean sea voyages which began towards the end of themiddle ages. This mystery is thought to be related to thefact that at that time Madagascar was already settled by alarge population of people whose physiognomy and languageleave no doubt that they originated in Indonesia In comparison to the hunter gatherer Pygmies they met inthe equatorial rain forests and the hunter gathererKhoisan they later met in Southern Africa the Bantu hadseveral advantages which placed the hunter gatherers attheir mercy. The Bantu

Were more numerous as a direct result of thesustenance provided by their agriculture.

Had superior weaponry made possible by their ironsmelting technology

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Had better political organization, a skill theydeveloped as a result of living in larger communitiesthan was possible for hunter gatherers.

The result was that whenever the Bantu encountered huntergatherers the latter were either engulfed and assimilatedor driven out of their lands. In the whole of SouthernAfrica those San people who were not assimilated by thesouthward bound Bantu were forced to retreat to semidesert areas which were of no interest to the Bantu. The southernmost front of the Bantu consisted of theXhosa who advanced as far as the Fish River. The presentday Western Cape was the land of the Khoi who were mainlyhunter gatherers though, by the beginning of colonialism,they had acquired some cattle, probably through trade withthe Xhosa. The only reason why the Xhosa could not advancebeyond the Fish River was that the Western Cape, unlikethe rest of sub Saharan Africa, is a winter rainfall areawith a Mediterranean climate which was unsuitable fortheir crops which, by that time included sorghum andmaize.

2.2 The first energy revolution

The first indigenous South Africans to encounter the whiteEuropean colonialists were the Khoi at the Cape, thesouthern tip of Africa. They immediately succumbed toEuropean diseases such as small pox to which they had noopportunity to develop immunity. The Khoi were also thefirst to lose live stock and land to the powerfulinvaders, representatives of the Dutch East India Company[DEIC] who were led by Jan van Riebeeck who made aninfamous declaration refusing to restore livestock andland which the colonialists had stolen from the Khoi “…as ithad now become the property of the Company by the sword and by the laws ofwar.” The confrontation with the Xhosa came much later when thecolonial settlements expanded northwards from the land ofthe Khoi into the land of the Xhosa. When Jan van Riebeeckarrived at the Cape the Xhosa had been on the land northof the Fish River for more than a millennium. Yet when theWest African origins of the Bantu were discovered thecolonialists gleefully put about the absolutely ridiculous

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myth that the Bantoe entered South Africa from the northat about the time when the colonialists arrived at theCape.The encounter between the colonialists and the Bantu, asthe former expanded northwards, was an unequal contestwhich was reminiscent of the previous encounters betweenthe Bantu and the hunter gatherers of sub Saharan Africaas the Bantu expanded southwards. The advantages which theBantu had over the hunter gatherers were almost a mirrorimage of the advantages which the colonialists later hadover the Bantu. The colonialists:

Were more numerous as a result of the sustenanceprovided by their more efficient agriculture thoughmost of their population was in Europe

Had superior weaponry made possible by their superiormetallurgy and chemistry which gave them gunpowder.

Were literate and had no moral qualms when dealingwith natives. They were ambivalent about theirhumanity.

Had better economic and political organization, askill they developed as a result of much denserEuropean populations

The first energy revolution began when man learned toharness animal muscle power effectively to till the land.The beginning of this revolution was marked by theinvention of the animal drawn plough. This revolutionplayed a crucial role in speeding up the Eurasianpopulation explosion which resulted in the privatizationof land and the subsequent facilitation of the division oflabour.This energy revolution never occurred in sub-SaharanAfrica which explains the relatively low populationdensities when colonialism began. Land was still plentifuland communally owned. A stage had not yet been reachedwhere there was pressure for people to move intospecialized trades. It is not obvious that the impetusfor specialization could have been created without theAfrican aristocrats emulating their Eurasian counterpartsby finding brutal ways to yank the peasants away from

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their subsistence comfort zone. I shall now look at someof these brutal ways.

3 Division of labour

3.1 Conditions for division of labour

Hunting and gathering, the most primitive economicactivity, entails living from hand to mouth and ischaracterized by almost zero accumulation of stock.Naturally, as food supplies rise and fall with seasons,there are bound to be periods of plenty and periods ofhardship. Yet even in this primitive economic state therewas some rudimentary accumulation of stock, however small.People gathered more wild plant food than they couldconsume at the time and brought the surplus home. In factit is most likely that home gardens arose when peoplenoticed that the seeds they defecated in their nearbylatrines germinated, raising the possibility that thecavemen could grow their own food and thus assume controlover supplies.When hunter gatherers became farmers their new economy wasbased on the accumulation of live stock and grain stockfrom their harvests which enabled them to smooth out theprevious wild fluctuations between times of plenty andtimes of want. However, before division of labour,subsistence farming economies produced little more thanwhat was required to provide the basic necessities oflife. There was a rather low limit to accumulation. Graincould be stored for only limited amounts of time before itwent to ruin. There was also a practical limit to thelivestock a single family could hold. For instance,without a market for milk, what would be the point ofraising a hundred cows? A more successful Bantu farmermight have more wives but his standard of living washardly distinguishable from that of less successfulfarmers.A large number of wives was [and still is in certaincircles] certainly a status symbol in Bantu societybecause it reflected a high capacity to pay bride priceand to feed a large family. Yet in the highly labourintensive farming economy of the Bantu wives were also anasset in that they augmented the workforce of a family

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without being a drain on its resources as modern womentend to be by demanding expensive modern comforts.Polygamy is therefore a practice which has its economicjustification in ancient economies which predate divisionof labour. When transplanted to a modern economic settingit is ruinously expensive.Long before land became private property, in Eurasia, itwas owned communally, just as in Africa, and consideredto be as plentiful and valuable as the air peoplebreathed. At that stage everyone had access to land onwhich they eked out an independent subsistence.Agricultural innovation sparked population expansionssimilar to those which happened elsewhere. However, inEurasia the process went much further until a stage wasreached when land became a scarce and therefore veryvaluable commodity. which became the private property ofthe aristocrats. Peasants were turned into serfs.Once land was in the hands of aristocrats they demandedpayment from the serfs for the privilege to live on it.The serfs were now obliged to use the land allocated tothem, by the aristocrats, to eke out a living and, inaddition, to either hand part of their produce to thearistocrats or put part of their labour at the disposalof the aristocrats in lieu of rent. Obviously thearistocrats had an interest to keep on their land onlythose serfs whose labour or fruits of labour they needed.With increasing productivity fueled by agriculturalinnovations, the reduced demand for the farm labour ofserfs added pressure for serfs to leave agriculture andserfdom and enter the trades. Towns developed as centerswhere the trades were practiced.When rent was paid to the aristocrats in labour or in kindthere was the problem that labour cannot be accumulatedand only limited amounts of agricultural produce can beaccumulated and only for a short time. Equivalent amountsof labour and produce are both equivalent to a certainamount of wealth which can be represented by a quantity ofmoney. Money, as a convenient means to store wealth,created the first possibility for an unlimitedaccumulation of wealth by individuals. Thus money

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facilitated exchange of goods and provided a means for thestorage of the means to acquire them.The wealth of the aristocrats created a demand for goodsand services which went way beyond the basic necessitiesof life. This in turn encouraged the intensification ofspecialization into trades which provided the aristocratswith luxuries such as opulent palaces, furniture, cutlery,clothing, jewelry and works of art including music andstage performances. Tradesmen determined the prices oftheir products as follows:

Price = Cost of materials + LabourThus the income of the tradesman was equal to the value ofhis labour. Earlier in this chapter I identified theentrepreneurs as the architects of wealth creation. Thewealth of a nation is the goods and services which thenation produces. The money circulating in the nation hasto be equivalent to these goods and services. If there ismuch more money than goods and services then that money isalmost worthless. In the extreme case, money without goodsand services to purchase is absolutely useless.What motivated entrepreneurs was profit. They soughtopportunities to make lots of profit in order toaccumulate money, the means to purchase wealth. Wealthconfers the means to satisfy luxurious wants as opposed tobasic needs necessary for survival. In other words theentrepreneurs were motivated by a desire to live likearistocrats. In their quest to enrich themselvesentrepreneurs do a service to society, when properlyregulated, by masterminding the creation of wealth whichlifts the general standard of living in a nation. In a simple subsistence agricultural economy where landhas no value, commodities of value which can be regardedas capital stock are mainly live and grain stock. Oncethere is division of labour there are many products oflabour which represent accumulated wealth and which cantherefore be regarded as capital stock. Money, calledcapital, can be used to purchase all such items and socapital stock can be represented by a sum of money. A tradesman needed capital to procure tools of his tradebefore he could manufacture anything. He also needed

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capital for subsistence until he could not onlymanufacture goods but also sell them and get an income.Some tradesmen were able to raise this capital and operateas independent businessmen. Other tradesman were not ableto do so. An entrepreneur would provide the capital inreturn for the right to extract profit from the labour ofthe tradesman which could be expressed as follows:

Labour = Wages + Profit

So the income of the tradesman would be reduced by theprofit which went to the entrepreneur. The intervention ofentrepreneurs was usually indispensable in those caseswhere the tools of trade were particularly expensive. If,in addition, there were advantages in splitting themanufacturing task between two or more peopleentrepreneurs exploited the opportunity to provide therequired capital and to organize the tradesmen andsupervise the manufacturing process. Those who are not particularly great admirers of freeenterprise tend to portray entrepreneurs as parasites whotake advantage of the tradesmen’s or workers’ [in today’sterms] lack of access to capital to appropriate a largeportion of the value he adds to materials. However, as thedivision of labour became established, entrepreneursneeded to be a lot more imaginative than merely organizingtradesmen to satisfy obvious needs such as the manufactureof shoes. They needed the judgment and foresight to beable to take calculated financial risks on new goods andservices in the hope that they would create new wantswhich could be satisfied in a commercially viable manner.In this role entrepreneurs acted as the true architects ofwealth. An entrepreneur sinks his money in an undertaking in thehope of obtaining profit for his trouble. Any supervisorywork he may do is incidental and he ought to draw a salaryfor that or he may even employ someone else as manager todo it. The reward which is due to an entrepreneur is inthe form of profit. It is the capital provided by theentrepreneur which makes the division of labour possible.The motive for providing this capital, which is profit,fuels further division of labour in the quest for greaterefficiency in order to maximize profit.

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During the early years of specialization the assembly linewas invented in terms of which the manufacturing processwas split into simpler steps which were performed bydifferent successive groups. This allowed a number ofpeople to do more work faster than would have been thecase if each person was responsible for performing all themanufacturing steps. The higher efficiency of the assemblyline increased the productivity of a given group oftradesmen. It was, of course, not always possible tosplit the manufacturing task. A work of art requires theinspiration, insight and hand of its creator from thebeginning to the end. By contrast, once designed, shoesare best manufactured in steps with one tradesman doingthe soles while the other does the leather uppers.Since productivity was increased by greater division oflabour which required increase of capital stock, thelatter could be regarded as a necessary condition for anincrease in productivity. It is capital stock whichultimately employed labour. Increased capital stock couldalso increase productivity by providing workmen withbetter tools of trade. However the division of themanufacturing process into simpler steps finally reached astage where the various steps could be done by machine.Increased capital stock could now purchase machines toreplace most of the workers in order to achieve higherproductivity. This was the situation at the beginning ofthe industrial revolution during the nineteenth century. In economies where all the land was held by aristocratsall resources, such as minerals which were extracted fromthe land, earned them rent. The extraction of resourcesfrom the land ought always to earn rent for whoever ownsthe land. Now the raw materials for manufactured goods areusually extracted from the land. It takes some labour toextract these raw materials and to add value to them inthe manufacturing process. Whether it be in the extractionor manufacturing process, labour must earn wages and thecapital which employs labour has to earn profit. Itfollows that the price of every manufactured objectconsists of three components, rent, wages and profit.

Price = Rent + Wages + Profit

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The price here includes the costs of bringing themanufactured object to market. In a country the annualincome of all rent, wage and profit earners engaged in theproduction of goods and services is called the Gross NationalIncome [GNI]. It consists of the prices of all the goodsand services which were produced in the country duringthat year so that

GNI = Total Price = Total Rent + Total Wages + Total Profit

The Total Wages include only the wages of all people whoproduce commercial goods and services and this mostemphatically excludes government services. This has nothing to dowith the importance or otherwise of government services.It only means that these services are not commercial and,as such, they do not create wealth but consume it. Anation pays for such services from its GNI. The GNI, orwhat amounts to the same thing, the total price of allgoods and services produced obviously depended on thevolume of these goods and services: the higher the volume,the higher the price. The volume of goods and servicesproduced depended in turn on national productivity. Thehigher the national productivity the higher the volume ofgoods and services produced. The national productivity inturn depended on the total national capital stock. Inchapter 1 we have seen that the national capital stock hasthe following components: human, knowledge, naturalresources, infrastructure, business machinery and publicinstitutions. Thus the gross national income depends onthe national capital stock

3.2National accounts and the wealth of a nation1

This seems to be the appropriate place to introduce somemacroeconomic parameters which have become part ofeveryday language. The decomposition of price into itscomponents has implications which go way beyond simplefeudal era economics. It is the basis for the nationalaccounts of modern economies as I shall now show.

1 The reader who has no interest in concepts which have numbersassociated with them can safely skip this subsection which I includedmainly because I felt that the discussion had taken us so close toimportant economic concepts of everyday interest that it would be apity to leave them out.

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Government is not directly involved in any wealth creationunless it is engaged in activities which make it one ofthe rent and/or profit earners. Government units engagedin such activities can be classified among othercompanies. Therefore the government does not earn anyincome. The money which ends up in government coffers isappropriated, through taxes, from rent, profit and wageearners. Who produce goods and services excludinggovernment services. So the GNI splits as follows

GNI = National Net Income + National Tax.The National Net Income is what rent, wage and profitearners remain with after paying tax. The governmentcannot afford to spend all the tax on consumptionexpenditure such as the payment of government salaries.Some of it must be used to augment or repairinfrastructure. So government expenditure has thefollowing components:

National tax = Gov Investment + Gov Consumption Expenditure Some of the national income belongs to wage earners andtheir households while the rest belongs to companies.Therefore

National Net Income = National Household Income + National CompanyIncome

Households consume some of their income and invest therest in a variety of ways such as bank accounts where itbecomes available for company investment.National Household Income = Household Consumption + Household savings

Part of the company income replenishes inventories and therest is invested, hopefully in the local economy:

Company Income = Inventories + Company Investment

In national accounts there is a conventional way ofregrouping all these components of income to reflectnational expenditure. The Gross Domestic Expenditure [GDE] isdefined as the total expenditure of domestically generated cash within theeconomy in a prescribed period of time. The expenditure is dividedinto these categories23:

1) Households = Final Household Consumption: This consumption consists of purchases of consumer goods which canbe classified as durable, such as cars, furniture and household

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appliances, semi-durable, such as clothing and car tires, and non-durable such as food, petrol, medicine and services like transport,medical etc.

2) Investment = Government Investment + Company Income + Householdsavings: This equation expresses investment from the incomeperspective. This income is spent on the following:Investment by companies and government in goods that are used forcapital formation. This includes investment in infrastructure, machinery,buildings [Gross capital formation] and goods that are neitherexported nor consumed in a particular period [Value of the change ininventories]. ThereforeInvestment = Gross Capital Formation + Value of Change inInventories .

This equation expresses investment from thealternative expenditure perspective.

3) Final Consumption Expenditure by General Government. Thiscomprises goods and services paid for by thegovernment, but made available to individuals. Thelargest portion of this component is spent on wagesand salaries of civil servants.

Investment is essential for an economy to grow because itprovides finance to augment capital stock and to reverseits depreciation. It is important to note that householdsavings [see the second category of expenditure above] arean important source of funds for investment. The GDE isdefined as the sum of all these expenditures all of which,as we have seen, are financed by the GNI: GDE = Final consumption expenditure by households + Gross capital formation + Change in inventories + Final consumption expenditure by government

I now paraphrase Adam Smith: To maintain and augment thestock which may be reserved for immediate consumption, isthe sole end and purpose of all investment whether it beon inventories or gross capital formation. It is thisstock which provides food, clothes, lodging, healing,transport, entertainment etc to the people. Theircollective wealth or poverty depends not on money but upon

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the abundance or scarcity of this stock. Money is merely ameans to apportion this stock within the nation. Itdetermines relative claims of citizens to the wealth ofthe nation. Money alone without this wealth is of noconsequence.It is self evident that for any entity engaged intransactions the total income, including borrowings ifany, should always balance with total expenditure,including savings if any, unless something untoward hashappened to the funds. It is basically this simple balancewhich auditors examine. I shall now approach GDE from theincome stand point allowing explicitly for international tradeincluding possible external borrowings of capital.Clearly, the GDE for a particular period must be equal tothe Gross income derived from the economy by all those whoproduced goods and services which the GDE purchased minus[income derived from] external cash borrowings. It isimportant to note that some of these producers of goods and services boughtwith the GDE may be based in foreign countries from which goods and serviceswere imported.GDE = Income of domestic and foreign service providers + Income of domestic and foreign goods producers – External cash borrowings

The GDE is the building block for other macroeconomicparameters which are used to characterize an economy. Oneof these parameters is the Gross Domestic Product [GDP]which is the total value of goods and services produced within a countryover a specified period of time. It is important to note that some of thedomestically produced goods and services may be bought with externalborrowings which are, of course, excluded in the definition of GDE. Itfollows thatGDP = GDE + Export of goods and services – Import of goods andservices + External cash borrowings

Note that we subtract imports from the GDE because some ofthe internally generated cash may be spent in the economybuying imported goods; we add exports to GDE because someof the goods produced in the country may be exported; weadd external cash borrowings because some of the goodsproduced internally may be bought with externally borrowed

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cash. The per capita GDP of a country, defined as the GDPdivided by the population, is the standard measure of thewealth of a nation.

4 The genesis of colonial era European economies

4.1The virtues of purgatory

Britain and other west European countries commercializedas they emerged from the Dark Ages in the period betweenthe middle of the thirteenth century and the middle ofthe sixteenth century. This was the time when Europe wasgoverned by monarchs and government consisted of littlemore than institutions for collecting tax for the monarch.Indeed even the justice systems, such as they were, servedthis purpose. Adam Smith24 described such systems asfollows:

The judicial authority of such a sovereign, however, far from being acause of expense, was for a long time a source of revenue to him. Thepersons who applied to him for justice were always willing to pay for it,and a present never failed to accompany a petition. After the authority ofthe sovereign too was thoroughly established, the person found guilty,over and above the satisfaction which he was obliged to make to theparty, was likewise forced to pay an amercement to the sovereign. He hadgiven trouble, he had disturbed, he had broke the peace of his lord theking, and for those offences an amercement was thought due.

It seems to be a general principle that classes which maketheir living from rent tend to be prone to corruption. Nocommercial systems could be based on such unreliable‘justice’ systems. The general lack of institutionalcapital to support the emergent commercial systemsnecessitated the establishment of alternative institutionswithin the business communities. These institutions wereall incorporated in voluntary associations which wereknown as guilds.The heyday of guilds occurred between the black death[1350] and the reformation [1517 to 1648]. The RomanCatholic church was still the sole purveyor of theChristian religion and the masses were still living interror of purgatory where they were sure to languish forextended periods, irrespective of how they had lived theirlives, unless they did a whole lot of expensive thingswhich enriched the clergy. The genius of the doctrine of

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purgatory lay in the claim that one’s family, friends andacquaintances could pray on one’s behalf to have theperiod spent in purgatory reduced and the more pious theywere the more effective their prayers. This gave everyonethe incentive to spy on others to ensure that they obeyedthe dictates of the church. For people of modest means, clubbing together in guildsmade the demands of the church more affordable. Theguilds hired priests to provide all sorts of expensiveservices. Medieval towns were usually organized such thatpeople engaged in particular trades lived in specificneighbourhoods. So a guild might be established forreligious purposes and end up diversifying to also servecommercial needs of the community. In fact dual purposeguilds were much more common than single purpose guilds. Guilds covered all sectors of the economy for instancefood processing was represented by ‘guilds of victuallers’who bought agricultural commodities and converted them toconsumables. These included bakers, brewers, butchers etc.There were also guilds of manufacturers who made durablegoods such as smiths, cloth makers, carpenters etc. Therewere even guilds of service providers such as clerks whoknew how to read and write, wagon drivers, entertainersetc. In any trade the upper crust consisted of master craftsmenwho owned workshops, usually at their homes, and retailoutlets. At entry level there were apprentices, usuallyteenagers, who worked under a master for boarding andlodging and a small stipend. The main benefit for them wasto get vocational training. After five or more years theapprentice would qualify as a journeyman. All thatremained for a journeyman to become a master craftsman wasto create a work of outstanding craftsmanship called amasterpiece. The masters dissertation in present day postgraduate education was probably originally modeled on themedieval masterpiece.All guilds had honorable and sometimes dishonorableeconomic functions Amongst the honourable functions of thecraft guilds was the enforcement of high standards ofworkmanship. However they also manipulated input andoutput markets to the advantage of the master craftsmen.

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For instance they sometimes lowered wages at theirsubordinate’s expense. The intake of apprentices wasmanipulated in order to keep the numbers of mastercraftsmen low to the detriment of the consumer.The wealthiest and most prestigious were the merchantguilds. They were involved in long distance commerce andlocal wholesale trade. They were also involved indiplomacy through their operations across borders. It isthe merchant class which later spearheaded Europeanoverseas expansion and formed the East India and AfricaCompanies which oversaw the commercial side ofcolonialism. Banking was also part of this sector.Merchant guilds took care of the interests of the truebourgeoisie. Gary Richardson25 described some of thefunctions of merchant guilds as follows:

Guilds policed members’ behaviour because medieval commerce operatedaccording to the community responsibility system. If a merchant from aparticular town failed to fulfill his part of a bargain or pay his debts, allmembers of his guild could be held liable. When they were in a foreignport, their goods could be seized and sold to alleviate the bad debt. Theywould then return to their hometown, where they would seekcompensation from the original defaulter. Merchant guilds also protectedmembers against predation by rulers. Rulers seeking revenue had anincentive to seize money and merchandise from foreign merchants. Guildsthreatened to boycott the realms of rulers who did this…Since boycottsimpoverished both kingdoms which depended on commerce andgovernments for whom tariffs were the principal source of revenue, thethreat of retaliation deterred medieval potentates from excessiveexpropriation.

Again we see that the rent seeking classes have never beenfriendly to entrepreneurship. The severest sanction guildscould impose was expulsion. There must have been manyprohibited practices which were sufficiently profitablefor expulsion not to be an adequate deterrent. Yet theguilds managed to maintain discipline because expulsionfrom the guild also meant ostracism from the religiouscommunity. In view of the horrors of purgatory therecouldn’t have been a better deterrent.

4.2The executive committee of the bourgeoisie

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The development of towns and cities was a commercialphenomenon which took place while the attention of thenobility was focused on their huge rural land holdings. Itwas therefore natural that the merchant guilds shoulddevelop into municipal government. In fact moderngovernment developed from guilds. They26 ‘enforcedagreements, built roads, built bridges, opened schools,educated apprentices, developed new merchandise andmanufacturing methods, indemnified members against theuncertainties of everyday life, and provided many publicgoods that governments provide today. Guilds accomplishedthose tasks with little direction from feudal authority’.It is ironic that it was the abuse of religious authoritywhich acted as a catalyst in the transformation of Europefrom feudalism to commercial societies. The spectre ofpurgatory was of course exorcised during the reformation1517 – 1648] and the guilds rapidly collapsed having losttheir coercive means to enforce conformity. The rentseeking nobility was quick to spot get rich quickopportunities which were presented by the renunciation ofthe doctrine of purgatory and the demise of the guilds.Richardson[ibid] notes that: ‘In England, the governmentsuppressed superstitious doctrines swiftly and completely.Royal servants visited clerical institutions, confiscatedimmense amounts of property…Auditors also visited everyguild in the realm and confiscated all funds collected forpious purposes’. The rent seekers acted as scavengers butby that time their days were also numbered. When the reformation process ended in the seventeenthcentury the era of enlightenment had already begun which,amongst other things, facilitated the democratization ofgovernment in Europe. Also the disruption of the guildscaused a terrible depression in Europe. All of thesefactors ensured that the ruling classes were amenable toideas put forward by the bourgeoisie with regard to thereorganization of government to take over essentialfunctions of the guilds. Karl Marx was not beingdismissive when he later referred to government as theexecutive committee of the bourgeoisie. The bourgeoisieinvented post reformation government in Europe.

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In the aftermath of the enlightenment some European rulingfamilies retreated gracefully from government and weregradually confined to pageantry. But it took theguillotine to remove other ruling families from power.There was now nothing left to counterbalance the power ofthe bourgeoisie which was immensely enhanced by theindustrial revolution, a process which occurred from aboutthe middle of the eighteenth century to the end of thenineteenth century.There were many factors which fueled the industrialrevolution such as the slave trade and the exploitation ofcolonies. What is of immediate interest to us is thetransformation of the late medieval workshop of the mastercraftsman into the late industrial revolution massproduction factory. I have already pointed out thatefficiency in the production of an item was first achievedby breaking up the process into the simplest possiblesteps. Then workers would be allocated to specializedgroups each of which was involved in just one of the stepsin the production process. They would be arranged in a‘production line’ so that a group received items whichwere at a particular stage of finish and did their bit totransform the items before handing them to the next groupin the production line. Most of the people who previously went throughapprenticeship training which involved creative work werenow condemned to spending their lives engaged in brainnumbing repetition of simple tasks. It was the inventionof the steam engine and electrical power in the nineteenthcentury which made it possible for machines to be inventedwhich took over the simple boring repetitive work fromthe workers. Instead of the original training ofapprentices to become master craftsmen, they were nowtrained in applied science to become artisans such asmechanics and electricians. The responsibility of themaster craftsmen was now split. Their training dutieswere now taken over by engineers while theirentrepreneurship fell on the industrialists, a species ofthe bourgeoisie.Further specialization in the twentieth century introducedrepetitive work which was taken over by computers and

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robots after the invention of information technology. Theartisan has been transformed into a technician who needs adecent background in science in order to function on thefactory floor.Karl Marx lived during the nineteenth century when thepower of the bourgeoisie reached its zenith during theindustrial revolution with the exploitation of workerswhich must have seemed natural to most at the tail end offeudalism. His works were a necessary overreaction to thisexploitation by the irresistible power of the bourgeoisie.Marx famously predicted the inevitability of thetransition from feudalism to capitalism and then fromcapitalism to socialism. What Marx was recognizing in thisprediction was 1) the simple fact that there would benothing to nationalize unless the bourgeoisie were firstallowed to get down to work and 2) the inevitability ofthe phenomenon of consolidation in the quest foreconomies of scale in highly competitive markets.

5 The executive committee of rent seekers 5.1 The missing class in Africa

Africa South of the Sahara never went through thetransition from feudalism to commercial societies.Colonial settlers who had undergone this transition set upparallel societies in Africa which sought to excludeAfricans from participating in the economies theyintroduced except as menial labourers. But Asians, whowere brought to Africa as either slaves or indenturedlabourers had no trouble moving into business, whenopportunities arose, mainly because they came from Asiancultures which had made the transition even beforeEurope.Africans, whose native knowledge was restricted to veryrudimentary technology in areas such as metallurgy, werenever part of the processes by which raw products such asiron ore were converted into machines and consumer goodssuch as utensils and plows. These processes did not eventake place in Africa. Raw materials were always loaded onships bound for Europe which sailed back with finishedproducts which might as well have been created by the godsof Europe for all the Africans knew.

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By contrast late medieval European culture gainedimmensely from the fact that craftsmanship developedtechnologies such as metallurgy as far as it was possiblewithout making heavy use of science. Indeed manufacturersonly made explicit use of scientific concepts during theindustrial revolution. The result is that a lot ofscientific concepts percolated European culture early atan informal level thus preparing the population for thesubsequent scientific and industrial revolution of thenineteenth century. Craftsmanship also instilled inEuropean cultures a love for excellence and admiration forthose who strive for it. For instance this must be theorigin of the enduring culture of German engineeringexcellence. When colonialism came to an end Africans essentiallypicked up their economic lives from where collision withthe colonial juggernaut had taken place. The onlydifference was that the original African nobility wasreplaced by new elites who took pride in their ability tospeak English or French and who lived on western consumergoods, and had inherited mines and infrastructure whichwere specifically designed to facilitate the export ofmineral resources. There was no interest in the processesby which raw products are converted to consumer goods.Africans were just hooked on the goods.It is instructive to establish correspondence between westEuropean social classes at the time of commercializationof that continent and their African counterparts in thepost colonial era. In Europe it was the nobility who hadpolitical power and control over the natural resources forwhich they levied rents. In post colonial Africa it wasthe political elites, connected to ruling parties, whohad equivalent power and privileges. The economic role of the colonies was to supply Europewith agricultural products, natural resources such astimber and mineral resources such as precious metals Assoon as the colonialists left the African elites installedthemselves as the aristocrats who levied rent for naturaland mineral resources as if they were being logged ormined on their private estates. Apart from the productionof food, the colonies also produced cash crops, such as

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cotton, tobacco, cocoa, coffee, tea, etc. for the mothercountries. These cash crops were mainly produced by thepeasants who were paid by the colonialists far less thanthe market value of their products. The colonialists wereeffectively levying heavy rent. After the end ofcolonialism the African elites inherited this exploitationwith alacrity.Just below the elites Africa had only the petitbourgeoisie such as clerks, teachers, nurses, pettytraders and a few doctors and lawyers. The rest were semiskilled or unskilled workers and peasants. Africa hasnever had the one and only class which is the engine ofeconomic progress, the bourgeoisie or entrepreneurs.Before the end of colonialism, circumstances never existedfor such a class to come into existence. From an economicperspective, this is the most important factor whichdistinguishes Africa from other continents. It is thefundamental reason for the lack of economic progress inAfrica.The worst possible wish in terms of which a country canever be cursed is that may it never have indigenousbourgeoisie. Many countries in history have suffereddevastation from pestilences and wars but they soon roseback to their former glory thanks to the resourcefulbourgeoisie. What Africa needed more than anything else inorder to rise from the servitude of colonialism wereindigenous bourgeoisie. But this was exactly the time whenAfrica was infatuated with the language and the halfbaked economics of Marxism if not the modesty which befitstrue Marxists.

5.2 The narcissistic African communist

In much of Africa colonialism amounted to racial feudalismin terms of which the settlers set themselves up as thenobility and the indigenous people were forced intoserfdom. The settlers basically levied rent for theexploitation of African natural resources and Africancheap labour to supply the industrial revolution on othercontinents. Later a defective entrepreneurial classemerged from the ranks of the settlers. This class lackedmaster craftsmen or their successors, the industrialists.

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It mainly consisted of merchants who relied on Europeanand American workshops which they supplied with rawmaterials. Some of them were mere employees runningsubsidiaries on behalf of multinational corporationswhich shipped in nearly finished products. At the end ofcolonialism Africans lacked even these managerial skills.Yet, according to Dowden[ibid]:

When African countries became independent, most of their leaders believedthe next stage in nation building should be government ownership of theeconomy…In country after country mines, land and business werenationalized. It was seen as Africa reclaiming its inheritance.Nationalization policies received substantial support from the World Bankand donors.

The stated aim of nationalization was to bring the whole economy in linewith a national development plan and prevent capital being exported. Theeffect was to give leaders total control of the money. Nationalization gavethem a vast barrel of patronage, allowing them to reward political alliesand pay off enemies. The parastatals also provided a slush fund for thepresident’s pet projects and removed any other wealth base in the countrythat might have been tempted to fund the opposition…

While parastatals jobs and contracts went to cronies, the state companieswere run for explicitly political ends, such as keeping politically importantsectors happy

In all fairness to Africa, the colonial era ended duringthe Keynesian era which lasted from the great depressionof the 1930s to 1980 when the western world veered sharplyto the right led by the United States and Britain. Duringthis era a typical western country had two dominantpolitical parties: a conservative Tory or Christiandemocratic party which was pro business and a liberallabour or social democratic party with a labour bias. However this did not change the fact that government inwestern Europe amounted to the executive committee of thebourgeoisie. All that had happened was that thebourgeoisie had split into two factions: the conservativesand the liberals. They all had the same basic belief: thatthe bourgeoisie were the only class that was qualified tolead the economic development of the west and that thisclass ought always to occupy this leading position. Theyall thought it in the long term interests of capitalism

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to manage the levels of inequality between the rich andthe poor through welfare programs. Furthermore they allthought it fare to nationalize natural monopolies forobvious reasons.The only difference between the liberals and theconservatives was one of degree. The former were morepragmatic and more mindful of the allure of the promisesof the socialist world to eliminate exploitation.Accordingly they believed in more comprehensive welfarethan their conservative counterparts. They were alsomarkedly less sympathetic to excuses of exploitativebusinesses and more inclined to favour nationalization ofborderline cases. Both liberals and conservatives werecommitted to profit but conservatives cared very littleabout anything else while liberals were also passionateabout fairness. By contrast the African elites who inherited post colonialAfrica were, at best, rent seeking petty bourgeoisie whoserampant narcissism fuelled their pretensions to royalty.They were passionate about narcissistic supplies andindifferent to anything else including profits and thewelfare of their people. The so called national economicdevelopment plans were drawn up by western advisors whohad an ulterior motive. The big settler entrepreneurscould see the looming problems and they wanted to selltheir businesses to government so that they could transfertheir wealth to safety in other continents. Financialinstitutions wanted to lend money indiscriminately to theAfrican governments because they knew that the BretonWoods institutions [The IMF and the World Bank] would bailthem out if they burnt their fingers. The Marxist rhetoricbecame fashionable precisely because it soundedrevolutionary which made it a perfect camouflage for asellout.Marxist speak is the last thing you need if you want toraise future bourgeoisie and to unite people to cooperatein building a country. It is a divisive language whichviews society in terms of classes which are eternallypitted against one another as mortal enemies. Communistrhetoric is anathema to the spirit required to get

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different sectors of society to work together in adevelopmental state. The bourgeoisie are singled out as the devil incarnatewhile the workers are the long suffering saintly childrenof God who work until they perspire blood for the benefitof the greedy devils. As already mentioned, this wasobviously an overreaction by Karl Marx to the exploitativeexcesses of the bourgeoisie at the height of thenineteenth century industrial revolution. Their power hadto be curbed. Europe had too much of a good thing whichhad terrible side effects because of lack of regulation.Of course greed is a dishonourable part of human naturewhich ought to be constrained by finding ways tocounterbalance the power of dominant sectors of society.The point I am trying to make is that employers have nomonopoly on greed. There is no doubt that Karl Marx wouldhave been appalled by many irresponsible and illdisciplined township teachers who do union and politicalwork during working hours and who hardly ever bother togive decent lessons to children they are paid to teach.This is also greed, a desire to extract from the employer,which is society, value which is grossly not commensuratewith services rendered.One of the great good fortunes of Africa is that thereisn’t a single real communist on the continent. The gripof narcissism on Africa has always been too tight for thecommunist ideology to be taken seriously. Unfortunately,there are too many Africans who are infatuated withantiquated communist rhetoric for purely narcissisticreasons. The enlightenment in Europe dethroned thenarcissistic aristocrats who had once claimed to rule bydivine right. Africa needs its own enlightenment todethrone the narcissistic elites who believe that leadingthe struggle against colonialism conferred upon them theright to rule in perpetuity and plunder the riches ofAfrica in the process.

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Chapter 3Battle for Colonial Souls

“Any sufficiently advanced technology is indistinguishable from magic” Arthur C Clarke’s Third Law

1 Division of Labour in Sub Saharan Africa

1.1 Early Christian converts as nascent entrepreneurs

I suppose it is an old cliché to mention that three ofthe factors or technologies which made the greatestimpact in Africa, at the beginning of colonialism, were1) the bible; 2) the horse and the gun and 3) the plow.Their significance were respectively associated with 1)reading , writing and religion; 2) rapid long distancetravel and rapid deployment of armed forces; 3) the useof animal power in agriculture, respectively. Hardcorecolonialists were usually preceded by missionaries whotaught the European language of the colonial mothercountry and simultaneously introduced the Christianreligion and taught reading and writing. That was theprettier face.The ugly face of colonialism entailed appropriation ofmineral resources, the best agricultural land and otherproperty such as livestock by the colonial settlers Insubsequent violent conflict the colonialists invariablymanaged to get the indigenous Christian converts to fighton their side. It was somehow always possible toconvince the Christian converts that the aggression ofthe settlers was consistent with the Christian religionwhile the resistance led by the traditional aristocratswas precisely what could be expected of heathens. It wasobviously the lesson which was extracted from the battleof JerichoThe confiscation of land was in fact analogous to themodus operandi of Eurasian aristocrats which led to theprivatization of land creating one of the conditions fordivision of labour. The difference is that in Africa itwas the Europeans who assumed the role of aristocrats. It


was racial feudalism. As had been the case in Eurasia, inAfrica, too, this paved the way for specialization ofsorts. The agricultural innovation of harnessing animalpower to till the land became instantly popular with theBantu for whom agriculture had entailed back breakingwork for millennia. They took to this technology withsuch enthusiasm that an entrepreneurial class of well todo farmers grew, especially among Christian converts, ata pace which alarmed the white settlers. This situation must have given impetus to the acceleratedland dispossession of Africans through measures such asthe 1913 Land Act. Despite having lost land at gun point,these African farmers still prospered as sharecropperson farms owned by pampered whites who, nevertheless, didnot have the labour, cattle and the appetite for hardwork required in those days to do serious farming. Theseidle whites, who modeled their lives on feudal eraEuropean aristocrats, lived by extracting rent from theAfrican farmers some of whom provided food supplies tothe burgeoning mining settlements. By this time the whiteunion government had begun mopping up a few remaining‘black spots’. Land dispossession was almost complete,with the exception of a few barren ‘native reserves’.This is the situation which prompted the union governmentin 1944 to enact the Land Bank Act to bolster whiteagriculture, against African competition, with cheapcapital and skills.There were many other categories of Africanentrepreneurs, such as traders, who emerged from theChristian converts. Conditions which made the division oflabour possible also allowed these new African elites torelease their youth to attend school. Indeed some of themtook education so seriously that they ended up gettinguniversity degrees in American and European universities.It is estimated that by the time of the Union of SouthAfrica in 1910 there were more than four hundred Africanuniversity graduates in South Africa. It was this cohortwho led the formation of the African National Congress in1912.The mission of the colonialists was straight forward: toconfiscate the land and to extort the labour of the

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Natives to exploit its natural resources for the benefitof the colonial mother country. Consequently, in SubSaharan Africa, the division of labour was limited by thefact that this was the main economic activity which tookplace there. In the preceding chapter I showed that theGross National Income is given by

GNI = Total Rent + Total Wages + Total Profit

The use of the land for agriculture and mineralextraction raised a lot of rent for its colonial owners.A few big colonial entrepreneurs made a lot of profitmainly from mineral extraction. These entrepreneursemployed some natives who earned meager wages from theselimited industries. To this day most former colonies inAfrica still depend almost entirely on exporting rawmaterials. The question is whether a country whichhappens to be rich in terms of God given naturalresources, such as precious metals or oil, can be said tobe rich in the ordinary economic sense of the word whichI defined in the preceding chapter.

1.2 The Oil Democratic Republic [ODR]

To address this question let us take the extremehypothetical case of a country which I shall call the OilDemocratic Republic [ODR]. At the ODR individual familieslive in simple self made huts. They eat food they growin their gardens and they wear simple garments made ofskins of domestic animals they keep but they do not seeany need for them to trade in food and livestock. In anycase every family has just enough of these. The ODR hasoil which is extracted by a British multinational oilcorporation using British engineers and technicians. TheODR has the good fortune of an honest government whichgets its revenue from the rent paid by the oilcorporation. Since there are no wage or profit earners,this rent is the only contribution to the gross nationalincome which is

GNI = Total Rent

The oil corporation ships the oil to Britain and itsentire income from that oil and gas is repatriated. Noone in the country does any work which creates wealth.There are civil servants who do things like nursing,

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teaching, policing and staging pageantry for visitingBritish royalty and dignitaries. The rent may actually bea substantial amount of money and the government may useit to pay its civil servants handsome salaries in Britishpounds, for argument’s sake, since the oil corporation isassumed to be British. The question is can the civil servants be called rich?What can they do with their large salaries? Without wageand profit earners there is nothing of value which isobtainable within the country. Actually if the countryhad a currency of its own it would be absolutelyworthless since there would be nothing to buy with itanywhere in the world since it does not represent anygoods and services produced at the ODR. Currency hasvalue only to the extent that it corresponds toappropriate quantities of goods and services produced atthe country to which it belongs. Within the ODR thecivil servants can only use their pounds if a number ofconditions are met. At least one entrepreneur is requiredto:

Identify goods that can be sourced in Britain andwhich are likely to be considered useful by thepeople of the ODR.

Market these goods to the people of the ODR in orderto create a ‘want’ and a strong demand for them.

Bring the goods to the ODR and sell them at aprofit.

For purposes of our discussion suppose the entrepreneur,perhaps with the capable assistance of a missionary,convinces the citizens of the ODR that it is anabomination in the eyes of the Lord to wear garments madeof animal skins and that more fitting attire for Godfearing people is cotton and woolen clothes. The ODRgains a few entrepreneurs who earn profits in theclothing import business and who employ a limited numberof workers who earn wages by providing services in thisbusiness.There are a few decent roads especially around StateHouse in the capital and there is, of course, also theexcellent road leading from the capital to the village of

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His Excellency, the President of the ODR. On these fewroads the few entrepreneurs, top government politiciansand officials drive their fancy cars. Otherwise the onlyviable means to get from one part of the country to theother is by air which is also available only to the fewsuper rich people. All these rich people take the ODR asjust a place to make money. Their only opportunity toreally enjoy their money is when they go to Britain whichthey do so often that they have second houses there.Cabinet ministers take great pride in the Londonaddresses which appear on their business cards.The resources of the ODR provide the capital to employBritons in all sorts of quality jobs some of which arecreated by a demand for goods and services at the ODR.For example the oil company used the profits it made fromselling ODR crude oil on international markets to buildan oil refinery in Britain which processes the ODR oil.Some of the petroleum is exported back to the ODR whereit is sold at considerable profit which is againrepatriated back to Britain. This profit is ultimately aportion of the rent the oil company paid to the ODR inthe first place. The demand for clothes at the ODR enables clothingcompanies in Britain to employ more machinery and workersin clothing factories. It also creates a secondarydemand for detergents and irons all of which are alsosupplied by Britain Similarly this demand finances theemployment of more machinery and labour in the Britishdetergents industry. Ultimately all the British machineryand labour which services the ODR is financed by the ODRoil. It generates wages and profits for Britons inBritain. These wages and profits augment the alreadyconsiderable gross national income of Britain. This wasthe colonial agenda.

2 The pedigree of the African elite

2.1 The partially assimilated

It is clear that the early African Christian convertsplayed an important role in the affairs of the continentfrom the beginning of colonialism. They were the firstindigenous allies of the colonialists but they were also

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the architects of the downfall of colonialism. I havealready pointed out that the introduction of westerneducation to the first Christian converts undermined theauthority of the indigenous aristocrats because theireducation made the converts feel superior. This dividedAfrican communities into ‘Christians’ and ‘Heathens’ whodespised each other. The Christians felt the Heathens were ignorant while theHeathens thought the Christians were traitors and puppetsof the colonialists. These divisions were activelycultivated and exploited by the colonialists to enablethemselves to recruit native allies against their morerecalcitrant compatriots. Tribes were weakened by thesimple stratagem of dividing their royal families bycreating Christian rivals of the legitimate rulers. Tothis day almost all African tribes27 in South Africa havetwo kings each, one of the two being a colonial creation.In Natal, after many bloody conflicts with colonialists,the Zulu traditionalists retreated to the region north ofthe Thukela River which came to be known as Zululandproper and to which the authority of the Zulu kingdom wasgeographically confined. The southern part of theoriginal Kingdom became known as Natal where thecolonialists now ruled the roost. Naturally, Christianconverts were initially concentrated in Natal though, inthis area too, there were also a lot of Zulutraditionalists who retained allegiance to the Zulu Kingand believed in resistance. The colonialists never attempted to assimilate theconverts into their society. On the contrary the latterwere kept at arms length by the former who only neededthe converts as functionaries to help the colonialistsfulfill their colonial mandate. However, to the extentthat their adoption of European ways alienated them fromtheir fellow Africans, the converts were assimilated intoa growing society with a way of life which was midwaybetween African and European culture. They underwent aprocess which might be called partial assimilation.Nothing illustrates this partial assimilation morestarkly than the mixture of ‘Christianity’ and Africanreligion which these ‘converts’ practiced and are still

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practicing to this day. Most African Christians stillbelieve that, as dictated by African religion, certainrituals must be performed to induce their ancestors tointercede with God on their behalf. Even during theceremonies for performing these rituals Africans areliable to offer prayers to God in the name of JesusChrist, as befits good Christians. As if this religiousconcoction were not sufficiently bewildering, nowadays itis not uncommon for those who practice this strangereligious hybrid to be also Marxists and active membersof the communist party!To Africans and everybody else, religion is a means ofharnessing supernatural powers. Now since, as the sayinggoes, imitation is the best form of flattery, it followsthat a people can only imitate the religion of strangersif those strangers are deemed, by their imitators, to behaving extraordinary powers. Speculating aboutextraterrestrial life and civilizations, the famousevolutionary biologist and philosopher, Richard Dawkins28

wrote:Whether we ever get to know about them or not, there are very probablyalien civilizations that are superhuman, to the point of being god-like inways that exceed anything a theologian could possibly imagine. Theirtechnical achievements would seem as supernatural to us as ours wouldseem to a Dark Age peasant transported to the twenty first century.Imagine his response to a laptop computer, a mobile telephone,…AsArthur C Clarke put it, in his Third Law: ‘Any sufficiently advancedtechnology is indistinguishable from magic’.

So the superior technology of the colonialists wouldhave seemed magical to the Natives. It is therefore notsurprising that the Natives would have wished to harnessthe power of the colonialists from source: thecolonialists’ gods. Of course this illicit love affairwith foreign gods had to be exercised with sensitivity soas not to offend the Native’s own gods. [Everyone’s godsare jealous. The African’s gods are no exception.] It wasa delicate piece of spiritual diplomacy. However, whenthe children of Jericho go so far as to admire Joshua,that is an abomination. It is tantamount to spitting onthe graves of their own forefathers and therefore they

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ought to expect the wrath of their spirits. [Ingqumboyeminyanya/Ulaka lwabaphansi]. The gods cannot be fooled.

2.2 A twilight spiritual existence

In African religion spirituality is an inseparable aspectof being a member of a family, a clan, a tribe andultimately, humanity. It is part of one’s existence whichis but a link between the future and the past in acontinuum which can be traced back to one’s ancestors andultimately to uMvelingqangi [Literally: the first one tocome into existence] which is the African name for God.As already mentioned, the African idea of worship is toimplore one’s ancestors to intercede with God on one’sbehalf. Where Christians pray to God through Jesus Christ, theAfricans pray to God through the ancestors. The ancestorsare permanently and vigilantly watching over theirdescendants and steering them away from dangers andgenerally bringing them good luck. In return thedescendents are supposed to show gratitude by regularlyperforming certain prescribed rituals. Gross neglect ofone’s responsibilities to the ancestors is certain toprovoke a spell of bad luck which can only be broken byperforming appropriate rituals to pacify the ancestors.In short, there is a fundamental conflict between the tworeligions. Indeed uBuntu, the central ethical principleof African religion, sits uncomfortably – to say theleast - with Christianity, as I demonstrated in chapter1. The African could not abandon his African religionbecause one does not choose to belong to that religion.The very notion of an African sitting down and reflectingon whether to subscribe to the African religion or not isabsurd. As already mentioned, an African’s very existencemakes him part of his religion. I have already outlinedthe circumstances which attracted the Africans toChristianity. So the impossibility of abandoning theirAfrican religion forced these ‘converts’ into atwilight religious existence. It was a partialconversion which is not unlike their partialassimilation.

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The African elite were forced to carry the burden oftheir ancestors by circumstances beyond their control,when all they wanted was to enter and be accepted intothe Kingdom of Jesus Christ. Similarly the African elitewere forced by circumstances beyond their control into anationalism which associated them with their fellowAfricans when all they wanted was to enter into and beaccepted by the colonial white community. This explainsMoeletsi Mbeki’s profound observation about Africannationalism which I cited in chapter 1.

2.3 The African elite as men of the world

During the twentieth century the African eliteencountered and befriended communists who were naturallyallied to the Soviet Union which was obviously the onlypower which had the inclination and the might tochallenge the colonial powers. History soon repeateditself. To harness the power of the Soviet Union theAfrican elite had to imbibe communism, their religion. Itdid not matter that communism and Christianity are notcompatible. By this time they were quite adept atjuggling clashing religions.Another contradiction was that the colonialists whom ourAfrican elite were so keen to join were of courserepelled by communism. The elites were clearly loved toshock their mentors in the manner of delinquentjuveniles. The elite even went so far as to allow thecommunist to draft the Freedom Charter, a document whichsoon assumed the historic status of the fundamentalstatement of principles guiding the liberation movement.Of course the Charter enunciated socialist principles.But as we shall see in the following chapters, even aftertaking over government having concluded a deal with thecolonialists which excluded socialism, the African elitecontinued to use socialist rhetoric to sustain links withor to occasionally touch base with the masses. We have seen that the essence of African religion isfellowship with one’s community which necessarilyextends to the past and therefore includes the ancestors.It is therefore clear that to abandon this religion afterconversion to Christianity would be tantamount to

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renouncing fellowship with one’s community. So one mightsay the African elite lived as Christians but retainedtheir African religion to sustain links with or tooccasionally touch base with their extended communities.The contradictions between Christianity and Africanreligion were only troubling from a philosophical standpoint. But the African elite did not view these mattersfrom this perspective. To them African religion andChristianity were merely two different modes of existencewhich were necessary in a dual world brought about by theencounter of African and European culture. Under thecircumstances the supreme life skill became the abilityto negotiate one’s way between these two contradictoryworlds.Later, when the African elite led the liberation movementin exile they had to negotiate their way between the dualworld of Christianity, western democracy and capitalismon the one hand and Communism, dictatorship of theproletariat and socialism on the other hand. At thisstage the African elite were past masters at negotiatingtheir way between contradictory cultures. On the one handthey jumped on the communist bandwagon without abandoningChristianity while on the other hand they embracedsocialism without abandoning capitalism. Indeed they evenembraced dictatorship without renouncing democracy!For example, South Africa experienced a democracy erapresident who could be such an unyielding autocrat,within his party, that he forced the membership toaccept voodoo biological science regarding AIDS andmarginalized competent technocrats he disliked whilekeeping corrupt officials which he liked. Yet thispresident championed democratic government and goodgovernance in the rest of the continent.

3 British colonialism in India

3.1 The economic value of India as a colony

Outside Africa, the only former colonies which revertedback to rule by indigenous majorities after colonialismare in Asia. India and China are the largest and bestexamples to examine. The colonial histories of thesecountries are unique and they are distinguished from

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their counterparts outside Eurasia by the fact that theyare two of the worlds oldest civilizations. Bothcountries acquired crucial technologies such as thecompass, gunpowder and the press, all of which Chinainvented, long before Europe received them.When the British East India Company [BEIC] set up tradingstations in India in the early seventeenth century,India outstripped Britain as an industrial andmanufacturing power. In the era prior to the industrialrevolution the attraction of India to the colonialistswas the supply of cheap manufactured goods while lessdeveloped colonies were needed for their supply of cheapraw materials. India then held the world championship,which it is regaining today, as a low cost manufacturerof goods such as textiles. In his29 ‘History of theUniverse’, J Pirenne wrote:

In the middle of the seventeenth century, Asia still had a far moreimportant place in the world than Europe. The riches of Asia wereincomparably greater than those of the European states. Her industrialtechniques showed a subtlety and a tradition that the Europeanhandicrafts did not possess. And there was nothing in the more modernmethods used by the traders of the Western countries that Asian tradehad to envy. In matters of credit, transfer of funds, insurance, andcartels, neither India, Persia, nor China had anything to learn fromEurope.

The BEIC was a chartered company, a creature which hadits roots in monopolistic medieval trading guilds. Itbrought together rich merchants who were grantedexclusive trading rights in a particular area. Theinfluence of these merchants was considerably enhancedby their common practice of bribing30 politicians. Theywere granted special diplomatic, legislative andmilitary authority which enabled them to harness the fullmight of the empire for profit. The BEIC rapidly established a number of trading stations[or ‘factories’ as they dishonestly and misleadinglycalled them] at various locations on the coastline ofIndia and, at every opportunity, cajoled the Indianauthorities into yielding concessions, such as exemptionfrom the payment of custom duties. By the middle of theseventeenth century the BEIC were transporting large

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volumes of manufactured goods to Britain via the Cape ofGood Hope using the largest ships of those days. In Britain these goods were re-exported to continentalEurope as far as Turkey where the BEIC managed toundercut its competitors who imported from India viaoverland caravan routes. The company could easily affordthe considerable cost of engaging in this strategic pricewar because of the highly lucrative slave trade betweenAfrica and the Americas in which the company earned a lotof silver31. For India the adverse effects of the dwindling overlandtrade were reduced revenues for the Mughal Emperor.In a multi-caste, multi-tribal and multi-religiouscountry, with a divisive pro-Moslem Emperor, cracks werethere for all to see, and the BEIC would waste no timein exploiting them as soon as the fortunes of the companybegan to wane. This happened when European wool and silkmerchants decided they would no longer put up withcompetition from India textiles which had becomefashionable in bourgeoisie society. They therefore soughtand obtained restrictions on the purchase of these goodsin their respective countries. The company had toreinvent itself if it was to stay in business.The trade balance had been skewed hopelessly in favour ofIndians who would only accept silver or gold for paymentsince they had no interest in European goods. So evenbefore trade restrictions were slammed on Indian textilesthere was already growing European belligerence whichfound expression in “a rising chorus of voicesbemoaning the loss of ‘European silver’ to Asia. Whenthe news of the European ban on Indian textiles reachedthe managers of the company trading stations in India,Gerald Ungier, chief of the ‘factory’ at Bombay wrote tohis directors: “The time now requires you to manage yourgeneral commerce with the sword in your hands”. To undermine the authority of their host, companyrepresentatives systematically broke Indian laws by forinstance using export permits illegally in internal tradeand using them as an excuse to refuse paying tax,interfering in local politics, fortifying their stationsillegally, setting one group of local merchants against

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another. This sort of behaviour culminated in 1757 inthe battle of Plassey [Palashi] in which the Nawab[Ruler] of Bengal confronted the company. The victory ofthe company in this battle is generally considered tomark the beginning of British colonialism in India.The immediate aftermath of the battle of Plassey was theappointment of a puppet Nawab for Bengal by the companyand the sacking of the treasury, ostensibly for thepayment of reparations. Most serious was the annexationof vast amounts of land and the appropriation by thecompany of rent for these lands. In ‘Rise and Fall of theEast India Company’, R Mukerji argued that there werecompelling economic imperatives that drew the EuropeanIndia Companies into the path of imperialism. He pointedout that although monopoly rights assured the IndiaCompanies of the exclusive privileges of buying andselling, it did not guarantee that they could buy cheap.For that, political control was essential”.As soon as the Company gained political control itstarted putting all sorts of impediments to thwart freetrade by Indian merchants. The export, import andmanufacture of goods by independent Indian merchants wasmade increasingly difficult as this business was forciblyshifted to intermediaries hired by the BEIC. “Sepoys[Indian soldiers allied to the colonialists] of the EastIndia Company were sent to destroy the factories owned byIndian rivals to the East India Company. Independentweavers who refused to work for the pitiful wages thatthe East India Company offered, had their thumbs cutoff”. After Plassey the BEIC rapidly extended itspolitical dictatorship and seized control of overlandtrade. The colonization of India had begun in earnest.

3.2The cultural influence of the colonial masters

There is a widely held theory, of the origins of theIndian people, which postulates a European occupation ofIndia which predates the colonial era by three millennia.In terms of this theory, which is supported bylinguistics, the original inhabitants of India consistedof three distinct groups of hunter gatherers, Negroids,Mongoloids and Austroloids. These people were later

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joined by Dravidians, a farming people of Mediterraneanorigins who probably migrated to South Asia for reasonssimilar to those which drove the Bantu to the south ofthe African continent. The Dravidians were responsiblefor the civilization which arose in the Indiansubcontinent around 3000 BC. Since then India hasexperienced two waves of European colonialism.The first wave came overland about 1500 BC when Aryansfrom Iran and Southern Russia invaded Northern Indiapushing locals southwards or towards the jungles andmountains of north India. Having conquered thesubcontinent the Aryans organized themselves into thefirst three of the following social classes [calledVarnas] which I shall list in order of their originalrelative importance:

Kshtria, the warrior class consisting of aristocrats Brahmans, the priestly class consisting of priests

and educated people Vaisia, the class of farmers and craftsmen Sudras, the peasants and simple workers

In a political struggle for leadership the Brahmanseventually gained the upper hand. As the conquest ofIndia proceeded the Vaisia became the landlords andbusinessmen. The last class of Sudras consisted of thevanquished locals and the descendents of the mixed racechildren of the Aryans and the locals. Now, some disputethe Aryan-Dravidian theory but whether it is true or not,Indian society did get to be divided into these classesat some stage in history and that is all that matters formy present purposes.With increasing specialization in the economy sons tendedto inherit the professions of their fathers Eventuallyclans associated with a variety of professions emerged.Each clan fitted into an appropriate class among thoselisted above. However there were lowly professions, suchas cleaning and sewerage, which were despised to such anextent that the clans who practiced them did not qualifyeven to be Sudras. They were called untouchables andtreated as outcasts of society. This class system isbuilt into the Hindu religion. Each class has certain

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duties and rights. Occupations and even diet aredetermined by class. The second [1st if the Aryan-Dravidian theory is wrong]wave of European colonialism hit India after the middleages, 3000 years after the first arrival of Aryans. Thepioneering Aryans had since merged substantially with theoriginal Indians. However the historical discouragementof intermarriages between different classes ensured thatthe complexion of the higher classes tended to belighter. This variation of complexion with class was alsoreflected in the Hindu religion which abounds withstories about good Aryans and dark skinned demons anddevils. The different Gods also have dark skinned slaves.It all leaves the general impression that gods andpositive heroes were people of Aryan origin.The Colonialists knew a good thing which promoted theiragenda when they saw one. In contrast to their modusoperandi in Africa where the missionaries worked intandem with colonial authorities, in India the BEICcolonial administration had a strict policy not tochampion Christianity. The hierarchy which was enforcedby Hinduism suited them just fine. Its appeal lay in thefact that, in practice, the white colonialists fittedsnugly at the top of this hierarchy so what more couldthey ask for?Another factor which made it unwise to attempt todisplace Hinduism was that the religion supported theelevated relative status of the most influential Indians.Having lost their country to the colonialists this wasall they had left to affirm their sense of self worth.Overzealous attempts to preach Christianity were liableto provoke even Sepoys to mutiny as they did in theSouthern Indian city of Vellore in 1806. After thismutiny the Queen of England considered the matter seriousenough to warrant a proclamation which assured hersubjects that their religious faiths would be respected.As Sanjay Seth32 puts it, “As long as the Queen’s Indiansubjects paid and obeyed, they could profess whateverthey chose”.In contrast to the Africans who were beholden to theircolonial masters on account of their superior technology,

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the Indians were not overawed by the Europeans. The mostimportant consequence of this was that though the Britishhad defeated the Indians they had some respect for them.The bible was translated alright into a number ofIndian languages but very few Indians were converted toChristianity and those who were converted, notsurprisingly, tended to belong to lower castes. TheBritish knew that the Indians were unlikely to abandontheir own religions and meekly accept lessons inreligious instruction from the British.The missionaries had to lower their ambitions and focuson circular education in the hopes that it wouldinculcate questioning minds which would reject what theBritish called the superstitions and idolatry of theindigenous Hindu and Moslem religions. It was not only aforlorn hope but it was a remarkably arrogant hope. It ismind-boggling why a questioning mind would acceptsuperstitions propagated by a European region and yetreject those associated with Asian religions.

4 Comparative impact of European domination

4.1 Religion and nationalism

There are four enormously important features whichdistinguish British colonialism in India from thecolonialism which was experienced by colonial subjects insub Saharan Africa. Unlike the Africans

The Indians were spared conversion to the religionof their conquerors

The pre colonial social structure already includedthe entrepreneurial class and the class of tradesmenboth of which would be of critical importance inleading the post colonial economy

The Indian social structure remained more or lessintact and in particular the pre colonial elitesremained in place with the colonialists slottingthemselves in just above the traditional Indianelite.

The nationhood of the Indians was therefore notviolated and recreated in the image of the colonizeras was the case in Africa.

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The fact that the Indians were spared conversion to thereligion of their colonial conquerors must have had animportant limiting effect on the negative psychologicalimpact of colonialism. At least the Indians continuedseeing the world through their own eyes since they neversuffered anything nearly as traumatic as the Jerichosubversion which I discussed in chapter 1.The Indian caste system is known universally for itsnegative aspects characterized by the virulentdiscrimination and gross violation of human rights whichwas meted out to the so called untouchables. This tendsto overshadow the positive aspects which encouraged theemergence of clans which specialized in particulartrades. The obvious advantages of this system were thatit facilitated the apprenticeship system and also createdconditions which encouraged a constant rise in the levelof workmanship. Furthermore it ensured sustainableexploitation of natural resources.The whole notion of people inheriting privileges, rightsand responsibilities, by virtue of being born into aparticular social class, is anathema to any democrat. Butthe displacement of the pre colonial aristocrats inAfrica by an elite created and molded by the colonialistshad serious drawbacks which were not counterbalanced bythe apparent egalitarian nature of the latter system.Those who were born into the higher castes in Indiaconsidered themselves as part of an ancient system andtherefore they did not feel particularly special. Ifanything they might have felt a little humbled by thefact that the colonialists had usurped their authority insociety. By contrast the new African elite were placed inunaccustomed limelight while they had been created underconditions which cultivated narcissistic tendencies.The higher castes derived their positions and authorityfrom ancient traditions which defined the nationhood ofIndians which was never really destroyed by theircolonial governments. By contrast the new African elitewere created to usurp the authority of the traditionalaristocrats and they derived their own authority fromassociation with Europeans. The colonial governments hadgone out of their way to destroy the nationhood of the

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Africans. The new elite did not want to build anynationalism. They merely wanted to join their colonialmasters.The fact that the Indians were not converted to thereligion of their colonial masters meant that there issome private space in their souls which escaped violationby the colonialists. This is the deeper reason why anattempt to convert Indian troops provoked a mutiny. Inthe case of Africans the very soul was reaped out andremolded by the colonialists. The Africans made patheticattempts to reestablish private space in their souls byretaining aspects of their traditional religion andpracticing it clandestinely under cover of darkness forfear of offending the Christian authorities.

4.2 Education

In those parts of the world where literacy was inventedor received early, the original model of formaleducation was that it was, in the words of Langhor33,‘inextricably permeated by religion’. The main purposewas the study or memorization of scriptures and rituals.Even when secular subjects, such as geography or history,were being taught opportunities were never lost to bringin the religious angle by using religious scriptures,texts or stories. This was to be expected because it wasinvariably religious authorities who were in charge ofeducation.Western Europe was the first region which adopted a neweducational model ‘in which material whose truth claimswere not based on religious faith, and which were nottaught through the medium of religious texts, dominatedthe curriculum. In this model religion, if allowed atall, was confined to a separate class on the topic’. Thisis the educational model which was brought by Britishcolonialism to India. The missionaries accommodated the‘religious neutrality’ of the BEIC only by refrainingfrom brazen proselytizing such as by street preaching.But within the scope of the recognized British educationmodel, in their schools, they made full use of theopportunity to teach religious instruction as a separatesubject.

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The Indians, especially the educated Brahmans, recognizedthe practical value of British secular educationespecially since it provided access to prestigious jobs,in the British colonial government, which were consideredappropriate for the Brahman class. They also recognizedthe excellent educational standards of many of themission schools and sent their children there despite theunwanted Christian religious instruction which went withit. There ensued ‘a cat and mouse game in which themissionary institution offered the bait of an Englisheducation, while the student and his parents sought totake the bait without swallowing the hook’. More oftenthan not, ‘parents succeeded in getting their sons aneducation without the disaster of conversion befallingthem’.Thus even as they surrendered their children to beeducated by the British, the Indians retained asubstantial measure of control over their own destiny asa nation. The Indians recognized the importance of thatinviolate private space in their souls. I believe that itwas the retention of this space which played a crucialrole in enabling India to rise again, after colonialism,as a self respecting nation. It helped that the precolonial Brahmans, unlike their African counterparts,were not illiterate

5 Afrikaner nationalism in post war SA

5.1 The Christian trusteeship of the European race

I have discussed how Africans were disabused of theirown religions and given a new religion by thecolonialists. I have also recalled how Indians stubbornlyheld on to their religions despite the dogged attempts ofthe colonialists to convert them to Christianity. I shallnow look at how the Afrikaners responded to their owncolonial condition by creating for themselves a newreligion, a version of Christianity which prepared themto turn the tables against the colonialists and becomemasters of their own destiny and undisputed top dogs.In South Africa racial feudalism, which was calledapartheid, was preceded by fully fledged slavery whichwas practiced mainly in the Western Cape. Most of these

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slaves were imported from Asia. During the era of slaverythere were two categories of whites in the Western Cape.The first category consisted of colonial officials whotended to be from the European higher classes. The secondcategory consisted of a collection of low class whites ofseveral European nationalities most of whom had escapedfamines in rural serfdom or in urban slums.On account of historical involvement of the Dutch in theCape, dating back to the days of the Dutch East IndiaCompany and its halfway station to India, a largeproportion of these freebooters were of Dutch ancestry.Even though many were of miscellaneous European ancestry,they spoke a peasant version of Dutch, the lingua francaof the Cape, which they shared with the slaves and whichmutated into a language they called Afrikaans. Thismotley group of European peasants were to later forge anidentity based on carefully constructed myths and callthemselves Afrikaners with Afrikaans as their triballanguage.Given the class consciousness of European society of thetime, it is not surprising that the Afrikaners weregenerally despised by the rest of the colonial settlers.According to Christi van der Westhuizen34:

European travelers described the trekboers of the late eighteenth centuryas ‘miserable and lazy’, differing from the Khoikhoi only in respect of‘physiognomy and colour’, as their mode of land use and living was thesame. Lord Kitchener called the Boers ‘uncivilized Afrikaner savages witha thin white veneer’. Lord Randolph Churchill used every derogatoryperception in circulation at the time: ‘It may be asserted…that [the Boer]never plants a tree, never digs a well, never makes a road, never grows ablade of corn…He passes his days doing absolutely nothing beyondsmoking and drinking coffee…His simple ignorance is unfathomable.Similarly, in English novels of the era, Boers were depicted as ‘slowwitted’, ‘fatalistic’, ‘childlike’, and a ‘simple race’.

In 1838 the Afrikaners packed their wagons and left theCape in a huff and headed for the interior of thecountry. The main reason for the trek was what theAfrikaners saw as a contemptuous attitude of the Britishcolonial authorities towards them. The most objectionablemanifestation of this contempt was the freeing of slaves

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which the Afrikaners interpreted as the ‘equalization ofcoloured people with the whites35’.In the interior the Afrikaners fought pitched battleswith the African tribes who eventually succumbed tosuperior military technology. This opened the way for theestablishment of a particularly virulent kind of racialfeudalism. Like an abused child who grows up to be anabusive adult, the Afrikaners had found themselves idealvictims who were rich in livestock and endowed with the‘promised land of milk and honey’.An elaborate mythology was to be developed much later toequate the ‘great trek’ retrospectively with the biblicalexodus of the Jews from slavery in Egypt to the ‘promisedland’. Nevertheless the genocidal wars in the book ofJoshua, which chronicles the conquest of the ‘promisedland’, must have served as an inspiration to many amassacre of Africans as they valiantly attempted toprotect their land with technologically inferior weapons.When the English heard of the minerals which had beendiscovered in the interior they followed the Afrikanerswith intentions to forcibly confiscate these riches forthemselves. The result was the Anglo-Boer war which wasresolved in a conference which established the Union ofSouth Africa in 1910. The Afrikaners and their formerBritish adversaries took charge of the new union to theexclusion of blacks who now became the common object ofcontempt.The Afrikaners’ coming of age from a past of beingregarded as ‘childlike’ to a present and future of selfappointed ‘trusteeship’ over others was again captured inan excellent choice of quotes by van der Westhuizen[Ibid] in the following passage:

In an international television interview around 1960, Paul Sauer, DFMalan’s confidant…explained the “responsibility” the National Party [NP]government felt. Seemingly oblivious to the irony of his words, Sauer saidthat the government not only had the responsibility to the white peoplewho had elected them, but also towards the ‘barbarous and semi-barbarous’ black people, even though the latter had not voted for them.Therefore ‘the responsibility that the white man feels…should not beunderrated…The responsibility of his duty towards these under developed

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people not capable of governing themselves and who would fall to piecesif we did not look after them…’

By the 1960s the NPs program of principles declared that ‘natives andcoloureds’ were regarded as ‘permanent sections’ of the country’spopulation, but under the ‘Christian trusteeship of the European races’.

5.2 A weaker form of British trusteeship after union

The colonial wars of liberation were all about throwingaway the yoke of trusteeship. Now knowledge is power andtrusteeship has always been a power relationship based onstrategic knowledge which the colonialist possessed andthe natives lacked. When the Afrikaners conquered blacksthe knowledge gap between the Afrikaners and the Nativesamounted to little more than the Afrikaner’s familiaritywith the gun. By all accounts, their reading skills wereshaky, at best, and confined to specific passages in thebible. Unfortunately, for the natives, the gun and thebible were associated with the most strategic knowledgein the context of that era.After Union the British launched a charm offensive on theAfrikaner leadership who were in any event so enamouredof the British, by that time, that they did not requiremuch persuasion to submit themselves to assimilation.Chief among the assimilados were Generals Jan Smuts andLouis Botha. The latter was the first prime ministerafter union while the former later served as primeminister more than once and even became a member of theBritish war cabinet during the second world war. Afrikaners like Smuts and Botha favoured an inclusivewhite nationalism which united the English and theAfrikaners against the Blacks. Despite past conflictswith Britain, they nevertheless accepted trusteeship ofthe British government as evidenced by the followingpassage from van der Westhuizen: ‘Smuts did not believethat South Africa was ready for independence andsupported close ties with Britain’. This trusteeship wasof course a much weaker version of the original formwhich was motivated by unbridled contempt for theAfrikaners by the British.The poor Afrikaners were less likely to be assimilated bythe British but instead faced the ‘danger’ of being

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assimilated by blacks who were now subjected to the jointcontempt and trusteeship of the Afrikaner elite and theEnglish. However the poor Afrikaners were not sitting andwaiting to be assimilated by the English. Assimilation bythe English was their idea of upward mobility. Forexample, during the 1920s they were wont to display theirupwards aspirations in such ‘undesirable’ practices asadopting English nicknames. The National Party of JBM Hertzog and DF Malandisapproved of the acceptance by the Afrikaners of theEnglish as the standard of civilization. Malan, inparticular, advocated a withdrawal of sorts, by theAfrikaners from the overwhelming shadow of the moreaccomplished English group so that the Afrikaners coulddevelop self reliance in building themselves up, and thusacquire more assertiveness in their relations with theEnglish. When Smuts asserted that South Africa was not ready forindependence and supported close ties with Britain, hewas alluding to the fact that most of the Afrikaners wereunskilled. In other words he had no confidence in theAfrikaners to rapidly acquire the skills which wererequired to run and develop the South African economy. Tohim, Britain was still indispensable to South Africa as asource of skills.

5.3 How Afrikaners overturned English trusteeship

To Africans who were at the receiving end of apartheid,naturally, the most significant aspect of post 1948Afrikaner nationalism was the intensification of blackoppression. However from a post 1994 perspective, themost interesting aspect of Afrikaner nationalism is how alarge proportion of Afrikaners were successfullyeducated and trained very rapidly and enabled to catch upwith their English speaking compatriots.The genius of DF Malan, a theologian by training, was toconcoct an elaborate myth around the ‘Great Trek’ which,at a stroke, elevated Afrikaners to God’s chosen nation.The whole scheme was set into motion in a campaign whichbegan during the early 1930s culminating in the 1938centenary commemoration of the Great Trek and the laying

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of the foundation for the voortrekker monument. Cultural,educational and, above all, church leaders popularizedthe myth that: the motley group of Afrikaner familieswho had trekked from the Cape in 1838 were, in fact, anation.In terms of this brilliantly innovative legend, thenation or ‘volk’ was ‘handpicked by God to overcome thehardships of Africa while fighting British imperialismand black encroachment’. All of these battles were to befought in fulfillment of ‘a calling by God’ who had a‘purpose for the Afrikaner volk’. Victory in thesebattles was, as Calvin would have it, predestined to cometo pass under a cloud of divine glory. Afrikaners had tobe constantly aware of this calling and commit themselvesto their Christian duty to live up to it to the best oftheir God given abilities.The master stroke in this myth was to leave: ‘God’spurpose for the volk’, conveniently vaguely defined, asort of blank slate to be filled in by the Afrikanerleadership according to the challenges at hand at anygiven time. Now juxtapose this with the following sloganwhich was popularized at the time: ‘Believe in your God;Believe in your country; Believe in yourself!’. Then, forall practical purposes, the ‘God’ in the slogan standsfor the Afrikaner leadership for it was the leadershipwho had the prerogative to elaborate on ‘God’s purposefor the volk’.The effect of all this was to instill self confidence inAfrikaners [as members of a God’s chosen volk], selfreliance and iron discipline under the leadership of theofficial interpreters of God’s purpose. Thus theAfrikaners were given a state of mind which waswonderfully conducive to the task of self uplifment andcompetition with the English for supremacy in everysphere of public and intellectual life.It is clear that discipline was of utmost importance tothe Afrikaner leadership for every opportunity was usedto instill it in the minds of the rank and file. Forinstance the secret organization for the Afrikaner maleelite, called the Broederbond, taught that: “Within thedivinely ordained unity of the nation, the ‘innate’

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inequality of individual members creates a hierarchywithin which each individual has a place. The division oflabour is in accordance with ‘the will of God’. Those whooccupy the higher strata arrived there through naturalability and accordingly have duties which match theirprivileges. Entrepreneurs should therefore provide aservice in return for making profits, which are ‘the justreward for the execution of Christian duty’”. Thus theAfrikaners relied on the internal resources of the tribeto fast track the creation of their bourgeoisie. Pre andpost 1948 Afrikaner nationalism was predisposed to createthis class of leadership while pre and post 1994 blacknationalism, such as it was, was geared towards creatingtrade union type leadership. The former were preparing torun the economy while the latter were preparing to stepup demands.After the victory of the Afrikaner nationalists at thepolls in 1948, they were not particularly keen toencourage mixing with the English. With the discipline oftheir ‘calling’ and their newly found sense of selfreliance the Afrikaners intensified efforts to developAfrikaans for academic purposes, build and developAfrikaans schools and tertiary institutions to the samelevel as the English schools. They had sought powerspecifically for the purpose of seizing resources toenable them to do these things. For instance the policyto offer tuition primarily in Afrikaans had been adoptedby the University of Pretoria as early as 1932 at thebeginning of the great Afrikaner ‘God’s calling’campaign. Ironically this university had beenestablished, to a large extent, as a result of the visionand actions of General Jan Smuts, the most prominentassimilado.In no time the civil service, state corporations andstate research institutions were in exclusive Afrikanerhands. Future Afrikaner leaders in the private sector gottheir practical training in state corporations. Promisingyoung Afrikaner academics and senior students wereselected for training in specific strategic areas forwhich they were sent to the best universities abroad.

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The newly trained Afrikaners were placed in upwardlymobile positions in existing institutions such as theCouncil for Scientific and Industrial Research [CSIR].Others were used to establish new strategic corporationssuch as the Atomic Energy Board which later changed itsname to the South African Nuclear Energy Corporation[Necsa]. Indeed the ‘God’s calling’ myth was powerful andeffective. Afrikaners did whatever they decided to dowith awesome dedication and zeal.In all these activities the Afrikaners cooperated withthe English to a limited extent and even then only whenit suited them. They always kept enough distance with theEnglish to be able to legitimately claim subsequentachievements as theirs alone and therefore part of thefulfillment of ‘God’s calling’ to the Afrikaner.To sum up, the Afrikaners experienced two stages ofstewardship from the English. First, especially duringthe pre Great Trek days, they were subjected to thestronger variety of stewardship which is characterized bysevere contempt. Later, after Union, they experienced theweaker form of stewardship which entailed being acceptedby the English but on their own terms. It is this morebenign version of stewardship which the Afrikanernationalists sought to end after their electoral victoryof 1948. From the time of Union to 1948 the dominantsection of the Afrikaner elite preferred to join theEnglish colonial elite. The Afrikaner rank and file wereonly empowered when true Afrikaner nationalists cameinto power in 1948.

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Chapter 4The Pedigree of the Company

“…as [the land] had now become the property of the Company by the swordAnd by the laws of war”Jan van Riebeeck

1 Introduction to the Company

1.1The wretched of Europe

When attempting to understand the violent behaviour of adysfunctional individual the standard psychologicalapproach is to delve into the past of the individual in anattempt to discover whether the individual was ever abusedin his youth. It is generally assumed that there is almostalways a causal link between being abused and later being anabuser. Apparently this general rule applies to individualsas much as it does to communities. A class based feudalsystem in pre colonial Europe later gave rise to race basedfeudal systems in the colonies.During the eighteenth century the majority of Europeancitizens were barely subsisting either in rural serfdom orin urban slums where there was a lot of joblessness andhunger. This resulted in serious social problems such ashigh rates of crime and prostitution. It is significantthat British law of the time prescribed the death penalty36

for stealing 40 shillings or more. Even allowing for thecallous treatment of the lower classes in those days, thiswas a draconian law from which one can infer that the levelsof theft must have been horrendous, obviously as a result ofhunger.Even the hard-hearted eighteenth century British judgesfound it difficult to implement the 40 shillings law andtended to go out of their way to find excuses to convictpeople for stealing 39 shillings. By the second half of theeighteenth century British jails were over flowing with


convicts. In a desperate bid to address the problem, in1787 the British authorities rounded up some of these pettythieves and prostitutes37 and plied them with liquor,whereupon they were married to a ship load of releasedslaves who had fought on the side of Britain during theAmerican war of independence. Presumably, as a gesture offriendship to their former allies, Britain then shippedthe whole lot to Sierra Leone where they were dumped onthe coast and left to their own devices. In 1788 Britain shipped more of her criminals to Australia.Other marginalized Europeans voluntarily decided to relocateto the colonies and made their own transport arrangements.The latter might be called economic refugees. Colonialofficials always came from the more privileged classes. Itwould, of course, be simplistic and incorrect to blame thecomplex European economic problems of the time on India butIndia had a significant contribution. After all India’sshare38 of world income in 1700 was 22.6% compared toEurope’s share of 23%. In chapter 2 I have shown that bythe second half of the eighteenth century Britain hadforced India to become a low cost supplier ofmanufactured goods, especially textiles. These supplieswould have aggravated unemployment in Europe.The question is then who benefited from colonialism and howdid they benefit? The treatment I have cited which Britainmeted out to her less fortunate people shows that in theBritish society of that time the poor did not count formuch. Actually the British poor did not rank much higherthan African slaves in the eyes of the upper classes. Itshould therefore be expected that the British East IndiaCompany[BEIC] hardly ever considered the effect of theirpolicies on the British poor. But this does not mean thatthe British poor did not profit handsomely from colonialism.In fact colonialism generally raised living standards in themother countries as I demonstrated in terms of thehypothetical Oil Democratic Republic [ODR] in chapter 3.Furthermore the peasant and working class Europeans whowere off loaded at the colonies were thereby given an

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opportunity to use the colonized people as stepping stonesto move to higher classes.

1.2The Exclusive Company of Merchants

Since the era of global voyages, India is one of a verysmall number of nations which have ever been colonized by apower which had no overwhelming advantage in terms of itsstate of technological and cultural development. Mostcountries which succumbed to colonialism, during this erahad not even reached the economic stage of specialization. Ishall now discuss some generic characteristics of suchcolonial situations. Actually, I have already mentioned someof these characteristics in connection with South Africa andin the hypothetical case of the Oil Democratic Republic.After the military subjugation of the natives the highestitem on the colonial agenda was always to confiscate anyprecious metals the natives might possess and then toacquire the land bearing valuable minerals. Fertileagricultural land in the colonies was, of course, alwayswelcome not only to supply the miners but also to exportfood back to the mother country, in view of the highpopulation densities which prevailed in Europe. The mother country usually appointed a company, which Ishall henceforth refer to simply as the Company, torepresent its interests and wield power on its behalf at thecolony. The BEIC was just one of many such companies whichincluded Jan van Riebeeck’s Dutch East India Company [DEIC]which established a bridgehead for colonialism at the Capeof Good Hope. As I have already pointed out in the precedingchapter, the Company was always the creation of influentialmerchants who usually secured exclusive rights to controltrade with the colony. Since the Company was in charge of the colonial project, ittook possession of the land once the natives had beenrelieved of it. The land became the first commodity to betraded in the colony, with the Company controlling thereal estate business. The first customers necessarily had tobe outsiders to inject Foreign Direct Investment [FDI]. They

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were, naturally, some rich investors back in the mothercountry who bought large tracts of the cheap colonial land.It was usually possible to extort dirt cheap or slave manuallabour from the defeated natives. When that was not anoption slave labour was brought in from elsewhere. The newlandowners needed overseers to supervise the clearing ofwhat was often virgin land and to establish and run farmingoperations. Only Europeans were considered suitable forsupervisory roles and European labour was scarce, as aresult of which the relatively few colonial settlers tendedto command high salaries. This enabled them to accumulateenough capital to buy their own land within a relativelyshort time. At this stage economic activity in the colonypredominantly consisted of land sales and land clearing. Sothe Gross National Income of the colony mainly consisted ofdisbursements to the company for land transferred to privatehands and the wages earned by workers engaged in theimprovement of that land since, at this stage, land was themain commodity which could be bought in the colony and theclearing of the land was the main economic activity.Initially this income consisted of money entering the colonyfor the purchase of land and to finance its improvement butlater there were also contributions from money paid frominternal savings.GNI = Increase in total farm value = Value of land transf + Improvement

The Company, as the owner of the land, received money to thevalue of land transfers. Labour employed to effectimprovements in farms was, in value, equal to theseimprovements and therefore :

Wages[Farm Labour] = Improvements

The GNI was financed by cash inflows into the colony, orforeign direct investment [FDI], for the purchase andimprovement of land and finance for the same purposes frominternal sources such as accumulated savings from wageearnings.

GNI = FDI + Cash from internal sources

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Initially there is no economy, i.e. GNI equals zero, in thecolony and therefore no internal source of cash. At thisstage FDI is indispensable to kick start the economy. Inother words, investors in the mother country have to injectcash to invest in land which is the only tradable commodityat this stage. Note that when I introduced the notion ofGross National Income in chapter 2 I did not include landsales. The reason is that in that all the land was assumedto be already within the economy earning rent. In the caseof a new colony land is initially in the hands of thenatives and not part of the initially nonexistent colonialeconomy. After the subjugation of the natives the land isexpropriated. In other words it transfers to thecolonialists as a form of income we normally refer to asspoils of war. As van Riebeeck once put it, it becomes theproperty of the Company “by the sword and by the laws of war”. The Company can then introduce the land into the nascenteconomy either by extracting rent for its use or by sellingit. In effect, the sale assigns a monetary value to spoilsof war which can be regarded as the initial assetsbequeathed to the nascent vassal economy by the power whichfinanced the colonial conquest. It is the transfer ofownership title of these assets to foreigners which inducesthem to inject the capital required to employ labour toimprove the land and thus transform it into productiveassets. As more land was transferred to private hands thefarm produce increased and its value became a significantproportion of the national income so that it becamejustifiable to express the national income as follows:GNI[Agric] = Value of Land Transf + Improvement + Value of Agric Produce

The Company eventually runs out of virgin land available fortransfer to private ownership. When this stage is reached itis more appropriate to exclude the land in the nationalincome and write

GNI[Agric] = Improvement[Agric] + Value of Agricultural Produce

Everything I have said about investment in land foragriculture applies equally well for investment in land formining.

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GNI[Mine] = Improvement[Mine] + Value of Agricultural Produce

Clearly, the total GNI for both economic sectors is givenby the sum of the two

GNI = GNI[Agric] + GNI[Mine]

Actually, as I shall show below, the economies of the vastmajority of colonies never developed beyond the agriculturaland mining sectors which served the economies of thecolonial powers in the manner I demonstrated in thehypothetical example of the ODR. Naturally, most of theinfrastructure that was developed was only intended tofacilitate the export of the products of these sectors. Themonopoly status of the Company enabled it to buyagricultural surplus and minerals from the colony at verylow prices for sale in European markets. It also enabled theCompany to sell European goods at the colony at the highestpossible price. The use of cheap native or slave labour madeit possible to lower the prices of colonial produce withoutlowering the profits of entrepreneurs and the wages ofcolonial settlers.

2 The emergence of global agribusiness

2.1 The Malthusian prophesy of doom

The centrality of food to human existence is such that themain features of the trajectory of economic development ofmankind can be traced from primitive societies to thepresent by focusing on the agricultural sector of theeconomy. We know that between 10 000 and 6 000 BC wheat wasbeing farmed in Asia and the Middle East while maize wasbeing farmed in America and rice in Asia. The introductionof processed grain to the diet of humans enabled mothers towean their children earlier thus halving the period betweensuccessive pregnancies. This resulted in one of the earliest examples of bursts inpopulation growth39 caused by advances in agriculture orfood processing. Unfortunately such population growthsalways led to food shortages which lasted until the nextadvance in agriculture which would cause another surge in

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population. Thus the history of agricultural development ischaracterized by a long series of booms and busts.The first technological developments which prepared the wayfor the first major advances in agriculture were the dawnof the iron age and the use of animal power. This set thestage for a major innovation, the invention, about 1000AD,of an appropriate animal drawn plow which cut the soil moredeeply and thus allowed farmers to reach more deeply buriedsoil nutrients. Further advances followed, such as the useof animal manure and the rotation of cover crops toreplenish nitrates in the soil. The payoff was that ‘between1300 and 1600 grain yields doubled’.The population growth which resulted from these advances

was interrupted by the black death in 1347. By the year 1600many European countries, such as the Netherlands, France andItaly, had population densities greater than their farmlandscould sustain. Famines and mass starvation became widespreadin Europe and Asia and, as I’ve already pointed out, thissituation was the major factor which drove colonialism.There is a group of related values, such as empathy, whichconstitute what Africans [of the South] call Ubuntu. We liketo think that such values are peculiar to our culture. Yetthere have been economic conditions, in the histories ofmany other races, which have been favourable for thedominance of such values. According to the French historian,Gaston Roupnel, “In the sixteenth century, the beggar orvagrant would be fed and cared for before he was sent away.In the early seventeenth century, he had his head shaved.Later on, he was whipped; and at the end of the century…hewas turned into a convict”.In 1798, in a book entitled: “An essay on the Principles ofpopulation”, the economist Thomas Malthus inferred, from thehistorical trend of booms and busts in per capita foodproduction., that humanity was doomed. He believed that thecycles of booms and busts would soon conclude, because cropyields could increase only linearly while population grewgeometrically. He therefore reasoned that population growthwould soon outpace humanity’s capacity to feed itself at

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which point he predicted a cataclysmic famine as early asthe nineteenth century.In the event Europe was indeed plagued by famines in thenineteenth century but populations were not decimated.Europe was saved by the combination of colonialism andthe industrial revolution which brought about a whole lotof technologies such as rail transport, shipping andrefrigeration which led to the globalization of the foodsystem. It became possible to source European food suppliesin the U.S., Argentina, Australia and many other distantcolonies.

2.2 The emergence of the specialized farm and agribusiness

While agricultural production in Europe at the turn of thetwentieth century was limited by the scarcity of land, theU.S. had a very low population density at the time. Thuswhen food production had to be increased it was a matter ofplanting more acres. Even crop rotation was not aconsideration because once soil was exhausted, the Americanscould always move on to virgin land.Following in the wake of the industrial revolution of thenineteenth century, the early years of the twentieth centurywere a time of great innovations in mechanical technologyand the U.S. was at the fore front of these developments.They were quick to adopt labour saving technology such asmechanical thrashers and combine harvesters. Soon the U.S.was producing mountains of surplus food which was off loadedin the rest of the world, especially Europe. Food had becomea global commodity.The U.S., however, was not lulled into complacency by the

abundance of virgin land. They knew that since the land wasnot unlimited, sooner or later it would be exhausted and,like Europe, their only possibility for increasing foodproduction would be to increase yield per acre. So theydecided to find solutions to problems of the future whilethey still had plenty of time. It was an exemplary piece ofgovernment forward planning.

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The government proceeded to intervene massively throughlaws, agencies, new agricultural ‘land grant universities’,infrastructure such as dams, irrigation canals and railnetworks to create an enabling environment for the privatesector to find effective means of improving yields. Aboveall, there was a public funded program to maximize outputwhile protecting farmers from harvest failures and foodprice volatility. All of these activities were driven andcoordinated by a department of agriculture, the mission ofwhich was the provision of affordable food.Researchers in the land grant universities soon developednew plant varieties and animal breeds which grew faster andlarger. Despite these developments farmers were committing alarge proportion of total acreage to growing feed, to beturned by livestock into manure, to cover crops. Tosupplement crop breeding, fertilizers were also developed asa more effective alternative to manure and crop rotationwhich were then used to replenish nitrates in the soil. Amajor breakthrough was made with the development of anindustrial process known as Haber-Bosch for the manufactureof a synthetic ammonia fertilizer. This released vastamounts of land for farming new high yield crop varieties.The high yields and massive harvests necessitated

accelerated mechanization of the farming industry. Butmechanical harvesting and processing worked only if plantswere uniform. Maize ears, for instance, had to grow at auniform height to facilitate harvesting and had to be ofuniform size to facilitate removal of the grain from thecob. Through breeding, it soon became possible to designplants with required characteristics to suit mechanicaldevices.The breakthrough which led to the production of high volumesof low cost grain also had enormous implications forlivestock farming. Grain fed chickens, pigs and cattle grewquicker and larger than their foraging predecessors and theyrequired a much smaller amount of space. Thus concentratedanimal feeding operations [CAFOs] came into being. Howeverthe crowded conditions in CAFOs were favourable to disease

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outbreaks. The antibiotics which were fed to the animals tosolve this problem had the added advantage that they causedanimals to grow larger than normal.Up to roughly the middle of the twentieth century the farmwas a diverse operation producing livestock and a variety ofcrops for livestock and others for human consumption.Livestock provided meat, labour [before the days ofmechanization] and fertilizer [before the days of the Haber-Bosch process].The need for low cost production influenced thetransformation of farms into specialized operations focusingon single products. While a lot more inputs now had to bebought, the advantage was that resources and expertise couldnow be focused and costs could be spread over more units ofoutput to achieve economies of scale. This narrowing of thecore business of a farm and the outsourcing of traditionalfarm functions was an early example of a way of organizingbusiness that was to be central to the neo-liberal economicdogma in a globalizing world.The development of agricultural technology and the relatedtrend to outsource led to the growth of agribusinessconsisting of those businesses which provided inputs to thefarm and those which focused on processing farm products.These businesses were much less risky than the core ofagribusiness which is farming and therefore attracted a lotof finance via the stock exchange.

3 The economic forces driving consolidation

3.1 Consolidation of farm operations

We have seen that the growing agricultural output in theU.S. was accompanied by a rapid globalization ofagribusiness as the market expanded to Europe. There areeconomic forces which are unique to farming which drove arelentless process of consolidation of operations, fromfarm inputs to food processing, into larger and largerbusinesses many of which spanned the globe.

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To appreciate the uniqueness of farming consider adifferent industry such as clothing. Each producer setsprices but, in a globalized world, the greatest source ofpressure to lower prices would be international competition.In this industry, the largest contribution to productioncosts is the labour wage bill. It follows that it is thefirm which operates in an environment where it can get awaywith the lowest wages which is in a position to gain theupper hand.There are therefore floor prices, for goods in the

clothing industry, which are dependent on the minimum wagesprevailing in the global clothing industry. Assuming thereis no protectionism, the producer with minimum costs candrive the competition out of business and then push pricesup again by limiting supply which he can easily do by layingoff some of his workers.In contrast to the flexibility of a clothing factory, afarmer cannot adjust the volume of output as easily becausehis biggest and costliest input is land. Farmers cannotlayoff their land, a costly asset that is usually mortgaged,and so it is a fixed cost. Even when laying off the land isnot an issue, there are usually long lead times betweeninvesting in inputs – such as fertilizer, seeds, younganimals or feed – and obtaining outputs.The old fashioned farm which produced a variety ofcommodities could easily turn away from a commodity that wasnot fetching good prices and focus on alternatives. Thusspecialization also exacerbated the inflexibility offarmers. So when prices of farm products fall the onlyresponse which can enable the farmer to stay in business isto increase production so as to reduce unit costs in termsof economies of scale. This is a vicious circle which hasresulted in an inexorable trend of ‘the creativedestruction’ of smaller farms which then get consolidatedinto larger ones.Economies of scale have also been obtained by establishinglarge farming operations in third world countries withcheaper and more abundant land and labour. Paul Roberts40

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notes that this has ‘transformed countries like Brazil,Panama, India and Malaysia into vast plantations of coffeeand tea, sugar and banana – all bound for the tables ofmiddle class consumers in Europe, Japan and the UnitedStates’.As the farming operations grew bigger they acquired enough

clout to demand lower priced inputs. Again this sparked awave of consolidation amongst suppliers in a quest foreconomies of scale. Unfortunately the final step in aprocess of consolidation is the emergence of monopolies.This is precisely what seed, fertilizer and pesticideproducers became. The power swung back to monopolisticsuppliers who could manipulate prices.Downstream the growing size of the farming operations also

influenced the size of grain trading companies which, afterconsolidation, consisted mainly of Cargill and Continental[which would later merge] and Archer Daniels Midland. Atthis level of consolidation the balance of power swung tothe agricultural commodity trading companies. Thus farmersbecame price takers who had to accept whatever price thebuyers offered.So the farmers were caught in a pincer movement by theirsuppliers on the one hand and their buyers on the otherhand. Compared to the suppliers of input and the buyers offarm produce the extent of farm consolidation was verylimited indeed. Farms might have been getting larger butthere would always be many thousands of them. A monopoly waspolitically impossible. In this regard Roberts41 observesthat : “In yet another perverse dimension of the economicsof food, farming had become what economists call a ‘perfectcompetition’, with neighbours fighting to undersell oneanother by fractions of pennies per bushel – while themarket they sold to moved towards becoming the ‘perfectmonopoly’”.Had the market mechanism been allowed to run its course,creative destruction would have seen to the disappearance ofweaker farmers until a monopoly was established. However apolitical barrier to further consolidation was hit long

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before anything approaching a monopoly was established. Thefarming community wields a disproportionate amount ofpolitical power in the U.S. where a sparsely populated ruralstate is represented by the same number of senators as adensely populated urban state. Furthermore developedcountries consider food security to be of vital importance.So the U.S. started paying farmers billions of dollars ayear to grow less food.

3.2 The consolidation of food processing

While some farm products are sold by farmers directly tocommodities traders such as the grain trading companies,which deal in commodities exchanges, other products such asmeat and vegetables are sold to food processors and toretailers such as large supermarket chains. I shall firstexamine the impact of food processors in agribusiness.The effectiveness of the forces which drove down prices offarm products is graphically illustrated by the fact that,as early as the 1930s, coffee beans were so cheap that theBrazilians were burning the beans as fuel for locomotives.The low farm gate prices spurred the development of the foodprocessing industry which sought to add value toagricultural commodities. A commercially significant featureof agricultural commodities is their indistinguishability.The same low margin high volume model applies to all farmersand none of them can charge a markup on a bushel of wheat,say, which is invariably as a good as the wheat offered bythe next farmer.By contrast, food processors not only add value to thecommodities but they also package the final product in amanner which distinguishes it from the product of other foodprocessors. They are therefore in a position to charge amark up which reflects the value of their brand. Kellogg’smay be basically the same product as Bokomo corn flakes butthe better of the two brands can afford to charge a markupabove the other.Brand strength depends on heavy marketing. The higher theexpenditure on advertising, the more units can be sold. But

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the more units are sold the lower the production costs perunit and the higher the markup per unit. The greaterrevenues thus obtained can be ploughed back intoadvertising. This ‘virtuous circle’ tends to keep top brandson top and it raises the barrier to entry. While farmershave to rely on economies of scale to lower prices andsurvive stiff competition, the food processors rely onmarketing to achieve economies of scale in order to increaseprices and pocket more profit.The virtuous circle also provides a spur for theconsolidation of processors into fewer and larger operators.Like the large grain trading companies, the large foodprocessing corporations gained enough clout to bargain downprices paid to farmers. Their global operations also meantthat they could source farm products wherever productioncosts were the lowest. By the 1990s Nestle consumed so muchfarm produce such as coffee, cocoa, sugar, milk etc thatfifteen thousand square miles of farm, around the world, wasneeded to generate it.Farmers produce nutrition for human consumption and there isa limit to the amount of nutrition a given population canconsume. As I pointed out earlier, centuries ago, whenagricultural technology was advancing much slower thanpopulation changes, populations would rise until availablenutrition was inadequate to sustain the population and thenfamine would set in.Nowadays the trick is to entice the segment of the

population with substantial disposable income to take morenutrition than they need. This feat has been achieved byadding convenience to farm produce by effectively gettingthe household to outsource the preparation of food. Therelated proliferation of cheap fast [some say ‘junk’] foodshas brought about a significant increase in the incidence ofobesity.The fear of obesity itself has created new lucrativebusiness opportunities. There is now a growing industry of‘low fat’ and ‘health foods’. Calories are extracted toenable the population to consume more. False ‘values’ have

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generally been added to a variety of foods by associatingthem, in marketing campaigns, with desirable traits such ashealth, sports prowess and celebrity status. In the firstworld, it is all about creating new wants beyond the need ofbasic nutrition while nutrition is still a challenge in thethird world.

4 The WTO as a vehicle for neo colonialism

4.1 The opium wars

I have just demonstrated that modern multinational companiesthrive on ever expanding markets. In many ways thesemultinationals, and allied multilateral institutions such asthe WTO, are modeled on the Exclusive Companies of Merchantswhich were once in vogue in many European countries duringthe colonial era. The striking similarities include themonopolistic tendencies of the multinationals and theirdependence on cheap labour which produces cheap agriculturalproducts in the colonies. The current relentless downwardspressure on already low third world wages evokes colonialera labour practices. Therefore, I shall now pick up thetale of the BEIC where I left it off, in the precedingchapter.The Asian trade of the BEIC was of course not confined toIndia. There was also a lot of trade with China where theBEIC imported tea, silk and porcelain. As was the case withIndia the balance of trade was again heavily in favour ofthe Chinese who also had no interest in British products.The company applied exactly the same strategy it had usedin India, to destroy overland trade by undercutting it inEuropean markets, with the same effect on the revenues ofthe Qing Emperor. The BEIC was soon to resort to drugrunning to solve the problem of an unfavourable balance ofpayments. After the Battle of Plassey the BEIC forced the cultivationof opium in large quantities in India. This opium wasexported to China where it was sold mainly through the portof Canton to a rapidly increasing number of addicts in orderto recover the silver the BEIC was paying for tea, silk and

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porcelain. In 1800 Chinese authorities outlawed the saleof opium42 in their country. But the black market tradeflourished until in 1838 the emperor, appalled by the extentof opium addiction, assigned the task of stamping out opiumtrade to Commissioner Lin, a trusted senior official Lin rounded up the British merchants in Canton and demandedsurrender of the opium they had brought as a condition forrelease. Though Lin succeeded in confiscating half a millionpounds of processed opium, a British naval officer, CaptainCharles Elliot, protested that the merchants had the full support of theBritish government and were not bound to obey the laws of China. Perhapsto show that they were not subject to Chinese law Elliot’sdrunken sailors later killed innocent Chinese villagers andElliot refused to surrender the culprits to CommissionerLin. The latter prevented the British merchants fromobtaining tea, rice and silk. This led to a war which theChinese lost. The surrender terms in the treaty of Nanjing were that Chinashould pay reparations to Britain, legalize the importationof opium and open four ports to Britain for narcotics trade,cede Hong Kong to Queen Victoria, give British subjectsextraterritorial privileges in treaty ports [i.e. exemptionfrom Chinese law!]. On hearing about the trade termsenjoyed by Britain at the expense of the Chinese, theFrench, Americans and Russians demanded and gained the sametrade terms. It was an application of the Most FavouredNation [MFN] principle which is today enshrined in the tradepolicies of the World Trade Organization [WTO].

4.2 The WTO’s support of the modern day ‘Exclusive Companies of Merchants’

The advantages which the BEIC had gained for the entireEuropean continent by extending its oppressive rule in Asiawere noted by the author Abbe de Pradt43 as follows:

The people who have enough control over India to reduce substantially theexportation of European metallic currency into Asia rule there as much forEurope’s benefit as for their own; their empire is more common than

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particular, more European than British; as it expands, Europe benefits, andeach of their conquests is also a real conquest for the latter.

In other words, the service which the BEIC was providingfor Europe was to turn the balance of trade with Asia infavour of Europe even if this meant sinking to the level ofdrug running. In 1994 the first world established a‘multilateral institution’, the WTO to work in tandem withpresent day multinationals to be to the first world whatthe BEIC once was to Europe.When the WTO was first mooted in the eighties it was

touted as an organization which would be adapted to the newglobalizing economy. After it was formed, the WTO turned outto be an organization which was adapted to facilitatingglobalization by enforcing free cross border trade on termswhich suited the developed nations at the expense of thedeveloping world. It turned out to be the spearhead ofexploitative trade liberalization by duress.The developed countries used their economic power to advancetrade liberalization only in those areas where they had acomparative advantage compared to the less developedcountries. Otherwise they resisted liberalization. Given theoverwhelming relative wealth of the developed countriestheir approach ensured that trade negotiations were littlemore than the stalking of a whole lot of lame prey bypowerful predators.In a paper44 published by the Third World Network [TWN] DrYilmaz Akyuz, a former Chief Economist of UNCTAD, wrote:

Liberalization is pursued where the advanced countries have the upperhand including trade in industrial products, movement of money, capitaland enterprises, but restrictions continue unabated over trade inagricultural products, labour mobility and technology transfer whereliberalization would generally benefit the developing world.

Multinational disciplines in trade now serve to restrict not so muchdiscriminatory treatment among countries but government interventionsvis-à-vis markets. The MFN principle has increasingly been replaced by‘market access’ and ‘national treatment’ as liberalization and non-distortionhave become the organizing principles of international trade and

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investment. The drive for greater liberalization than is found feasible at themultilateral level has given rise to proliferation of discriminatory bilateraland regional free trade agreements, thereby constantly eroding the MFNprinciple.

In money and finance, both pillars of the postwar international monetaryarrangements – restrictions over short term capital flows and exchange rateobligations - disappeared with the demise of the Bretton Woodsarrangements. In effect, finance has become the vanguard of theinternational liberal order, premised on the assumption that financialmarkets can do their own disciplining and do not need international rulesor policy interventions

In order to clarify the predatory nature of trade termswhich are imposed by rich nations on their poorercounterparts I shall now briefly discuss each of the sectorsof international trade which are mentioned by Yilmaz Akyuzin this passage.

Trade in agricultural productsThe current [2008] round of WTO negotiations is the DohaDevelopment Agenda [DDA], or Doha Round, which was launchedin Doha, Qatar in November 2001. The Doha round was supposedto be an ambitious effort to make globalization moreinclusive and help the world’s poor, particularly byslashing barriers and subsidies in farming. The talks haveturned out to be highly contentious and to date there is noagreement in sight.For many years the issue of farm subsidies has fuelledlegitimate disgruntlement and protest by third worldcountries against the first world. Third world countriescontend that their farmers are disadvantaged by unfairtrading condition because at home and in international tradethey have to compete with subsidized first worldagricultural products. The first world ought to beembarrassed by this situation given that they have thepropensity to lecture the third world about the virtues offree trade.Instead of being overcome by a sense of shame, the US andthe EU have been strenuously resisting pressure from the

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third world to reduce farm subsidies. Instead they have beenshamelessly using offers of insignificant reductions insubsidies as bargaining chips to make endless demands fortrade concessions which are economically damaging to alreadyimpoverished countries which rely heavily on agriculture fortheir incomes.

Labour mobility If free trade across national borders is something to beencouraged then surely people must be allowed to crossborders freely for purposes of selling their labour wherethey like. However this would result in a tidal wave ofthird world workers migrating to the first world. In otherwords it would allow the third world to export theirunemployment to the first world. So the enthusiasm of thefirst world for trade liberalization does not include labourmobilityThe rules of the game appear to stipulate that the firstworld has a right to dump its surplus of anything on thethird world but the third world is not allowed reciprocalaction so liberalization can wait in this sector.

Technological transferIt is the developed countries which can afford to spendsubstantial amounts of money on science and technology [S&T]research and which have abundant S&T skills which drivetheir economic development. It is technology transfer whichenabled economically advanced countries to make thetransition from underdeveloped to developed countries. Now one of the parts of the agreement establishing the WTOentails TRIPS, an agreement on intellectual propertyrights. This agreement includes effective mechanisms totemper the power of patent holders. Governments are allowedto issue compulsory licenses to government agencies orcompanies to produce or import generic versions of amedicine that has been patented.To close such loopholes the developed countries usebilateral or regional agreements with weaker nations to

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conclude one sided agreements which extend IntellectualProperty [IP] rights beyond the requirements of TRIPS.

Trade in industrial products. Industrialized countries are, by definition, the main sourceof industrialized goods in the world and therefore they havethe greatest interest in getting less developed countriesto lower tariffs which apply to these goods in order tofacilitate their export to those countries.The other side of the coin is that low tariffs forindustrial products remove the protection which is necessaryfor less developed countries to develop their ownindustries. This condemns them to forever being exporters ofprimary products such as minerals and importers ofmanufactured goods.The exploitative relations between the first world and thedeveloping world are reflected in both international financeand international trade. In both cases the first world ramsdown the throats of the developing world a god, representedby the WC, which they themselves obey only when it suitsthem. In the former case the IMF and the World Bank enforceobedience while in the latter case it is the WTO whichwields first world economic power to cow the developingworld into submission.

4.3 The perennial knowledge gap

It is remarkable how the agenda of western countries hasremained constant over centuries and how the modernpolitically correct diplomatic language masks this agenda.Where the missionaries softened the colonies for subsequentassault by ‘The Company’ the diplomats now prepare the thirdworld for the multinationals.The missionaries were, of course, not only responsible forthe spiritual nourishment of the natives. They provided allthe education for the natives which they designed toinculcate the colonialist’s worldview. The present daymissionaries take their role just as seriously. For instance

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paragraph 24 of the Doha WTO Ministerial Declaration of2001 reads, in part, as follows:

We recognize the need of developing and least-developed countries forenhanced support for technical assistance and capacity building in thisarea [Interaction between trade and competition policy], including policyanalysis and development so that they may better evaluate the implicationsof closer multilateral cooperation for their development policies andobjectives, and human and institutional development.

Shorn of the diplomatic speak, this means that the officialsof the developing and least developed countries are going tobe given lessons by developed countries on trade andcompetition policy so that they can understand, accept andinternalize the worldview of the developed nations.‘Capacity building’ is mentioned in several other paragraphsof the declaration including paragraphs 25, 38 and 39.The current global colonialists are a polished, suave lotwho are masters of politically correct speak. They alwaysgive the impression of being only interested in developingless developed countries and helping them eliminate hunger,in particular. Paragraph 2 of the Ministerial Declarationmentioned above reads, in part, as follows:

International trade can play a major role in the promotion of economicdevelopment and the alleviation of poverty…The majority of WTO membersare developing countries. We seek to place their needs and interests at theheart of the Work Programme adopted in this declaration…We shallcontinue to make positive efforts designed to ensure that developingcountries, and especially the least developed among them, secure a share inthe growth of world trade commensurate with the needs of their economicdevelopment.

Yet, in reality, the developed countries are only interestedin gaining access to the natural resources and markets ofthe third world without necessarily opening their ownmarkets to the third world.Knowledge has always conferred power upon those who possessit. Knowledge is power, as the saying goes. But in theglobalized world this truism is of greater relevance than ithas ever been. It is not just superior economic or military

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power which has enabled the first world countries to lootthe wealth of the third world. It is all round knowledge.Third world leaders still relate to their first worldcounterparts as our illiterate forefathers related to thecolonial masters. If anything, the knowledge gap haswidened.It makes sense that first world countries have superiortechnological knowledge but the third world have no excusefor its lack of capacity in areas which merely requiredecent levels of literacy. For instance, several paragraphsof the Doha Ministerial Declaration of 2001 identify,with nauseating paternalism, a number of areas in which‘developing and least developed’ countries need ‘enhancedsupport, technical assistance and capacity building…’ It isdifficult to understand how third world ministers broughtthemselves to sign such an insulting document.The citizens of the developing world are still treated asilliterates in exactly the same way they were treated duringthe first wave of colonialism. It does not seem to help thatAfrica is home to about one hundred universities. As I shallshow in the next chapter, OPEC demonstrated that it ispossible to organize effectively against bullying by thedeveloped world but African countries endowed with naturalresources do not seem to have learned any lesson from this.

5 A new scramble for colonial possessions

5.1 Africa is not coping

In the preceding chapter I sketched the political economy ofa pre colonial world in which Asia was the most economicallyand culturally advanced continent on earth and Sub-SaharanAfrica was among the most backward regions on earth. Apositive spin off of colonial exploitation in Africa wasmodernization. The exploitation of Asia by the East IndiaCompanies [EICs], the original multinationals, destroyedadvanced civilizations and reversed the economic developmentof the region.To be effective, the EICs were granted by their respectivecountries (a) monopoly status and (b) special diplomatic,

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legislative and military authority. Present daymultinationals, the successors of the EICs, do not need tobe granted monopoly status. In this chapter I have outlinedthe economic forces which automatically drive consolidation.Furthermore, the WTO exercises diplomatic and legislativeauthority on behalf of multinationals. In the next chapter Ishall show that the western countries are still as eager touse military force, to support their multinationals, asthey were during the EIC days. A new scramble for colonialpossessions is afoot. The interesting question is the extentof readiness of Africa and Asia this time round.I shall continue using the agricultural sector toillustrate the serious problems which the current neoliberal global economic dispensation is inflicting onAfrica. Food is such a fundamental human need that for agesone of the priority responsibilities of governments has beento ensure food security for their countries. Governmentsprovided means for the bulk storage of staple foods such asmaize, wheat and rice. The granaries would be filled intimes of good harvest to provide insurance for hard timesusually caused by unfavourable weather conditions.The granaries served exactly the same purpose45 as thereserve banks. The granaries were used to maintain a balancebetween supply and demand of grain which ensured that theprice remained at a level corresponding to production costsin order to create a sufficiently stable environment not todrive farmers out of business. If the price fell below theselevels the granaries withheld supplies. If the price roseabove the appropriate level the granaries released moregrain. Reserve banks do much the same thing with regard tomoney through upwards or downwards adjustments of interestrates.By this mechanism, a government would ensure food securityby supporting minimum prices, for important staple foods,at levels above production costs. Tariffs were used toprevent foreign competition from destabilizing national foodprices by selling below national production costs. Otherinterventions in common use were to prescribe maximum

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quantities [called quotas] of particular products which maybe imported. A favourite intervention for the developedcountries was to allow prices to fluctuate and pay farmerssubsidies so as to guarantee them incomes even when theprevailing prices of their produce were below productioncosts.Through subsidies or by otherwise ensuring stable foodprices countries ensured that a critical number of farmerswere kept in production. It was recognized that it wasunrealistic to rely on market forces to keep this criticalnumber of farmers in production. Farming operations havelong lag times and outputs could not be adjusted as quicklyas could be done in manufacturing operations.In terms of the new WC orthodoxy of trade liberalization,governments have to abdicate their responsibility to ensurefood security for their countries and abolish tariffs andall other interventions. Instead each country has to exploitits comparative advantages by confining its production tothose export crops it is best suited to produce. It is heldthat this arrangement increases efficiency and enables eachcountry to earn enough foreign currency to be able to importcheap food from those countries which have a comparativeadvantage to produce those foods.I have already mentioned that the US and the EU spendastronomical amounts of dollars and euros to guaranteethemselves food security by subsidizing their farmers inblatant and cynical violation of the principles of freetrade which they promote and enforce through the BWIs andthe WTO. This enables the developed countries to exportagricultural products priced below cost thus subjectingfarmers in less developed countries to unfair competitionand driving them out of business.Yet in recent years the BWIs have been tirelessly usingtheir coercive powers to persuade third world countries toabandon food security. The case of Ghana is well documented.In a paper46 which he presented at the FAO Food SecuritySummit, Rome, 4 June 2008, Martin Khor, a Director atThird World Network [TWN] wrote:

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The policies of food self sufficiency and government encouragement of theagriculture sector (through marketing, credit and subsidies for inputs) hadassisted in an expansion of food production ( for example in rice, tomato,poultry). The policies were reversed starting from the mid 1980s andespecially in the 1990s. The fertilizer subsidy was eliminated, and its pricerose very significantly. The marketing role of the state was phased out. Theminimum guaranteed prices for rice and wheat were abolished, as weremany state agricultural trading enterprises and the seed agencyresponsible for producing and distributing seeds to farmers, and subsidizedcredit was also ended . Applied tariffs for most agricultural imports werereduced significantly…[The result:]

o Rice output in the 1970s could meet all the local needs, but by 2002importa made up 64% of domestic supply…In 2003 the US exported111000 tonnes of rice to Ghana. In the same year the US governmentgave US$1.3 billion subsidies for rice… A government study found that57% of US rice farms would not have covered their costs if it were notfor subsidies…

o Tomato was a thriving sector…As part of a privatization programme,tomato canning factories were sold off and closed, while the tariffswere reduced. This enabled the heavily subsidized EU tomato industryto penetrate Ghana….Tomato paste imported to Ghana rose from3200 tonnes in 1994 to 24077 tonnes in 2002…

o Ghana’s poultry sector started its growth in the late 1950s, reached itsprime in the 1980s and declined steeply in the 1990s. The decline wasdue to the withdrawal of government support and the reduction oftariffs. Poultry imports rose by 144% between 1993 and 2003, and asignificant share of this were heavily subsidized poultry from Europe.In 2002, 15 European countries exported 9010 million tones of poultrymeat. In Ghana the half a million chicken farmers have suffered fromthis situation. In 1992 domestic farmers supplied 95% of Ghana’smarket but this share fell to 11% in 2001 as imported poultry sellscheaper.

In 2003 Ghana’s parliament raised the poultry tariff from 20% to 40%. Thiswas still much below the bound rate of 99%. However the IMF objected tothis move and thus the new approved tariff was not implemented. The IMFrepresentative in Ghana told Christian Aid that the IMF pointed out to thegovernment that the raising of tariffs was not a good idea and thegovernment reflected on it and agreed.

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So the Ghanaian government took time to reflect soberly uponits loss of sovereignty and, in the end, agreed with the allpowerful and merciless usurpers that indeed it should be so!After repeated defeats at the hands of the technologicallysuperior European colonial armies, many an African Chief andhis Counselors must have felt exactly like the Ghanaiangovernment.The technology gap between the first world and Africa isstill as large as it was towards the end of the nineteenthcentury. We have spent the first half of the interveningcentury fighting colonialism and the second half doingnothing with our land and its minerals to empower ourselves.This land, its minerals and our cheap labour are stillrequired by our erstwhile colonizers who do not need tobecome settlers in the current wave of colonialism calledglobalization. We are just as incapable of stopping it as wewere of stopping the first wave.

5.2Asia is thriving

By contrast, while each African country has been striving tobe the best student of the WTO and the BWIs, Asiancountries, with few exceptions, have been doing all theycan to ignore these institutions. They have not forgottenthe lessons of the era of Opium wars. In particular, Chinahas recently adopted a policy of encouraging its farmersto buy farms in Africa in order to ensure food security forits enormous population. The response from the west in thepress and the internet has been nothing short of amazing.China has been accused of planning to colonize Africa bythose who benefited for scores of decades fromsystematically forcing China at gun point to buy Opium. In the next chapter I shall discuss the success of Arabsthrough OPEC to ensure that they received a decent price fortheir oil. Africa is blessed with many mineral resources butshe has never even tried to protect the prices of theseresources. Of course, all this peculiar behaviour by theAfrican elite makes perfect sense in terms of MoeletsiMbeki’s ‘No nationalism but inclusion’ hypothesis.

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Chapter 5Spiritual Roots of the ‘New World Order’

“For it is an awesome thing that I will do with you…”

Exodus 34:10

1 A crusade against the great Satan 1.1 The American Taliban

The United States and Britain led the way for the wholewestern world in their sharp ideological shift to theright in 1980, the beginning of the Reaganomics era. Itwas a sort of first world nationalism. This was, ofcourse, not brought about by economic circumstancesalone, as I explained in chapter 1. It derived itsfundamentalist tone from Christian nationalism47, asignificant political movement in the US, which was bornduring the late Keynesian era. Christian nationalistsclaim that the bible is absolutely and literally true.Furthermore they ‘extrapolate a total political programfrom that truth, and yoke that program to a politicalparty’, the Republican Party or GOP. The movement is a‘hydra-headed thing’ which is spearheaded by a variety ofcivil society organizations including churches, studentclubs, professional societies and media outlets.This is how it all started. During the late 1970s a groupof conservative political strategists recruited theBaptist televangelist, Jerry Falwell, to found the ‘MoralMajority’. The purpose of this movement was to useemotive and divisive issues like abortion ‘as a wedge tosplit social traditionalists from the Democratic Party,and to harness the energy of the evangelical movement tothe GOP’.The strategy worked. Evangelical Christians contributedsignificantly to Reagan’s 1980 electoral victory and tothe routing of a slate of liberal Senators andCongressmen. It was the beginning of a massive politicalrealignment in Middle America which lasted for thirty


years and that Democrats only managed to arrest duringthe presidential election2 of 2008 with a charismaticpresidential candidate, in Barack Obama, who hadsufficiently fresh ideas to be able to credibly blamethe credit crunch on the policies of the GOP.Another televangelist, Pat Robertson, was a candidateduring the 1988 presidential election which was won byGeorge Bush Sr. He used this campaign to establish alocal level organizing infrastructure which later becamethe ‘Christian Coalition’. Its capacity was much moreformidable than that of the Moral Majority which hadfocused only on direct mail and large rallies.According to Michelle Goldberg [Ibid] there is atheocratic sect who call themselves ‘ChristianReconstructionists’. Since this sect predates thereputation of the Taliban, one might say the Taliban wasa worthy response to the Christian Reconstructionists.This sect ‘advocates replacing American civil law withOld Testament law such as the death penalty for a longlist of moral crimes, including homosexuality andapostasy’.Though the teachings of this sect have little appealoutside the sect, the same cannot be said of thepolitical theory cum theology, called dominionism, whichis based on these teachings. Pat Robertson helped putdominionism at the center of the movement to bringevangelicals into politics. The starting point ofDominion theology is Genesis 1:26-27, where God tellsAdam to assume dominion over the animate and inanimateworld. “When man fell, his control over creation wasforfeited; but the saved, who are restored by baptism,can claim again the rights given Adam. Thus the true inheritors ofthis world are Christians who can ‘name it and claim it by divine right’”.Through the ages, beliefs of this nature have been usedto justify wars of aggression to grab other people’sresources. Indeed, this belief appears to be at the coreof the more belligerent conservative policies of the GOPranging from the transfer of wealth from the poor to therich and imperial globalization which I shall discuss in2 President Clinton’s election did not change the conservative trajectory initiated be Reagan

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the next section. It is therefore no accident that thepresidencies of the two Bushes were dominated by war.Home schooling is a movement which is closely allied toChristian nationalism. It was prompted, firstly, by theopposition of Christian nationalists to the exclusion ofprayer and biblical instruction at school, as required bythe principle of separation of church and state.Secondly, Christian nationalists were opposed to theteaching of the theory of evolution in biology classes,preferring the teaching of the biblical story of creationinstead. The rest of the world watched with greatbemusement as the United States, the global leader inscience and technology, hit the headlines with schoolboards which rejected evolution. In his book48, RichardDawkins mentions a particularly amusing example of thisphenomenon:

In November 2005, the citizens of Dover, Pennsylvania voted off theirlocal school board the entire slate of fundamentalists who had broughtthe town notoriety, not to say ridicule, by attempting to enforce theteaching of ‘intelligent design’. When Pat Robertson heard that thefundamentalists had been democratically defeated at the ballot, heoffered a stern warning to Dover:

“I’d like to say to the good citizens of Dover, if there is a disaster in yourarea, don’t turn to God. You just rejected him from your city, and don’twonder why he hasn’t helped you when problems begin, if they begin,and I’m not saying they will. But if they do, just remember you just votedGod out of your city. And if that’s the case, then don’t ask for his help,because he might not be there”.

Home schooling instills the notion that answers to everyprivate or public dispute can be classified into twocategories: the ‘Christian worldview’ and the nonChristian worldview. Furthermore the Christian worldviewholds the answer to any such dispute, whether it be aboutgay marriage or income tax rates. [For instance Godfavours flat rates!] Whenever these two schools ofthought contend, it is necessarily a struggle betweengood and evil.In terms of the Christian worldview: Charles Darwin’stheory of evolution eroded people’s faith in man’sdignity and God’s supremacy. Also in terms of this

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worldview: Franklin Delano Roosevelt’s ‘New Deal’ broughtGodless socialism to America and began the process bywhich government, rather than the churches, became theguarantors of social welfare; atheist judges scorned theLord by outlawing prayer in public schools, striking downbans on contraception and, most ignominiously, forcingthe states to legalize abortion.The campaign to turn Christian house schooled studentsinto political cadres was, most fittingly, calledGeneration Joshua. This campaign had powerful supporters.Goldberg details how George Bush Jr. ‘brought Christiannationalism into the government in an unprecedented way’.He gave the Christian nationalist movement governmentauthority and access to billions of taxpayer’s dollars.The movement, in turn, ensured his reelection. Ultimatelyit became “common for Christian nationalist leaders andthe Republican politicians they support to speak of anyattempt to defend church/state separation as part of a‘war’ on believers”.As the influence of the Christian nationalists reachedits zenith in the US of George Bush Jr. a similarmovement was making significant gains in the Britain ofTony Blair. In terms of an initiative49 of the Blairgovernment, a ‘benefactor’ could donate £2 million to buyrights to control the ‘ethos’ of a new school in whichthe government provided about £20 million forconstruction plus all the running costs of the school inperpetuity. A number of these ‘city academies’, whichwere required to teach literal biblical creationism, wereactually built in terms of this scheme. It is notsurprising that the greatest supporter of Bush in 2003when he launched an illegal war against Iraq was Blair,ironically a Labour Party leader. At the time, NelsonMandela accurately observed that Blair was acting asBush’s Foreign Minister!

1.2 Corporate versus imperial globalization

The era of Reaganomics was further characterized by ahigh level of polarization of politics in the US. The twobroad camps, the neo liberals and the neo conservatives,were noted for the intense passion with which they held

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their positions. The religious fervour of the neoconsundoubtedly gave them the upper hand in the passionstakes. What the neolibs and the neocons had in commonwas their belief in the basic tenets of Reaganomics,namely: the Washington Consensus.The neolibs and the neocons also agreed that the rest ofthe world should be persuaded, through the Breton WoodsInstitutions, to adopt these economic prescriptionsunquestioningly even if [or perhaps especially if] theseprescriptions opened their economies to looting bymultinational corporations and financial institutions. Inother words both neolibs and neocons expounded a zealousideology of market50 fundamentalism. The formergenerally belonged to the Democratic Party while theneocons were generally members of the Republican Party.What distinguished the two was that the neocons tended tobe Christian Nationalists with all the pathologies that Ihave discussed in the subsection on the ‘AmericanTaliban’.The Christian Nationalism of the neocons conditioned themto be perpetually in need of an enemy, a Satan. Duringthe Presidency of Ronald Reagan the Soviet Unionrepresented Satan. By the time George Bush Jr. becamepresident, the ideology of the neocons had mutated to amore fervid form. They saw Satan in every ideologicaldissenter but, in the absence of the Soviet Union, theiranimosity lacked focus. Under the circumstances, theoutrage of 9/11 satisfied a pressing need.Just before George Bush Jr., the defining event of theClinton presidency had been the establishment of theWorld Trade Organization [WTO] in 1994, the functions ofwhich have already been described in the precedingchapter. Another significant event which wascharacteristic of the priorities of the Clintonpresidency was the conclusion, by the US, Canada andMexico, of the North American Free Trade Agreement[NAFTA] in 1994. This agreement provided for freemovement of goods and services in the region. The Clintonera saw the beginning of unprecedented economic growthfor America and accelerated the globalization of finance,trade and commerce.

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These developments may have been satisfying to neolibs,such as President Clinton himself, but they weredisconcerting to neocons. According to Engler51 “…theywere dismayed by what they viewed as a critical missedopportunity: America’s hard power was only sparinglydeployed. The nation’s all powerful military, theylamented, was going to waste”.Engler further observes that: “The neocons are clearlycapitalists. Yet the non economic aspects of theirthinking – their ideological fervor and attraction togood-versus-evil showdowns – have surprisingimplications. At key moments when nationalism andcommerce have conflicted, the Bush administrationmilitarists have chosen nationalism…they have presented avision of globalization brimming with hubris…Neoconservative ideology has aimed to secure a newcentury of global dominance for America”.It was this sort of thinking which was dominant in theWhite House when 9/11 occurred. This provided a perfectexcuse for ‘shock and awe’ campaigns which the neoconshad been craving, long before Bush Jr. became president.It was the damage which these campaigns inflicted on theAmerican brand which repelled neolibs in general andAmerican corporations in particular and persuaded them tosupport Barack Obama.While the hybrid religion of the African converts had themodest objective to augment the power of their own godswith the power of the white man’s god, the religion ofboth the Afrikaner aspirant top dog and the American topdog stressed god assisted victory of the in group againstall sorts of real and imagined enemy outsiders. To themreligion served the imperative to be at the top while,to the African, religion merely served the more basicimperative to survive the power of the colonialists andtheir Afrikaner allies.What the African elite chose to emulate in the widespectrum of Anglo-American principles was not theirnationalism but their liberalism; the convictions ofthose who fought against slavery and the52 ‘dispossessionand mistreatment of defeated communities’. After theabolishment of slavery and mistreatment the former victim

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and perpetrator would live together in peace, harmony andmutual respect. Indeed they would merge into one. Therewould be no need for Africans to assert themselves. Itwas a utopia inspired by the biblical notion of heaven.

2 Oil imperialism

1.1 An energy revolution

The significance of oil derives from the fact thatthrough the ages, major transitions in productioncapacity, the mode of production and the very nature ofindustry have been sparked by revolutions in powerdelivery devices and energy sources. The power deliverydevice, driving production, has advanced from humanmuscle to animal muscle and finally to machine. Theprimary source of energy for machines has in turn changedfrom coal to oil and, to a small extent, to nuclearenergy.The dominant energy source for transport has been oilsince the early years of the 20th century. Indeed it wasthe first month of the first year of that century whichmarked the dawn of the oil age as copious yields werediscovered by Al Hammil near Beaumont in Texas. This wasfollowed by decades of rapid industrialization by the USin which oil and the internal combustion engine played amajor role.Soon after the Texas discovery of oil, further richdeposits were discovered in other parts of the U.S. andfurther afield in Iran and Iraq. Paul Roberts53 notesthat, ironically, Saudi Arabia, with the largest knownoil reserves today, was dismissed at that stage, bygeologists, as a poor oil prospect!The advantage of oil over coal is that it is cleanerburning and it has a higher energy density. This meansthat oil contains more energy per unit mass than coal.Coal fuel in ships, of the nineteenth and early twentiethcentury, occupied so much space that there was hardly anyspace left for cargo. It was for this reason that in 1908Britain converted its entire navy fleet from coal to oilfuel. To ensure security of fuel supply Britain thoughtit necessary to keep part of her fleet in theMediterranean.

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By virtue of possessing oil deposits, the Middle Eastbecame, willy-nilly, a ‘protectorate’ of Britain. Decadeslater the region was to become a protectorate of the U.S.which, till today, has its Fifth Fleet stationed there.This is one sense in which being rich in naturalresources, especially oil, has turned out to be a curseto developing countries. Oil inevitably attracts firstworld oil imperialism.Saudi Arabia came late into the oil business. It was onlyin 1939 when they dispatched their first export shipment.Theirs turned out to be the largest oil deposits in theworld with the lowest extraction or ‘lifting’ costs. TheU.S. were [and still are] such gluttonous energy usersthat by the time Saudi Arabia came into the picture,their oil consumption was about to exceed their domesticoil production. In fact the U.S. became a net importer ofoil in 1946. U.S. oil production was to reach its peak by1970.The first Saudi oil exports were shipped to the U.S. theyear the second world war was declared. Saudi Arabia hadstruck a one sided deal with an American oil consortium,generously called the Arab-American Oil Company [Aramco].King Abdul Aziz, of Saudi Arabia, was acutely aware ofthe important role oil was going to play in the war. Heneeded protection from President Roosevelt. So henegotiated from a position of weakness. The terms of theSaudi Agreement with Aramco were so typical of thepredatory nature of the trade of multinationals withdeveloping countries. An intensification of this sort oftrade was to later occur in the WC and WTO era. Roberts54

describes the terms of the agreement as follows:Whatever the original intent, the effect of the oil venture was to drawSaudis into a modern day deal with the devil. In exchange for steady oilrevenues and a shot at modernity, the Saudis were forced to play thedual role of supplying cheap oil to a consortium of American oilcompanies…while simultaneously buffering those companies against theprice swings that make oil such a risky business.

For, as the international companies had learned long before, oil isinherently volatile. Production is continually running ahead of demandor behind it, causing the market to shuttle back and forth betweenshortage and glut and creating huge swings in price. This volatility leads

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to additional costs: either for consumers, who must pay more in a tightmarket, or for producers who earn less for their oil in a glutted market…

With the emergence of the modern oil state, the international oilcompanies had found a new beast of burden. When world oil prices fell…it was the oil states that paid the price. The international oil companies,instead of allowing their own profits to fall, would unilaterally drop their‘posted price’ for oil, thereby cutting the royalties they paid to the oilstates. The tactic ensured huge profits for oil companies but forced theSaudis, the Iraqis,…, the Libyans, and other oil state vassals to swallowthe cost of price swings.

2.1 The oil crisis which caused a 3rd world debt crisis

Clearly agreements similar to the Saudi-American dealwere prevalent among oil producing states. As long asthey did not cooperate in dealing with first world oilcompanies they were at a great disadvantage. It did nottake the oil producers long to realize this. In 1960Venezuela organized Iran, Iraq, Kuwait and Saudi Arabiato form OPEC. Many other oil producers later joined theorganization and soon the combined output of OPEC was 53%of world production.OPEC members began by forcing oil companies and oilimporting countries to share the risks pertaining tovolatility which had previously been the sole burden ofthe oil exporters. Then the exporters gradually raisedtheir royalties. As might be expected, the oil companieswasted no time in passing all these new costs to theconsumer. Militant action of the cartel was pioneered byLibya in 1969 when she cut production causing a worldwideshortage. The rest of OPEC raised their pricesaccordingly. The next phase of militancy was spearheadedby Venezuela in 1971 when she raised royaltiessubstantially to 70% and followed by nationalizing theoil industry.It was the Yom Kippur war of 1973 which decisively swungthe balance of power in the oil industry. Up to thispoint the U.S. was able to play the role of a swingproducer of oil: cutting production when there was a glutand pumping more oil when there was a shortage. But nowOPEC raised oil prices by 70% to $5.11 per barrel andthen slammed an oil embargo on the U.S. and the

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Netherlands in 1974. This was followed by a productioncut which the U.S. was unable to make up for with herdeclining oil production. The oil price promptly shot upto levels well above $20 per barrel.So devastating was the result that the U.S. evenseriously considered confiscating Middle Eastern oilfields by force of arms. But at that time there was stilla countervailing force, the Soviet Union. So, wisercounsel prevailed. During the period from 1973 to 1979the direction of flow of funds changed dramatically andthere began a massive transfer of funds from the U.S.,Europe and Japan to OPEC countries. This happened soquickly and on such a huge scale that finance forspending on other goods and services dried up and therewas a temporary shortage of cash in the world’s financialmarkets.It is this oil crisis which fueled the 1st world inflationof the 1970s which I mentioned in chapter 1. Thisinflation, combined with the specter of the rise of Chinaand India as highly competitive trading nations causedthe panic in the Anglo-American world which led to thedemise of the welfare state and the rise of Reaganomicsand Thatcherism from its ashes. The U.S. never forgot thehumiliation which had been inflicted on the superpower bytiny nations which command energy resources. After thefall of the Soviet Union the pride of the U.S., as thesole power, must have been enhanced. Yet thevulnerability of the U.S. to the threat of being held toransom by the oil producing states never changed after itbecame the undisputed world leader.The 9/11 terrorist attacks of 2001 exposed yet anotherquite unexpected vulnerability of the United States. Theneed to demonstrate that their outrageously costly armedforces were not useless prompted the U.S. to launch itsshock and awe attack on impoverished Afghanistan whichwas alleged to be harbouring Osama Bin Laden, the allegedmastermind behind 9/11. An awful lot of sophisticatedand hideously expensive hardware was used to destroyhumble mud houses of miserable poor folks. But Osama BinLaden, who was wanted by President Bush ‘dead or alive’,was never found.

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This was the superpower which was spending more ondefense than the combined spending of the next ten bigspenders. Afghanistan never satiated the need fordramatic revenge. Instead it accentuated the Americanfeeling of impotence. With neocons in the white house,America was in a dangerous state of mind. Even withoutany provocation, to them the use of the military toproject American power was an article of faith. MarkEngler55 summed up the neocon belief in the military asfollows: “The neocons believe that ‘the world is aHobbesian state, power resides mainly in the belly of aB-52 [bomber], and the only reliable way to keepbarbarians at the gate is to step outside the gate andkill them’”.The neocons in the white house could not help associatingthe Osama Bin Laden and the perpetrators of 9/11 withOPEC by virtue of their common Islamic connections andtheir ability to destabilize 1st world economies. Therewas unfinished business with OPEC which had humiliatedthe U.S. two decades before. Under the circumstancesSaddam Hussein, who was already a pariah, became anirresistible target. There were neocons who wereexceedingly optimistic about the Iraq adventure. NaomiKlein56 describes their thinking as follows:Iraq had been chosen to introduce “a different model in the heart of the Arab-Muslim world” which would “set off a series of democratic/neo-liberal wavesthroughout the region”. These waves were in turn forecast to develop into “atsunami across the Islamic world…”, in “Tehran and Baghdad”. Indeed it wasto be “a war to remake the world”.

Other neocons were a little less euphoric. The startingpoint of their analysis was that Iraq was second only toSaudi Arabia in terms of the magnitude of known oilreserves and the low cost of extraction. If a puppetregime were placed in power it could be convinced tobreak away from OPEC and play the role that had once beenplayed by America in smoothing out fluctuations in globalsupplies. Paul Roberts [Ibid] further elaborates on thisthinking:

The flood of new oil would effectively end OPEC’s ability to control prices.As supply expanded, prices would fall dramatically, and not even theSaudis…would be able to cut production deep enough to stop the slide.

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Caught between falling revenues and escalating debts, the Saudis toowould be forced to open their oil fields to Western oil companies, aswould OPEC countries. The oil markets, free at last from decades ofmanipulation, would seek a more natural level, which, according tosome analysts, would be about fourteen dollars per barrel, or evenlower…

Reviving Iraq’s moribund oil industry would take massive infusions ofcapital…$5billion just to resume prewar production…at least $40billionover the long haul. That kind of money could come from only one source– the international oil companies – which would invest in Iraq only if a)Saddam were gone and b) they received some assurance that they wouldhave a share in production revenues and that the market, and notOPEC, would determine production levels.

It is now history that the U.S. told a blatant lie to theworld that Saddam Hussein had weapons of massdestruction. This gave them an excuse to launch a shockand awe campaign against Iraq which deposed thedictator. But, as many had warned, Iraq disintegratedinto warring factions and the U.S. got bogged down in afutile war to stabilize the country which ended upcosting the U.S. over a trillion dollars. It also costthe neocons the white house.The insurgency gave the U.S. no chance to raise oilproduction. This spectacular failure was highlighted bythe oil price bubble of 2007/2008 which sent the oilprice to an unprecedented peak of $150 per barrel by mid2008 before the bust. The irony was that OPEC, which wasaccused by the U.S. of causing oil price volatility,never managed to achieve these price heights. Instead itwas the speculators, the progeny of the WC, who managedto cause a disruption of this magnitude to the worldeconomy.

3 The markets are god

3.1 The markets are jealous

Like most other technical professions, economists havealways had a way of communicating which juxtaposes aninternal colloquial language with the formal jargon. Ina specific market for assets of a given kind theaggregate behaviour of dealers is expressed in terms ofwhat a fictitious being, ‘the market’, is doing and

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colourfully explained as if ‘the market’ were anindividual being, with fears and hopes, likes anddislikes, preferences and opinions. However the evangelical manner in which free marketfundamentalists advocate their dogma gives theirotherwise innocent ‘economics speak’ an ominous tone.They impute infallibility to ‘the markets’ in terms ofwhich this construct acquires omnipotent as well asomniscient connotations. The markets become part of thegeneral forces for righteousness which are lined upagainst evil in a world which is all about a strugglebetween good and evil, as Christian nationalists wouldhave it. Having elevated the market to a god if not the God,market fundamentalists often hi jack the whole notion ofa market to represent a specific economic interest groupthe preferences of which are then presented as thepreferences of the infallible markets. In all religionsit has always been very difficult to tell the differencebetween what are the demands of God and what are merelythe demands of powerful and overbearing members ofsociety. A close scrutiny of such issues is liable toopen one to the serious charge of a lack of faith or eventhe much more serious charge of believing in other gods[such as regulated markets]. In the hands of free market fundamentalists, the notionof a market bears a remarkable resemblance to the OldTestament [OT] concept of God. The OT reminds us onnumerous occasions that Yahweh is a jealous God and haszero tolerance for those who worship other gods. This isreflected in the first commandment which, according tothe English Standard Version, states that “You shall haveno other gods before me”, Exodus 20:3. This mostimportant commandment is further reinforced in Exodus34:10-17.

…for it is an awesome thing that I will do with you. Observe what Icommand you this day. Behold, I will drive out before you the Amorites,the Canaanites, the Hittites, the Perizzites, the Hivites, and the Jebusites.Take care, lest you make a covenant with the inhabitants of the land towhich you go, lest it become a snare in your midst. You shall tear downtheir alters and break their pillars and cut down their Asherim for you

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shall worship no other god, for the LORD, whose name is Jealous, is ajealous God, lest you make a covenant with the inhabitants of the land,and when they whore after their gods and sacrifice to their gods and youare invited, you eat of his sacrifice, and you take of their daughters foryour sons, and their daughters whore after their gods and make yoursons whore after their gods. You shall not make for yourself any gods ofcast metal.

The markets expect the leadership of every country tosubscribe completely and unquestioningly to the WC.Otherwise “it is an awesome thing that [the markets] willdo” to you. Way back in 1996 the markets would not evenpermit the poor Mr Trevor Manuel, Minister of Finance, toexpress an opinion about the complexion of the SouthAfrican rugby team. This invariably caused the rand totake a dive. Presumably such opinions exposed him as sucha rabid radical that ‘the markets’ could not entrust theeconomy with him. His subversive thoughts had to bestrictly controlled on pain of severe punishment. Themarkets were indeed a worthy successor to the apartheidpolice state.After 1994 the ANC soon found out that even frequentdeclaration of faith in the Washington Consensus was notsufficient to pacify the markets. The markets hadinternational informers, called credit rating agencies[e.g. Moody’s and Standard & Poor] who monitored everyaction of the government and measured it against thecommandments of the market as stipulated in the WC.Even more ominous is the annual consultation which theIMF has with every country in the world. These so called‘article 4’ consultations are supposed to ‘ensure thateach country is adhering to the articles of agreementunder which the IMF was established fundamentallyensuring exchange rate convertibility for tradepurposes’. But in reality ‘these consultations are but aminor part of the entire surveillance process. Thereport is really the IMF grading of the nation’seconomy57’.Just as school kids have to display their best behaviourin the presence of a prefect, governments have to weightheir every utterance and action in case they upset thehypersensitive international credit rating agencies and,

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even more importantly, the IMF. Such are the vagaries ofglobalization. It rendered the apartheid governmentredundant.

1.2 The familiar prophets and favoured nations

The bible in general and the old testament in particularis obviously about Hebrew mythology, culture and history.Yahweh, the god of the old testament is very frank andunambiguous about being the exclusive god of the Hebrewsand is quite unapologetic about His favouritism. TheHebrews are His chosen nation, ‘finish and klaar’. Anyonewho stands between the Hebrews and their freedom andpromised land is sure to have Yahweh unleash plaguesand pestilences against them if not Joshua’s genocidal‘edge of the sword’.I happen to be one of the greatest admirers of the Jewishpeople for their outstanding achievements. Howeverinflammatory writings glorifying blood baths, such as thebiblical book of Joshua, do them a grave disservice. Inmy opinion, what makes such writings even moreunfortunate is the regrettable and sad fact that Jewshave been victims of persecution and violence throughmuch of history. I would definitely enjoy myths andfables in which the Lord gives them strength to vanquishtheir persecutors but certainly not innocent people. As I showed in chapter 1, standing between the Hebrewsand their promised land can be as innocent as livingpeacefully on one’s ancestral lands which Yahweh has now,according to some prophet, capriciously decided tobequeath to his chosen nation. It would probably beblasphemous to ask whether the prophet was motivated bygreed and brutality. It is as if non-Hebrews werecreated only to serve as guinea pigs for the LORD’spestilences or as objects for target practice by Hebrewswordsmen under the generalship of the indefatigableJoshua. Of course this is a splendid arrangement if youhappen to be a Hebrew. Despite the well known jealousy of Yahweh and theblessings he constantly showers exclusively upon hischosen nation, the chosen ones frequently lose faith inthe LORD. At the slightest opportunity they are liable to

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waste no time in fashioning for themselves gods of castmetal. In Exodus 32:1 it says

When the people saw that Moses delayed to come down from themountain, the people gathered themselves together to Aaron and said tohim, “Up, make us gods who shall go before us. As for this Moses, theman who brought us up out of the land of Egypt, we do not know whathas become of him”

However the LORD is most indulgent towards his own chosennation. After a slap on the wrist He pursues His plan forthem regardless.One can always count on capitalists, who profess beliefin free markets, to undermine competition and thefreedom of the markets, the essence of their god, at theslightest opportunity. Like the biblical Hebrews who hada perennial attraction to “gods of cast metal” they onlypay lip service to this principle. It is O.K. as long asit suits them but as soon as it gets in the way of makingsuper profits they jettison it without any hesitation. By no stretch of imagination can anyone claim to be abeliever in the god of free markets if one also believesthat there are economic problems which have to be solvedby nationalizing private business. Nationalization is theequivalent of worshipping worse than just ‘gods of castmetal’. It is the perfect equivalent of worshipping Satanhimself. In fact it was precisely this heresy, amongstother things, which prompted Reagan to confer the ‘GreatSatan’ epithet upon the Soviet Union.These days no developing country can afford to even thinkaloud about nationalization if they do not want to incurthe wrath of rating agencies and the IMF. Below I give abrief summary of the global financial crisis which hitthe world in 2008/2009 leading to the nationalization ofa large number of banks in the developed world. The problem started in the US during the early 2000swhen a bubble developed in the residential housingmarket. Since the financial markets were unregulated, asrequired by the WC, an opportunity was provided forunscrupulous lenders to deliberately lend to people whosimply could not afford bond repayments. Bad and goodquality mortgages were mixed and securitized in terms of

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financial instruments called Collateral Debt Obligations[CDO]. The CDOs were then sold in international financialmarkets where they spread the risk of the poor mortgages.The CDOs were a good investment as long as the housingbubble lasted. As soon as it burst and house pricesstarted falling, the CDOs proved to be so ill conceivedthat they could not even be evaluated.The banking community could not always know for sure whoheld the bad CDOs. Consequently, the internationalfinancial system seized as banks became unwilling to lendto each other on account of mutual suspicion. Manyfinancial institutions which had gambled away theirsolvency by over committing themselves in CDOs cried forgovernment assistance.As already mentioned, the WC constitutes the commandmentswhich are espoused by fundamentalist prophets of the freemarket gospel. A principle which they also espouse andwhich is intimately linked to these commandments is‘creative destruction’. In terms of this principle, freemarkets derive their capacity to optimize efficiency [ofallocation of resources] from their propensity to destroyinefficient businesses and favour the creation of moreefficient undertakings in their place, hence theexpression ‘creative destruction’. In terms of this doctrine, which market fundamentalistare so fond of ramming down the throats of weakernations, one would have expected Britain and the US tosimply allow insolvent financial institutions to facedestruction. In fact this is what the Asian Tigers wereadvised during their 1997 crisis which had beenengineered by the IMF in the first place. Instead theworld was treated to the spectacle of witnessing marketfundamentalists engaging in the heresy of nationalizingseveral financial institutions including Northern Rock,in Britain and the world’s largest insurance company,AIG, in the United States. A proviso was now appended:creative destruction could be allowed to take its courseonly if a business was not ‘too large to fail’.

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1.3 Passing of the baton from the apartheid state to ‘the markets’

Many authors58 have observed, in the course of theiranalysis of the South African political economy, thatwhat constitutes the dominant core of the economy iswhat they call the Minerals Energy Complex [MEC] whichincludes the financial sector and mining together withassociated chemical and engineering companies. Theoligarchs who own the MEC are the local oracles whodivine what ‘the markets’ want. It is also theseoligarchs who took the decision during the eighties thatthe apartheid state had outlived its usefulness and thatit was time to pass the baton from the apartheid state to‘the markets’. The significance of the Union of 1910 is that the Uniongovernment took over the diplomatic and coerciveresponsibilities of the Company while the businessresponsibilities gradually spread in a growing MEC.During the course of the twentieth century the power ofglobal capital grew to such an extent that the apartheidstate became redundant as the MEC increasingly relied onthe markets for coercive power. I shall now outline keystages of this process.

2 From colonial to global capital imperialism

4.1Invitation of the Afrikaner elite to join the Company

I have argued that the East India Companies of theseventeenth century evolved into the present daymultinational corporations and the three multilateralinstitutions: the WTO and the two Breton Woodsinstitutions. To the extent that the diktat of ‘themarkets’ or international finance is expressed andenforced through these multilateral institutions one can,with equal validity, say that the markets are areincarnation of the former dictatorship of the EastIndia Companies.The founding fathers of South African big capital werethe Rand Lords. The most prominent of these capitalistswas of course Cecil John Rhodes, the arch imperialistwhose ethnic and racial arrogance was legendary.Amongst the memorable statements history quotes himmaking are the following gems: “To be born English is to

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win first prize in the lottery of life” and “I contendthat we are the first race in the world, and that themore of the world we inhabit the better it is for thehuman race…If there be a God, I think that what He wouldlike me to do is paint as much of the map of AfricaBritish Red as possible…”.The views of Cecil John Rhodes were typical of theattitudes of Britons to others. As I have explained inchapter 3, the contempt of the representatives of HerMajesty’s Government was not only reserved for Africans.The Afrikaners were also not spared this contempt andthis was not entirely without reason. They may have beenskilled in handling guns but they were basically simplefarmers who had no mining, technological, entrepreneurialor financial skills and know how. There was hardly anyknowledge gap between them and the emergent black farmerswho had been reduced to sharecropping in vast Afrikanerowned lands which had been seized from Africans at gunpoint. So the Afrikaners were not in a position toparticipate in a meaningful way in the diamond rush of1867 and the gold rush which followed in 1886 even thoughboth happened in the Boer Republics.After the discovery of diamonds at Kimberly the placewas quickly flooded by the so called uitlanders[Overwhelmingly but not exclusively British expatriates]who made fortunes while the Afrikaners participated onlyas labourers. Amongst those who got rich quick was CecilJohn Rhodes who was financed by N M Rothschild & Sons toachieve a virtual monopoly in the diamond industrythrough de Beers which he founded. As soon as theenormity of the diamond riches became apparent the CapeColony promptly annexed Griqualand West and thus excisedKimberly and surrounds from the Free State Boer Republic.Again after the discovery of gold in Johannesburg theAfrikaners were not in a position to participate inwealth accumulation. The town was almost instantlycrowded with uitlanders who rapidly outnumbered theTransvaal Afrikaners. Understandably, the latter werealarmed as they faced loss of control if they extendedthe franchise to the uitlanders. This is of course theexcuse which was used by imperialist mine owners to fund

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the ill conceived and disastrous Jameson Raid of December1895 to January 1896 which was meant to support ananticipated uprising which, it was hoped, would lead to acoup d’etat. The forces, which Leander Starr Jameson led, were theMounted Police, the military arm of the British SouthAfrica Company. The main conspirator was in fact CecilJohn Rhodes who had earlier established the Companywhich received a Royal charter in 1889. The purpose ofthe Company was to secure African precious metals for theEmpire, a matter of vital importance given the goldstandard of those days and the fact that London was keento retain its status as the financial capital of theworld.The Jameson Raid provoked the Boers to start the secondAnglo-Boer war by launching a preemptive strike onBritish forces which were already amassing on theTransvaal border. The war ended with the surrender of theBoers in 1902. Despite her victory, Britain thought itprudent to negotiate a lasting peace with the Boers forthe following reasons:

The Boers had demonstrated their military prowessand Britain clearly did not relish another encounter

The knowledge gap between the Boers and theuitlanders was such that it would take a very longtime for the Boers to pose a credible threat aseconomic competitors

In any event there was a good chance that theAfrikaner elite could be persuaded to join theBritish elite to pursue the colonial agenda.

Indeed in Generals Louis Botha and Jan Smuts the Britishimperialists had influential Boer leaders who soon provedcontent with a political settlement which simply allowedthe Afrikaner to assume political power and use it topromote the interests of the empire while the Englishcontinued to play that role in the economic sector. In asymbolic sense the Afrikaner elite were invited to jointhe British South Africa Company or simply the Company,as I shall henceforth refer to this convenient analyticalconstruct.

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The actual BSAC operated mostly in other Southern Africancountries to the north of the South African border. Itwas never nearly as big or successful in generatingprofits as the BEIC. The Wikipedia closes its history ofthe BSAC with the words:

In 1964, the company was forced to hand over its mineral rights to thegovernment of Zambia, and the following year, the BSAC merged withthe Central Mining & Investment Corporation Ltd and The ConsolidatedMines Selection Company Ltd to form a mining and industrial companyknown as Charter Consolidated Ltd, of which slightly over one third ofthe shares were owned by the British/South African mining company:Anglo American plc.

The important point is that by the second half of thetwentieth century the Company had diffused and dissolvedinto the MEC, which is part of a global network, and lostits individual identity in the process. The originalBritish imperial interests had evolved into globalcapital imperial interests.When Botha and Smuts joined the imperialists in 1910there were many other prominent Afrikaner leaders, suchas de la Rey and Hertzog, who saw things from anationalist perspective. This faction of Afrikanerleaders immediately began organizing the Afrikaner rankand file and stoking the fires of nationalism. Under theleadership of DF Malan they finally won power thirtyeight years later which they used to redirect stateresources to the upliftment of the Afrikaners instead ofthe empire. Of course, after the Afrikaner elite tookcommand of the MEC it became impossible for them tooperate in isolation without joining global big capital.But their nationalism had accomplished its mission ofuplifting the Afrikaners.

4.2 Invitation of the African elite to join the Company

One of the companies which owes its existence directly tothe 1886 discovery of gold in the Witwatersrand isConsolidated Goldfields [Consgold] which was founded in1887 and incorporated in London to fund the newlydiscovered gold reefs. By 1900 it had already started todiversify outside South Africa and after 1945 it acquiredmines in the USA and Australia. When political conflict

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intensified during the antiapartheid struggles of the1980s, it was this mining multinational, a representativeof the MEC by virtue of a major Consgold subsidiary inJohannesburg, which intervened with practical assistanceto arrange opportunities for dialogue between theliberation movement in exile and leading members of theAfrikaner ruling class. Big capital had apparentlydecided that it was now time to invite the African eliteto join the Company. When Nelson Mandela initiated dialogue with theapartheid regime, during the mid 1980s, he sent messagesto the ANC in exile to inform them about what was takingplace. Oliver Tambo then sought to initiate paralleldialogue between the ANC in exile and influentialAfrikaners. It was Consgold which offered to organize andfinance this dialogue. There followed a series ofmeetings between the ANC, represented by Thabo Mbeki andJacob Zuma, and a variety of Afrikaner groups. Thesemeetings were held at Mells Park House, a Consgold estatein the village of Mells , near Bath in Somersetshire.According to Allister Sparks59 there were twelve meetingsin all between November 1987 and May 1990. The lastmeeting was hardly necessary. The ANC, and otherorganizations of the liberation movement, had beenunbanned in 1990 and Mandela was already a free man. The newly unbanned ANC of the early nineties begannegotiations with the apartheid government at a time whenthe post cold war neo-liberal global economic orderhad just entrenched itself. It was soon after the demiseof communism and capitalism was still in a triumphalmood. Under the influence of the intoxicating power ofsuddenly becoming the sole dominant system in a unipolarworld, capitalism had just veered sharply to the right.These developments took place at a time when the ANC waspreoccupied with the goal of seizing political power. The ANC had never found time to formulate a coherenteconomic policy, let alone policies which took intoconsideration the emerging global economic order. At thebeginning of negotiations the ANC in general and Mandelain particular were still wedded to the Freedom Charterwith its promise of nationalization of mines, banks and

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monopoly industry. But the economists of the democraticmovement were already aware that globalization hadrendered these ambitions impractical.They met in Harare as early as April 1990 and produced adraft document which abandoned nationalization butproposed a “Developmental State” which would bring about“Growth through redistribution”. The theory was that amassive increase in the wages of the poor would stimulatedemand which would result in the creation of jobs inorder to provide a corresponding increase in supply.Through this positive feedback process the economy wouldexpand exponentially and we would all eventually livehappily ever after. It was akin to a utopian situationwhich physical scientists call perpetual motion.To paraphrase Allister Sparks60: This simple theory wasshot down by the business community who pointed out thatexperience shows that the swelled demand would soonoutstrip the country’s capacity to produce, causingprices to rise, imports to rocket and exports to fall.The result would be that spectacular growth would beachieved initially but then the country would run into ahuge balance of payments deficit, crippling foreignexchange shortages, runaway inflation and ultimately adebt trap. What subsequently happened between 1990 and 1994 can besummed up in one sentence: The outgoing apartheidgovernment, big business and the World Bank put the fearof God into the ANC. They did this by organizing aseries of workshops at Mont Fleur in which they presenteda variety of scenarios from utopia to purgatory. By aprocess of elimination, the ANC finally conceded thatthere was no alternative to the Washington Consensus.One of the leading ANC negotiators of the time was AlecErwin who was a Minister in various portfolios from 1994to the end of Mbeki’s presidency. Allister Sparks61

recalls a conversation he once had with him after 1994in which he insisted that he was still a Marxist:

It’s a system of analysis. When I approach an economic problem today Iapproach it from a Marxist perspective. We all do. But that doesn’t stopus from recognizing the power of the market. The most important thing

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is that we are not utopian. If the capitalist system is dominant, ifpowerful global forces are there and they are real, then it’s pointlesstrying to implement a program that has no bearing on the present.

In other words Alec Erwin was saying that if you can’tbeat them, join them. This is the huge policy shift whichthe ANC made by stealth before the 1994 elections. Thefailure of the ANC leadership to communicate, to itsalliance partners and its own grassroots, the realitiesmentioned by Alec Erwin, forced Thabo Mbeki into asituation where he had to be constantly talking leftwhile acting right. The World Bank graciously gave Mbekispace to do this by operating discreetly within thecountry. According to Professor Ben Turok62, an economist, struggleveteran and ANC MP of long standing: “The World Bank…hadrecommenced relations [with South Africa] in 1990, and inthe early 1990s produced a series of substantial policypapers on economic policy [for South Africa]. Inaddition, from 1992 an internship program took six SouthAfricans to work at the Bank for six months with a focuson technical assistance, capacity building, publicinvestment and bank lending”. The professor further quotes remarks attributed to Mbekihimself in his biography authored by Mark Gevisser.Apparently Mbeki and some others in the leadership felt aprofound disempowerment upon going into government in1994, and that “he and his government had been forced toacquiesce to the Washington Consensus on macro-economicpolicy when they implemented their controversial GEAR63

program in 1996”. [Against this background, it isinteresting to note that in mid-1995, Deputy PresidentThabo Mbeki said64 he “had no problems of ideology withthe Bank”].Turok goes on to claim that “A further indication of thegrowing influence of the Bank was provided by the factthat when GEAR policy was being prepared, its chiefauthor, Richard Ketley, was seconded from the Bank to thegovernment. He subsequently became its main spokespersonin presentations to Parliament’s Finance Committee.Furthermore various departments have made other use ofBank expertise without public disclosure.

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He laments the fact that: “The relationship of the ANCand government with the IMF and World Bank have largelybeen conducted behind closed doors. They have never beenreported to the National Conference, nor have anyagreements been reported to parliament as required by thenational institution. It is therefore difficult toidentify the degree to which compliance with theseinstitutions occurred or when it began”.The GEAR macro-policy document replaced, withoutexplanation to the general ANC membership, another ANCpolicy document which had been drawn up democratically inconsultation with alliance partners. In fact thisdocument, entitled the Redistribution and DevelopmentProgram [RDP], served as the election manifesto of theANC during the first democratic elections in 1994. It wasstrong on rhetoric and long on promises but weak onrigour and short on how to actually deliver on itspromises. Amongst the memorable promises of the RDP were:

The redistribution of a substantial amount of landto the landless black population within five years

Building and electrification of millions of houseswithin very tight schedules

Access to clean water and sanitation for everyone Access to health care, education and communication

facilities for all Jobs, jobs, jobs and a better life for all!

When the African elite were invited to join the companythere was no contest between imperialist fellow travelersand nationalists as had been the case in 1910. Thesubstance of the transformation they subsequentlydelivered was always going to depend on the extent towhich they were going to allow themselves to be used topromote the interests of the Company or ‘the markets’ asopposed to the interests of the country and the nation. Ishall return to this topic shortly.

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Chapter 6The Great Leap Forward

“The mineral wealth beneath the soil, the banks and monopoly industry, Shall be transferred to the ownership of the people as a whole”

The Freedom Charter

2 A leaf from Mao’s little red book

There are some interesting parallels between the blunders ofMbeki and the ANC after it took over in 1994 and theblunders of Chairman Mao Zedong and the Chinese CommunistParty [CCP] after the establishment of the People’s Republicof China in 1949. Both leaders seriously lacked the commonsense to recognize an unsustainable process when they sawone. At the time Mao and his CCP saw the top economicpriority as industrialization and decided that thegovernment would finance it by taking control ofagricultural production, buying low from the peasants andselling high on international markets. To this end, sweepingland reforms were undertaken involving the redistribution ofthe land holdings of landlords and wealthy peasants andthe establishment of agricultural collectives.The Chairman failed to recognize that a necessary conditionfor his scheme to be sustainable was that the productionwhich the government appropriated had to be limited to thesurplus which was not required for the basic maintenance ofthe peasants. The widespread famines which ensued in 1956,after the first phase of collectivization, led to generalskepticism in the policy among party leaders and theintelligentsia. Chairman Mao responded to these tensions bypromoting free speech through his 100 Flowers campaign: “Leta hundred flowers bloom. Let a thousand schools of thoughtcontend !”. Of course the academics and party members who


stuck their necks out were either arrested or purged fromthe party or both. The top economic priority of the ANC government was toaddress the economic inequalities which were bequeathed toit by the apartheid government. As I shall show, the ANCchose to deal with this problem by introducing BEEprocurement in state run institutions. This opened unlimitedopportunities for all manner of unscrupulous middlemen,connected to the government, to become instant millionairesby causing a dramatic increase in the prices which thegovernment paid for goods and services. The result was poorservice delivery. True, no one was ever arrested forspeaking his mind against the government during the Mbekiera but there was a widely held view that verbal attacks ondissenters were so brutal that people were compelled to keeptheir views to themselves. Even icons such as Mandela andTutu were not exempt from vicious attacks.The period for the first five year plan ended in 1957 bywhich time Mao had doubts about the particular path tosocialism he had chosen. But the Great Helmsman, as theChairman was known, had a new big idea, the Great LeapForward, which he unveiled at the beginning of 1958. Interms of this plan, rapid development of the agriculturaland industrial sectors was now to take place in parallel.The importation of heavy machinery was to be avoided bymaking use of the massive supply of cheap labour. This necessitated the merging of the existing collectivesinto huge “People’s Communes”. The haste with which thistask was undertaken is demonstrated by the fact that anexperimental People’s Commune was established in April 1958.At a meeting in August of the same year it was decided thatthese communes would become the new form of economic andpolitical organization in the whole country. By the end ofthe year 25000 communes had been established with an averageof 5000 households each. The Mbeki administration introduced similarly sweepingreforms in education, training and skills development withcomparable haste and with similar results.

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Mao saw grain and steel production as the pillars ofeconomic development. Therefore the people’s communesincorporated agriculture, light industry and construction.Someone had convinced Mao, a man with no personal knowledgeof metallurgy, that high quality steel could be produced inprimitive backyard steel furnaces. Accordingly Maoencouraged the establishment of these furnaces in everycommune and in each urban neighbourhood. The fuel for thesefurnaces was wood and the feedstock was scrap metal.However, in their enthusiasm to increase production thepeasants often used their furniture as fuel and their potsand pans as feedstock. Unfortunately their output consistedof low quality lumps of pig iron which was of negligibleeconomic worth. The South African reforms were also very costly consideringthe high proportion of the GDP that was spent on education,training and skills development. The quality of the outputwas such that the country today is facing a crippling skillsshortage.People who were qualified to advise on such technicalmatters were terrified of Mao, especially after the purgesfollowing the 100 Flowers Campaign. But the Great Helmsmanstill had a lot more nasty surprises in store for thenation. He had a dangerous infatuation with unscientificagricultural methods advocated by a discredited SovietBiologist called Trofim Lysenko. [Mbeki’s disregard and evencontempt for conventional scientific wisdom was legendary.He was fond of referring to medical scientists who differedwith him on AIDS as mere technicians.] Despite good weatherthe harvest of 1958 was drastically reduced by:

The methods of Lysenko Neglect resulting in the harvest rotting in the fields

uncollected as a result of the diversion of labourto useless ‘steel production’.

Locusts after Mao upset the ecological balance byordering the mass killing of sparrows [The great

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sparrow campaign] which he believed were consuminggrain harvests.

The subsequent famine was so serious that some Chineseresorted to cannibalism. This must have been particularlytraumatic for a country which had attained such dizzyingheights of culture before colonialism. The positive spin offof this catastrophe was the beginning of the politicaldemise of Mao and the renewal, in at least some in the partyleadership, of faith in education, technical expertise andeven the application of ‘bourgeois methods’ in developingthe economy.

3 Economic transformation

2.1 Mbeki’s great leap forward

After the transition of 1994 the first democraticallyelected President, Mr Nelson Mandela served only one termduring which he focused on completing his delicate missionto consolidate the transfer of political power. It fell uponhis deputy, Mr Thabo Mbeki, a trained economist, to handleeconomic transformation. To this end the priority economicchallenges he faced were: 1) macroeconomic stabilization 2)restructuring of state controlled institutions 3) reducingpoverty and economic inequalities 4) improving privatesector competitiveness 5) reducing unemployment. Of allthese goals the reduction of absolute and relative povertywas of greatest strategic importance simply because it isthe ultimate measure of economic progress and it also hasgreat potential for causing serious conflict. All the otherchallenges could be viewed as defining means to this end.These priorities had been identified by the RDP document butthe government ultimately addressed them in terms of theGEAR policy, with mixed results. The neo-liberal ideologywhich underpins GEAR also informed a radical Transformationand Restructuring [T&R] of state institutions includingEducation, Training and Skills Development [ETSD]. Howeverthe impact, on the economy, of the successes or failures ofGEAR pales into insignificance compared to the disastrouspresent, imminent and future effects of the T&R of ETSD or

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Mbeki’s Great Leap Forward. In other words the neo-liberalideology behind GEAR ultimately did great but relativelyless harm through this macroeconomic policy than it did bysuggesting Mbeki’s hideously complicated and bureaucraticGreat Leap Forward which the government implemented sozealously through the Department of Education and theDepartment of Labour.

Macroeconomic stabilization The minister of finance unveiled the GEAR policy in hisMarch 1996 budget speech. The apartheid government hadincurred a huge debt which burdened the fiscus with hugedebt service costs leaving a huge hole in the budget thusforcing the government to run an unsustainable budgetdeficit. Lack of foreign investment exacerbated a negativebalance of payments. Inflation was about 10% which is nothigh by the standards of developing nations. However theinflexible one size fits all Washington Consensus [WC] dogmaprescribes inflation targeting. So the range 3% to 6% wasarbitrarily set as the target and interest rates wererelentlessly increased often in a forlorn hope to combatcost push inflation. The governor of the Reserve Bank was frequently accused ofextinguishing growth through high interest rates, to whichhe would retort that he had a constitutional mandate todefend the currency. What he always failed to mention wasthat no where does the constitution define the defense ofthe currency as confining interest rates to the specificrange which IMF advisors had recommended.Another standard prescription of the WC is fiscal austeritywhich is usually a good thing. The government really had nooption in this matter if it wanted to bring the public debtdown to manageable proportions. Nevertheless it wasunfortunate that this happened at a time when long neglectedinfrastructure badly needed attention. The effects of thisneglect were compounded by gross incompetence, wide spreadcorruption and chronic lack of skills at local governmentlevel. I shall later come back to the question of skills.

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Part of the WC inspired strategy to address lack ofinvestment was rapid if not instant liberalization of themarkets including labour, financial and trade markets.Liberalization of labour markets meant the removal of workerprotection to allow employers to hire and fire at will.With the militant trade union federation, COSATU, as apartner in the tripartite alliance this was out of thequestion. So the government cynically threw the borders openfor African economic refugees in order to undercut COSATUmembers. The irony is that COSATU often spoke out againstwhat was called xenophobia, in favour of African solidarity.The deregulation of financial markets was implementedrapidly and resolutely even as the rand was attacked byspeculators, like all other emerging market currencies,during the Asian Tiger Financial Crisis of 1997. However wewent the extra mile in removing regulations. In fact we weresuch excellent students of the WC dogma that we ended up atthe top of the class with the most tradable currency of allthe emerging market currencies. Consequently the rand wasthe most volatile of all these currencies. What we actuallyachieved was excellent macroeconomic destabilizability.

‘Restructuring’ of state owned enterprisesAs a further aspect of reducing the deficit and boostingforeign investment the WC prescribed a fire sale of stateassets, preferably to foreigners, and rapid if not instantliberalization of the markets. So the government proceededto ‘corporatize’ and ‘restructure’ State Owned Enterprises[SOEs] to prepare them for sale. ‘Restructuring’ was aflexible and often loaded term which frequently disguisedactual privatization. However the government dragged itsfeet with regard to ‘restructuring’ because it was hopedthat privatization of SOEs would be ideal for Black EconomicEmpowerment [BEE]. I shall discuss examples in chapter 10.

Reducing poverty and economic inequalitiesThe most glaring feature of South African society which isan unmistakable signature of its infamous past is the hugeincome gap between the rich and the poor and the fact that

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the rich are mostly white and the poor predominantly black.After 1994 the country experienced a long period of ‘joblessgrowth’ during which unemployment increased even as theeconomy grew albeit at moderate rates. The government wasforced to implement massive social welfare programsproviding monthly grants to an ever increasing category ofcitizens from the aged to indigent children. It as a remedywhich could only be sustained in the short to medium termAt the top end of the socioeconomic scale the governmentsought to create a few black instant millionaires through apolicy called Black Economic Empowerment [BEE]. I shall havemore to say about this in chapters 9 and 10. Suffice to saythat this policy had nothing to do with reducing economicinequalities. Its effect could only be to allow a fewblacks to join the ranks of the superrich without reducingthe income gap. Meanwhile unemployment persisted. It wasn’t just that theeconomy was not growing fast enough to create a sufficientnumber of jobs. It was shedding jobs. Politicians started todeny any responsibility for the situation. The word‘unemployable’ began to appear with increasing frequency intheir statements and speeches.

Private sector competitivenessThe direct reason why the economy was shedding jobs was thehaste with which the government removed tariffs andexposing South African manufacturers to competition with lowcost producers without giving them sufficient time toadjust. Even as the disaster was slowly unfolding,government officials were fond to point out, with relish,that South African industry was used to apartheid andsanctions era protection and had grown fat inefficient andantiquated in terms of its machinery and methods ofoperation. Exposure to the cold winds of internationalcompetition would force it to improve competitiveness. Thiswas in fact one of the prescriptions of the WC which iscalled trade liberalization.

Reducing unemployment

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So in the big scheme of things the economic woes of thelowest ‘unemployable’ wrung of society were to be addressedthrough welfare, the elite had BEE to take care of them andwhat about the middle layer consisting of the working andmiddle classes? This problem was to be sorted out throughthe implementation of grand theories which I shall nowendeavour to describe.The 1980s and 1990s saw the arrival of new high impactcommunication technologies such as the cellular telephone,the personal computer and the internet. Though globalizationhad been with us for centuries, these technologies revivedinterest in the phenomenon of globalization. Experts hadgood reason to be inspired to conjure up all sorts ofexciting future scenarios which the rapidly advancingtechnology was to bring about. There was no exaggeration inpredictions such as: “The 10 jobs which will be most indemand in the year 2000 did not exist in 1990”.Accordingly it was predicted that the future worker couldnot expect to acquire a skill and depend on it forlivelihood for the rest of his life. The workplace would bea rapidly changing scene requiring lifelong learning. Thiswas predicted to be particularly the case with skillsrequired to add high value to products. This was in linewith the export intensive manufacturing industries whichSouth Africa was promised would materialize from foreigninvestments which were sure to follow if South Africaimplemented the WC prescriptions with sufficient enthusiasm.Even the normally thoughtful Deputy President Thabo Mbekiwas so enamoured with the idea and so enthused by itspossibilities that he took to inviting65 the press to callhim Thatcher. However this was a fanciful scenario giventhat indiscriminate trade liberalization would actuallydestroy much more jobs than it created. To prepare for thisNongqawuse66 promise the government formulated and rapidlyimplemented grandiose plans to transform education, trainingand skills development. I shall discuss these schemes in thenext section.

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In “Architects of Poverty” Moeletsi Mbeki argues that partof the deal between the African elite and the MineralsEnergy Complex [MEC] was that the former would ensurecontinued supply of cheap labour to the latter by removingtrade barriers and thus securing cheap consumer goods forworkers. Since this deal had the effect of destroying localmanufacturing, Mbeki reckons that this must be the reasonwhy the manufacturing sector was excluded from Codesa IIdeliberations. I prefer a much simpler explanation. It seemsmore likely that the manufacturing sector were absent byreason of apathy rather than exclusion. The diverse natureof the industry is not conducive to organizing an effectivelobby. In a recent book67 Alan Beattie discusses how sometrade lobbies can ‘punch above their weight’. The MEC doesnot only have an ideal structure for an effective lobby ithas considerable weight. It seems to me that the state hassecured cheap labour for the economy more effectively bythrowing the borders open.By the year 2009 the trade unions had been so out maneuveredthat they were frantically campaigning for the abolishmentof labour brokers, a mere symptom of an establishedsweatshop economy which was steadily but surely renderingtrade unionism irrelevant.

2.2 The scourge of unemployment

Politicians and trade unionists had all sorts sillyexplanations for the unprecedented unemployment whichfollowed Mbeki’s great leap forward. Though the unions didblame the removal of tariffs, if rather quietly, they alsoblamed industry for moving towards capital intensiveproduction as if better tools were responsible forunemployment. They often repeated their preference forlabour intensive industries to help alleviate theunemployment problem. Politicians, from President Mbeki toPresident Zuma took to referring to the unemployed asunemployable. In other words the jobs were there it was justthat the people had no skills.

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As already mentioned in the preface, since humans began touse tools, economic development commenced and ever sinceeconomic advancement has been marked by the invention ofnew, and better tools which increased productivity. In thelong term, better production tools have never destroyedjobs, on the contrary they create more jobs. Better toolsincrease productivity which decreases the price of thegoods being produced and this results in an increase inthe demand for those goods. The increased volumes ofproduction go some way in making up for decreased employmentas a result of increased productivity. Furthermore even ifthere is a net decrease in the number of employees in thefirm which has increased productivity, the remainingemployees earn more and their increased buying power meansthat their demand for other goods will increase jobs in theproduction of those other goods. Increased productivity in the production of certain productsmay give rise to new industries. For instance, as Idemonstrated in chapter 4, productivity improvements in theproduction of meat affected and was affected by the creationand expansion of the fast foods industry. The problem withglobalization, as spearheaded by the WTO, is thatmultinationals always arrange that the quality jobs whichresult from productivity improvements go to first worldcountries.

3 Qualifications framework, skills development & education

3.1 The qualifications framework and skills development

People love conspiracy theories because they aresensational, a quality they derive from the fact that theypurport to unveil nefarious plots, of the powerful against

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society, which they surreptitiously hatch in top secretvenues. However conspiracy theories are seldom true. Quiteoften a conjuncture of political, economic or socialcircumstances may favour behaviour patterns which appear tobe orchestrated in a manner which is consistent with theunfolding of a conspiracy. None the less it may be useful,for purposes of analysis, to note, without any intention ofbeing sensational, that things are happening as if therewere such a conspiracy. The period between the unbanning of liberation movements in1990 and the nonracial elections of 1994 had the ambience ofa wild west frontier town. Political control was about tochange hands and people felt insecure. They sought to usewhat leverage they had to place themselves in advantageouspositions for the uncertain future. While the majority wereorganized to deploy their preponderance in numbers, manysought to gain some control of events through violence. As asideshow to the main political developments, the white elitedeployed their superior knowledge and technical expertise tosecure economic advantages for themselves. The side showwas to have a profound influence on the future trajectory ofthe country.As early as the mid 1980s, when the secret talks between theANC and the government began, it was widely anticipated inwhite circles that the power of a future ANC governmentwould be severely circumscribed by lack of skills and thatthis would create opportunities for enterprising whites. Theauthor, Brian Pottinger68, recalls that, at the time, asenior Afrikaans business leader cynically remarked to him:‘Stand by for the biggest outsourcing exercise in thiscountry’s history’. This was at the height of theinsurrection which had begun in 1976 and never really dieddown until 1990. Anyone vaguely acquainted with thefrustrations of the black community would have known thatthe one department which would be responsible for deliveringon their most cherished aspirations would be the departmentof education. This was the one department which had the

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potential to ensure that blacks would eventually be in powerif initially they could only manage to be in office.As the political settlement was being negotiated whiteconsultants set out to work marketing all manner ofpolicies, plans and schemes to the leadership of theliberation movement. As might be expected, the majorconsideration was almost always to ensure that lucrativeoutsourced business would come their way for a long time tocome. The more complicated and unworkable the policies andplans, the more they would render the consultantsindispensable.As the fundamental basis for classifying and grading allknowledge and skills the government was advised to set up acomprehensive and highly complex ‘National QualificationsFramework’ [NQF] in terms of which all knowledge and skillswere graded in levels corresponding to the usual primaryschool to high school to undergraduate to postgraduatelevels. The body responsible for this mammoth task is theSouth African Qualifications Authority [SAQA]. The basicassumption was that all knowledge or skills which oneacquires in the course of life including through workexperience could be fitted into this formal scheme. It wasin this context that in July 2009 Dr Blade Nzimande - thenew Minister of Higher Education - commenting about the lownumber of matriculants who got university exemption, askedwhy a working forty year old should require a matricexemption to be admitted to university. The basic idea of a qualifications framework was thereforeto formalize all knowledge and skills, a daunting task whichwas to spawn a huge empire. First, knowledge had to beclassified in order to determine the relevant accreditedstandards generating body [SGB] which is responsible forpackaging the knowledge into units, setting standards forthe units and grading their levels. Units are buildingblocks for qualifications. The NQF empire includedaccredited Education and Training Quality Assurance [ETQA]bodies to ‘monitor and audit the provision, assessment andachievement of specified standards and/or qualifications.

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This, of course, called for the existence of a huge industryof education and training service providers. It amounted tothe privatization of education and training on a massivescale in the best tradition of the WC dogma.The ETQAs representing various economic sectors were namedSector Education and Training Authorities [SETAs]. The SETAsreplaced the old Industry Training Boards which administeredapprenticeships. But the mandate of the new bodies was anover elaboration of the original mandate of the bodies theyreplaced. The SETA mandate included:

Developing a sector skills plan consistent withnational skills strategy Implementing the sector skills plan by 1) establishinglearnerships, 2) approving workplace skills plans 3)allocating grants in the prescribed manner to employers,education and training providers and workers and 4)monitoring education and training in the sector.

The workplace skills plans which had to be approved by SETAsmicromanaged Human Resource Development within the workplaceto the extent of demanding individual worker careerdevelopment plans. This is consistent with the definition:“The NQF…is a lifelong learning system…” which appears in anofficial SAQA document69. The system seeks to monitor and directindividual career development of workers who are expected to be constantlyengaged in lifelong learning. The burgeoning industry which wasspawned by this bureaucracy is illustrated by the followingadvertisement which appeared on the Web:

Changes in legislation now forces companies from this year on to reporttheir Workplace Skills Plan [WSP] and Annual Training Report [ATR]according to the new Organizational Framework for Occupations [OFO]system. For more information or assistance to convert current WSP/ATRreporting structures to the new OFO structures or on how to effortlesslyautomate your WSP and ATR to meet the requirements of the newlegislation email….

The government instituted a 1% levy on payrolls to financeSETAs and to enable them to reimburse companies for creatingskills complying with the NQF. But companies ignored SETAs

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and took the levy as just another company tax. Where did theelaborate plan go wrong? The plan was based on half truths;on assumptions of limited validity which grossly exaggeratedreality:

The average educational level of black workers is lowand that low level of education was obtained in barelyfunctional schools. However this does not mean that themajority of these workers have an appetite forlearning, let alone lifelong learning.

In hi tech companies knowledge becomes obsolete veryrapidly and lifelong learning is essential in suchenvironments. But most South African work placesrequire skills such as simple boilermakers orelectricians. The basic training required for anelectrician in 2010 is still the same training whichwas required in 1980. Companies simply want people whoobtained decent basic school education.

3.2 The post 1994 restructuring of school education

I have already mentioned that the NQF administered by SAQAclassifies and grades all skills and knowledge some of whichis of course what is taught in our schools. The SGBsgenerating the relevant standards whether it be for somework place learning unit or some learning unit in theschool syllabus use the same universal principle enshrinedin Outcomes Based Education [OBE]. A unit is defined interms of the outcomes it is supposed to achieve. In terms of a SAQA document [ibid] a feature of the OBEapproach is to “balance the need for quality education for all citizens withthe need for flexibility to cater for the wide-ranging circumstances that facelearners and the wide-ranging options for delivering what constitutes relevantcredits and qualifications. In other words, it must balance society’s needs withthe needs of the individual”. The document further speaks of“acceleration mechanisms for the redress of past unfair discrimination” andit also declares that “Qualifications and standards would be expectedto ensure that the potential of citizens that were previously denied education andtraining opportunities is brought to the fore”. This resonates with anobservation made by Pottinger [ibid] about OBE:

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The theory of OBE is that all education must be geared towards equippingpupils with the sort of skills needed to survive in a modern andtechnologically evolving world. Understanding and flexibility are moreimportant than content; the process is more relevant than what is learnt.Gone is rote learning. It was experiential learning…

The whole National Qualifications Framework was designed to‘integrate’ knowledge in such a manner as to allow informal‘experience’ to be graded and accepted as a substitute forlearning up to a specified level in the formal system ofeducation. The ability to have knowledge gained in onesphere of life recognized as a basis for entry in anothersphere is referred to as portability. In other words theprinciples of OBE in a school classroom are the same as in aworkplace training environment.Where the workplace teacher must take into consideration thebackground and chosen career path of the worker in gradinghim, at school the teacher must consider the background andfuture plans of the learner. There is hardly any universalstandard. Every teacher requires the wisdom of Solomon tomake it through this minefield. This mess was imposed onblack schools with highly unionized and ungovernableteachers who threw out school inspectors decades ago. Thesenseless new education system only served to justifyexisting irresponsible behaviour. It is not surprising thatOBE has reduced the educational system to a level wherepeople are convinced that apartheid education waspreferable. Consequently the country is neither educatingits children nor training its workers.

4 Specialization: The spirit of the times

4.1Restructuring of state assets, labour flexibility and outsourcing

The ANC leadership elite never owned up to its change ofpolicy and it never attempted to explain the new globaleconomic realities to the rest of the leadership and to thegeneral membership. When the alliance partners condemnedGEAR and called for a return to the RDP, the top leadershipof the ANC took to dismissing them as populist, which theydeeply resented. With increasing frequency the top leaders

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of the ANC, from the time of Nelson Mandela’s presidency,declared that the ANC and the SACP were two differentorganizations and that the ANC was not a socialistorganization. President Mbeki, in particular, often cameacross as encouraging a split. Mbeki already had a reputation for arrogance and for beingan intellectual bully. It is therefore no exaggeration toassert that this attempt, on the part of a small group oftop ANC leaders, to browbeat everyone else in the alliance,with regard to economic policy, contributed significantly tothe antagonism which led to Mbeki’s loss of the ANCpresidency at the December 2007 Polokwane conference. Evenat or immediately before this conference Trevor Manuel,Mbeki’s financial supremo, was reported as talking down tothe ANC membership with declarations such as: “GEAR was theANC government’s macro-economic program to implement theRDP, which itself was an elaboration of the FreedomCharter”.Generations of ANC activists were taught that the FreedomCharter encapsulated the ideals for which the liberationmovement was fighting. The Charter clearly spelled out asocialist program in its famous clauses especially thefollowing:

The national wealth of our country, the heritage of all South Africans, shallbe restored to the people;

The mineral wealth beneath the soil, the banks and monopoly industry shallbe transferred to the ownership of the people as a whole

Under the circumstances some may argue that the ANC’sfailure to educate its followers about the new economicrealities was nothing short of insulting their intelligenceif not dereliction of duty. It was against this backgroundthat, on assumption of power in 1994, the new democraticgovernment continued with the privatization of state assetswhich had been initiated by the apartheid government.Because they were still shy to own up to the reversal ofpolicy they took to the habit of using euphemisms.

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Privatization for instance was never referred to by itsproper name. It was called “restructuring of state assets”. It was also against this background that state fundedinstitutions such as hospitals and educational institutionswere suddenly hit by severe budget cuts during the earlynineties. These cuts were accompanied by demands for theimplementation of a package of drastic cost cutting measureswhich was variously known as transformation, downsizing orrightsizing. These euphemisms referred to a one sizefits all business model which was prescribed for theseinstitutions. A university was required to view itself as a businesswhich offered a service, which is education, to customerswhich are the students. Thus the core business wasconsidered to be teaching and research. In accordance withthe WC all other non-core activities which could be renderedby private companies at a profit such as catering, securityetc had to be outsourced. Likewise a hospital was required to view itself as abusiness which offered a service, which is health, tocustomers which are the patients. Thus the core business wasconsidered to be health care. In accordance with the WC allother non-core activities which could be rendered by privatecompanies at a profit such as catering, security etc had tobe outsourced.Once the outsourcing fetish took root, it went completelyoverboard with so called ‘management’ outsourcing everychallenge until capacity to do even the most basic androutine work disappeared. Faith in white experts, whousually win these lucrative contracts of outsourced work, isnow firmly established.The transformation, rightsizing or downsizing of theseinstitutions entailed mass retrenchment of employeesrendering non-core services. As retrenchments were beingfinalized private companies would be allowed on site toselect those workers they wished to hire. In many casesthose workers who were lucky to be selected by the private

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companies lost recognition of years of experience and werecompelled to undergo “retraining” and accept thecorresponding status. Benefits were drastically reduced.Government institutions seemed to be taking their lead fromthe private sector which, in the spirit of the times,rapidly perfected the art of ‘casualizing’ workers. Retrenchedprivate sector workers would be recruited by labour brokerswho would then sell their labour often to their originalbosses. The workers would now earn much less than theiroriginal wages with the balance, sometimes more than 50%,going to the brokers.The underlying new dogma which the government had imbibedfrom its World Bank friends but was too embarrassed todeclare, motivate, debate and promote publicly was that theneo-liberal agenda dictated by the WC was the necessary andsufficient condition for improving the efficiency andcompetitiveness of the economy. The unions must have been party to the conspiracy ofsilence by the government because everyone including thempretended to be puzzled by the massive job shedding that wastaking place while the economy was growing. A new word wasadded to the South African lexicon: jobless growth. Some saythere was a direct relationship between this myopia of theunions and the rate at which top politicians were beingappointed from their ranks and multi millionaires wereemerging from the union leadership through lucrative BEEdeals.In their headlong rush to downsize, right-size and right-shape the government institutions lost all will andcapacity to monitor the quality of the services they hadprivatized. Was privatization not automatically supposed tolead to improved efficiency? They only retained staff whowere only willing and competent to perform or supervise thecore services. This encouraged the private companies to cutcorners when minimizing costs in order to maximize profitirrespective of the quality of service.

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The subsequent deterioration of services coincided with along period of curious behaviour by senior governmentofficials: When they walked with their heads above theclouds having lost all capacity to see what was happening onthe ground. It was as if they were no longer living in SouthAfrica but in the stratosphere. This is why an article70 bythe Minister of Finance, Mr Trevor Manuel, which appeared inthe press was so remarkable. Below is an extract:

I went to visit somebody in a TB hospital in Cape Town. The place was filthy.The grass was knee-high throughout. Black rubbish bags pulled apart;benches so grimy you could not sit down. There were buckets of dirty waterstanding around. The person I visited said, “We never get meat in our food.”

I called the premier [Ebrahim Rassool] and health MEC [Pierre Uys] andasked, “Can it be that you’ve taken the decision that says to hell with thesepeople, don’t feed them?”. I found out that what had happened is thatservices had been outsourced…Why is nobody watching?

4.2Transformation, rightsizing and downsizing of universities

There was a time when universities had an authoritativevoice in South African society. They regularly leveledconstructive criticism publicly at the government on avariety of issues ranging from morality and politics tomanagement and economics. The governments of the daycertainly resented the outspoken criticism especially fromthe liberal English universities. Nevertheless such was theprestige of universities that the apartheid governmentsfrequently found it hard to ignore them.What gave university communities the moral authority tocriticize is that they were exemplary in the orderly mannerin which they administered their institutions and in thecompetent manner in which they utilized state subsidies andthe funds they raised independently. Universitiesdemonstrated that they were repositories of knowledge andskills by the manner in which they conducted their ownaffairs. From inception the black universities were created for thesole purpose of producing a docile middle class which wouldact as a buffer between the white rulers and the oppressed

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blacks. The reason why these universities became hotbeds forrevolution is probably similar to the reason why RobbenIsland became a hotbed for revolution.During the first phase of the existence of the blackuniversities their top officials were almost always white.The first major transformation of these institutionsoccurred during the mid-seventies when they were turnedinto symbols of fraudulent statehood of Bantustans. As newBantustans were created more of these universities came intoexistence under the leadership of people who were eitherwilling or reluctant supporters of the Bantustan system. The administrative chaos which came to be associated withBantustans was accurately reflected in the management of theBantustan universities. Generations of students passedthrough the portals of these universities before and afterthe transition of 1994. Even after 1994 chaos still reignedin these universities until it was decided that many ofthem be swallowed up BEE style by formerly whiteuniversities during the general reorganization of tertiaryinstitutions during the early years of the millennium. Universities are the intellectual homes in which the youthare brought up. It is the university which inculcates anotion of competence in young minds. Later in life whenformer students get their first jobs they can only beexpected to run things as efficiently as they witnessedtheir universities being run. The poor notion of competencewhich a student imbibes from a poorly run university maymake the graduates arrogant incompetents who are worse thanhumble and eager to learn people who have never been touniversity. A university may do worse that to merely fail to impartknowledge and useful skills: It may impart pathologicaltolerance for incompetence and hopeless insensitivity tochaos and disorder masquerading as education. In short, auniversity may do worse than to merely fail to educate orto leave students uneducated, it may end up miseducatingthe students very effectively by bringing them up,intellectually, in a dysfunctional university environment.

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Conditions which were already bad, in the Bantustanuniversities, were exacerbated soon after 1994 by theenforcement of the dictates of the Washington Consensus onall tertiary institutions. This sought to bring about acomplete change of ethos which completely destabilizedinstitutions which were already completely lacking in asense of purpose. Out of the blue university communitieswere told that students had become customers, academics hadbecome service providers and the team of administrationofficers had become management.The courses which the academics offered were now productsthe “market viability” of which had to be assessed andevaluated. Products which attracted low demand had to bediscontinued. While there are courses of dubious value whichdeserved to be discontinued, there were also very importantmathematical courses which attracted low demand preciselybecause Bantu education was designed to make such knowledgeinaccessible to black people.In the new business oriented environment academicdepartments had to be rationalized to ensure that theyproduced their products [formerly courses] cost effectively.This entailed the grouping together of related departmentsinto what were called schools. This had its merits inencouraging interdisciplinary integration of courses andresearch. A further benefit was more efficient utilizationof the skills of academics. However this rationalization wasalso indicative of an ominous new trend to squeeze as muchwork as possible from academics for as little pay aspossible. Staff were offered meager voluntary retrenchmentpackages as massive retrenchments were threatened.Management was the only university sector which thriveddespite restructuring. Actually management thrived becauseof restructuring. It started with the principals who nowbegan to view themselves not as academic leaders but asChief Executive Officers (CEOs). Naturally their salariesand benefits now had to be comparable with those of otherCEOs in the private sector. During the late nineties theimpoverished University of Transkei [Now Walter Sisulu

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University (WSU)] had a principal who once remarked to methat Umtata is so isolated that he was consideringpurchasing an aircraft for the university. Clearly he hadbeen spending too much time with CEOs of huge corporations.If there is an area in which the trickle down theory workswith perfection it is in the area of management remunerationand privileges. Before the advent of the business model, themost senior administrative official below the principal andhis deputies was called the Registrar who only had deputies,assistants and clerks below him. All of these officerssuddenly disappeared and what materialized in their placeswere multitudes of Directors, Chief Directors and ExecutiveDirectors. Their salary packages and privileges were asfancy as their brand new titles. The university community thus came to be divided intoclasses the highest of which was management. The secondhighest class consisted of students and the lowliest classconsisted of the academic staff. As customers, students werealways right. It was not uncommon for students to gracepanels which interviewed academics. Indeed where there wereworkers who had escaped outsourcing, these workers ratedhigher than academics by virtue of their superior toyi-toyipower.Previously, academic work had been managed by heads ofdepartments and heads of faculties [Deans] who werethemselves academics. These positions were usually rotatedso that there was nothing really special about them exceptfor a token allowance which was not a sufficiently strongincentive to cause a stampede. In the largest universitiesthere was a good justification for making faculties costcenters with Executive Deans as full time managers. Needlessto say, the Executive Deans joined the Executive Directorsin earning what were astronomical salaries from theperspective of academics.With the lowering of the status of academics and the strongfinancial incentive provided by high salaries for Deans, thesmaller universities disregarded all principles governingefficient organizational structures and followed suit by

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introducing Executive Deans. The proliferation of highlypaid management positions also served the purpose ofenabling corrupt university bosses to dispense patronage.The era of top heavy institutions had truly arrived. Itbecame common for an institution to boast a number of idlehighly paid managers while lecturers were toiling inseverely understaffed departments.This is similar to the situation in hospitals which ledTrevor Manuel to ask “Why is nobody watching?” Most of thepolicies which the post 1994 government has adopted areadmirable. A big problem permeating all policyimplementation is that the government governs as if byremote control from a distant galaxy. No attempt is evermade to follow up by reviewing and evaluatingimplementation with a view to detecting and rooting outadverse unintended consequences.

5 Governance at board level

5.1The hottest status symbol in town

State controlled institutions [SCIs] such as universities,hospitals and the State Owned Enterprises [SOEs] weregoverned by boards [called Councils in the caseuniversities] many of whose members were, naturallyappointed by the government. In the spirit of non racialism- and, indeed, affirmative action - the majority of theseboard members were black. Unfortunately the government choseto source candidates for directorships from a much smallerpool than the already small pool of qualified black people.A stringent condition which people had to satisfy in orderto qualify as candidates was that they had to haveconnections with the elites through friendship, family orruling party structures.Often the elites created a transparent illusion ofdemocratic processes by demanding participation of allmanner of ‘stake holders’ in the appointment of boardmembers of SCIs. Central government, provincialgovernments, trade unions and other institutions dominatedby the ruling party would nominate their favourites. The

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same small number of well connected candidates were recycledagain and again in all sorts of SCIs. Not to be outdone,private white owned companies which needed to have access tothe African elites also recycled the same names. Many ofthem ended up sitting on so many boards that boardmembership became a full time occupation. Others juggled animpossible number of board memberships with responsible jobsas top executives in State Owned Enterprises. In black society a high number of board memberships held byan individual became a status symbol and a fashionaccessory to be flaunted at every opportunity. The newelites had transformed boardrooms into catwalks. There is noway a person can do justice to more than twenty boardmemberships. The private companies which appointed suchpeople certainly did not expect them to add any value totheir boards except to arrange access to people in power forquestionable reasons. The overcommitted board members hadsuch divided attention that they were not in a position tolearn anything of value from their participation in suchboards. It was yet another disgraceful example of the sad tendencyof post liberation African elites to trivialize matters ofgreat importance and to seek to milk narcissistic suppliesfrom opportunities which ought to be used to gain vitalknowledge and experience in corporate governance. The resultis the tendency of a mismatch between the classes which theblack hierarchy deploys to boards and their whitecounterparts. In a country with a history of racialprejudice, by their performance, black board membersgenerally misrepresent blacks as flippant good fornothing showoffs with no interest in the serious business ofboards. Is it any wonder that, at least from anecdotalevidence, blacks no longer enjoy the respect from whiteswhich they enjoyed in 1994?I have had first hand experience of the attitudes of ourpeople to board membership both in a SOE and in aHistorically Black University [HBU]. In such institutionsboard members can be classified into two broad categories:

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those on the one hand who see the board as a catwalk andthose on the other hand who are serious tenderpreneurs whosee the board in much the same way as the big cats in thewild view the watering hole where they lie in wait to ambushtheir prey. I shall start with the socialites I observed at the HBU.Many of the council memers tended to be people who leftuniversity at a stage when they were still tremendouslybeholden to professors. Membership of the council and anopportunity to rub shoulders with Vice Chancellors tended tobe regarded as a great honour. Close questioning ofmanagement decisions was viewed with distaste as impolite.Council was regarded as an elite society the membership ofwhich boosted one’s standing in society and enhanced one’sCV. A council meeting was the place where to be seen inone’s best Sunday suit. Naturally a worthy member of such apolite society polished his deportment to ensure that hisaccession to the ranks of the elite was affirmed.

5.2The watering hole for tenderpreneurs

. Top university management was always vehementlycomplaining of under funding by government but theprincipal could earn appreciative applause at councilmeetings by making announcements such as the hiring ofconsultants all the way from Cape Town, two thousandkilometers away, to come and organize the registration ofstudents at the beginning of the year. The years of‘transformation, downsizing, rightsizing and outsourcing’had taken their toll on the university The administrationhad learned to outsource every challenge until they forgoteven how to organize simple annual chores such as theregistration of students.Since the administration had been freed of theirresponsibility to administer they had plenty of time intheir hands to engage in tenderpreneurship themselves andthey had the full backing of council. In fact any indicationfrom management that they were going to outsource oneservice or another was always guaranteed to gain

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enthusiastic support from the council. It was a convergenceof interests between management and those members of councilwho specialized in aspects of council work involving thetender, audit and finance committees. In sharp contrast tothe narcissists on the catwalk, they were definitely theonly council members who had any enthusiasm for their work.A closer examination of the tenderpreneurship which wastaking place showed clearly why the university could alwaysbe expected to be complaining about inadequate governmentfunding. Council members and even senior administrationofficials had phantom companies which won tenders to supplythe university with everything from printed material tohighly sophisticated scientific equipment. The supplieswould be obtained from legitimate companies but it is thephantom companies which took delivery and then invoiced theuniversity after adding astronomical markups on thelegitimate prices. Any improvement in government funding wasseen as a windfall which meant more lucrative business forthe in house tenderpreneurs.

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Chapter 7The Elixir of Discrimination

“The focus [of OBE] is on achieving outcomes according to ability. Achievement is supported by flexible time frames and not bound by closed,

structured teaching time.” Professor SPT Malan71

1 The ‘transformation’ of school education

1.1 Pass one pass all!

The first post 1994 Minister of Education was ProfessorSibusiso Bhengu and his Director General was ProfessorChabani Manganyi both of whom were, incidentally, formeruniversity vice chancellors. It was these gentlemen whospearheaded the establishment of the National QualificationsFramework [NQF] and the introduction of Outcomes BasedEducation [OBE] both of which I introduced in the precedingchapter.At the beginning of the tenure of the new government therewas an oversupply of teachers, many of whom were products ofnumerous teacher training colleges, of varying quality,which had mushroomed during the apartheid era. A lot ofteachers who were in full time employment were not onlyunder qualified but they specialized in subjects for whichit was easy to find better qualified teachers among newunemployed graduates.It was generally acknowledged that the OBE which was in thepipeline would require highly qualified teachers. So, allthe teacher training colleges were closed down, and teachertraining was transferred to universities. In order toentice under qualified teachers out of the system thegovernment offered lucrative voluntary severance packages.Unfortunately the unwanted teachers were not interested inthe packages but instead they were quickly grabbed byscarce and highly marketable teachers of subjects like


Mathematics, Science and Accountancy who left the teachingprofession for greener pastures in the private sector.The school education system never recovered from this owngoal which was scored by the leadership right at thebeginning of what was billed as a revolution in theeducational paradigm. Universities never trained teachers insufficient numbers for a variety of reasons including thecost of university education and their more stringentrequirements for admission compared to the former teachertraining colleges. Those university students with anaptitude for the subjects with the most serious shortage ofteachers tended to go into more paying professions thanteaching.The shortage of qualified teachers was not the only problem.The education system which Bhengu inherited wascharacterized by a chronic lack of discipline at all levelsfrom students to teachers including their principals. It allstarted in 1976 when Soweto high school children werecompelled to take to the streets to protest againstTreunicht’s policy to ram Afrikaans down their throats. Itwas a low point in resistance politics, a time when adultswere not involved in any visible resistance against theapartheid regime. The children were therefore alsoindirectly protesting against the complacency of theirparents in the face of blatant bullying by the apartheidregime.It is now history that since June 16 1976 the townships werenever the same again. The youth seized the initiative andnever let up until the 1980s when intensive armed propagandasupported internal activism and the intensity of theuprisings steadily rose to a crescendo towards the end ofthe decade leading to the unbanning of the liberationmovements. During the struggle parents, including teachers,lost the authority to be arbiters of acceptable behaviourgiven that many of them were helpless bystanders whilechildren were risking their lives tackling matters ofnational importance.

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The period was marked by a proliferation of ‘communityorganizations’ each of which engaged in politicalmobilization around a special aspect of community life.Amongst these were student organizations which mobilizedaround demands for reforms in the schooling system. One ofthe first reforms they won was the abolition of corporalpunishment. Some of the slogans which gained currency duringthis period and which had an insidious effect on classroomdiscipline included “Pass one pass all!”. During this period the teaching profession became rapidlyunionized and acquired a lot of clout. There was an upwardspiral of rebellion against authority with each leveldefying the one immediately above it. Not to be outdone bystudents, teachers also rebelled against authority, defiedprincipals and threw school inspectors out of the schools.Principals found themselves isolated in their schools assolitary symbols of authority entrusted with the impossibletask of keeping an unholy alliance of students and teachersat bay. There was thus a convergence of interests betweenrebellious students and teachers: to do as little work aspossible provided everyone was guaranteed a pass. Someinnocent souls of humble intellect came to believe thatthose who enjoined them to study hard were part of theoppressive apartheid system. Some say this ruinouspropaganda was spread by the same sort of apartheid agentswho were sent to deliberately spread aids in black areas atthe time.

1.2 Outcomes based education

What I have just outlined is the chaos into which a neweducation system called Outcomes Based Education [OBE] wasintroduced. The idea behind OBE is simple enough and in factit is common sense to anyone who has teaching experience.The key is to distinguish between information on the onehand and knowledge and skills on the other hand. Learningconsists in transforming information into knowledge andskills which can be used and applied. The ideas underlyingOBE can be summarized in terms of three principles:

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Learning cannot take place passively. The teacher [orfacilitator] can only guide the learner and assist himin his own efforts.

A lesson has maximum effect in terms of transforminginformation into knowledge, i.e. logical relationshipsbetween facts, and develop skills if the learners areguided and assisted to discover knowledge on their own.

In order to prepare effective lessons, facilitateefficiently and to assess sensibly, for every lesson,the teacher must have a clear idea from the start whathe intends the learner to achieve. He must know theoutcomes he is aiming for; the knowledge and skillswhich he expects the learners to acquire from thelesson.

All of this is straight forward enough and teachers haveknown it since time immemorial. OBE, as it is espoused byutopian theorists including our department of education, isan over elaboration of these principles which transformsthem from sensible propositions which are practical underappropriate conditions to a crazy dogma which isunrealistically expected to apply even under the mostinappropriate conditions. To appreciate what I mean, it ishelpful to form a mental picture of two contrasting schoolssituations:1) The first school is populated by children from middle

class families with small well resourced classes, wellstocked libraries and properly equipped computer andscience laboratories and disciplined highly motivated,qualified and experienced teachers.

2) The second is a dilapidated school with no resources, nolibrary and no laboratory overcrowded with children fromworking class or peasant families many of whom haveunemployed parents and get their first meal of the day atschool, when supplies are not disrupted by corruption.Under qualified, unmotivated, ill disciplined teacherswho vehemently reject any form of supervision.

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In chapter 12 I have reproduced, as annexure 2, a tablewhich appears in Professor Malan’s paper [ibid]. The paperlists ten pairs of characteristics and correspondingtransformational aspects of OBE, which convey two entirelydifferent and contradictory messages to the two schools Ihave portrayed. For instance, consider the second pair inthe table with the characteristic that “OBE allows forexpanding learning opportunities beyond traditional seattime as learning time”. The transformational aspect is that“The focus is in achieving outcomes according to ability.Achievement is supported by flexible time frames and notbound by closed, structured teaching time.”In the first school this might refer to the use oflaboratory equipment, library facilities and the internet toresearch topics which were discussed in class. Studentsmight be given a guide indicating the nature of theinformation they need to search for, the analysis andsynthesis of the information which is required in order toaddress specified interesting questions. The outcomes soughtmight be precisely the ability to address these interestingquestions. In the second school none of these facilities exist. The OBEtextbook the teacher uses actually assumes that the teacherwill be able to set assignments as described above. However,the teacher is not sufficiently motivated or competent inhis subject to deviate from the textbook approach, theauthor of which clearly never envisaged a school as poor ashis. But even if the teacher was motivated and had thiscompetence he would have to prepare alternative studymaterial without appropriate resources. The teacher islikely to tell himself that he is not responsible for theseadverse circumstances and give the assignment to thelearners anyway. Lastly and most tragically he can cynicallyinvoke the ‘outcomes according to ability’ and ‘flexibletime frames’ of Professor Malan to shrug off the inevitablenon performance of the assignment. There are many otheraspects of OBE which are wide open to abuse.

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OBE is too prescriptive and it idealistically andunrealistically places too little emphasis on content andtoo much faith in the self discovery approach to teaching,an ancient idea which used to be called the Socratic method.The Greek philosophers of old used to have one or a fewstudents at a time and they had no exam deadlines to meet.This is the proper context of Malan’s fourth set oftransformation aspects which states: “Teaching is no longeraimed at covering the curriculum (content driven), butinstead at learners discovering new knowledge, skills andattitudes by reconstructing content for themselves withcreative guidance by the teacher”. Covering the curriculumis a given in well resourced schools but it has always beena major challenge in poor rural and township schools. Thatis why OBE helps ensure that their students make it to highgrades without acquiring even the most basic literacy andnumeracy skills.One of the most chilling revelations of the machinations ofthe apartheid government during its lowest years ofdepravity is that it commissioned its scientists toinvestigate the possibility of manufacturing diseases whichcould only affect black people and be harmless to whites.Had they succeeded they would have discovered what I wouldcall the hard elixir of racism, a magic portion to bringabout the utopia of racism without any need to overtlytarget blacks. However the apartheid scientists need nothave wrecked their brains. OBE has turned out to be a highlyeffective soft elixir of discrimination which was ironicallyconcocted with the full cooperation of legitimate blackleadership.

1.3 The outcomes of OBE

In his essay on ‘The aims of education’, Bertrand Russellremarked that: “Passionate beliefs produce either progressor disaster, not stability”, the implication of which isthat where there is neither progress nor disaster therecannot be passionate belief. In chapter 3 I discussed theremarkable capacity of the African elite to accommodatecontradictory beliefs [To believe everything is to believe

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nothing]. This capacity testifies to a singular lack ofpassionate belief by these elites, a characteristic whichcan also be deduced from the lack of either progress ordisaster in our national affairs. Of course this does notmean that the elite may not indirectly cause disasterthrough ‘stability’ or lack of progress. All it means isthat our elite is not inclined to deliberately set out toachieve progress or disaster, they prefer stability. Thisbrings us to the Bertrand Russell form of the Mbeki hypothesis:The African elite lacks passionate belief which is a necessary condition forprogress or disaster.

To assert that the elite prefers stability appears to be acontradiction in the light of what I called ‘Mbeki’sgreat leap forward’ in the preceding chapter. By definition,a great leap forward is an attempt to introduce drasticchanges in one fell swoop. The key to resolving the paradoxis what I called the Mbeki ‘No nationalism but inclusion’hypothesis. In the context of nationalism [or passionatebelief in self] ‘the leap’ would have been far reaching andwould have had potential for progress or disaster. But inthe context of inclusion the potential of ‘the leap’ wasdefused and if any disaster is imminent it will only occurby default. The feat of simultaneously embracing the greatleap forward and stability is yet another manifestation ofthe extraordinary capacity of our elite to accommodateopposites. I shall discuss the stability aspects of thegreat leap forward as examples of what I call ‘The BEEmentality’ in chapter 9. Stability is underwritten by whitecontrol.In 2007 the government spent about 5.4 % of GDP oneducation, a proportion which is said to be higher than inmost developing countries and equivalent to many developedcountries. Yet, in return for that kind of expenditure,studies72 show that our children progress to high gradeswith levels of literacy and numeracy corresponding to muchlower grades. Our young beneficiaries of OBE are reputed to

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be among the worst performers in comparative studies73 whichinclude South Africa in samples of impoverished third worldcountries which spend much less on education than we do. Inmathematics our children are regularly beaten by countrieslike Ghana, Botswana and even the war ravaged Palestinianauthority.The matric results of 2005 provide a picture of themathematics pass rates. The total number of students whowrote the exams, some of whom did not write mathematics, isabout 470 000. Of these students only a total of about 40000 wrote higher grade mathematics. Of these only 7200blacks and 25 000 whites passed. Since whites are about 10%of the population this means that a white student is thirtytimes more likely to get a pass in higher grade mathematicsthan a black student. And politicians are still blamingapartheid.On the 25th September 2009, Sydney Baloyi had a 19h00 to20h00 talk show on radio SAFM which he introduces asfollows: ‘Research shows that matric graduates cannot read,spell or reason. During my time students could not speakEnglish properly but they could read, comprehend, spell andreason. Today it is the other way round. They can speakEnglish properly but they cannot read, comprehend, spell andreason’.A former student of the University of the North phoned andremarked that during his day first year mathematics classeswould comprise about 200 students. But in second yearmathematics the numbers would drop catastrophically to aboutten which included repeaters. The presenter got a littleirritated by this caller whom he considered to be out oftopic because “mathematics has nothing to do with reading,comprehension or reasoning. It is just about getting thingsright!” Now, as a former applied mathematics lecturer, Iwould be able to live with criticism that I failed toexplain the intricate reasoning involved in mathematics.However, I do not know if I would survive the news, from thepublic broadcaster, that my former students thinkmathematics has nothing to do with reasoning!

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Despite these depressing results, the government has not yetsummoned sufficient courage to generally enforce disciplinein schools and, in particular, to bring back supervision ofteaching. The result is that township children have migrateden mass to white run formerly whites only schools in middleclass suburbs. This is the white control which underwritesstability.

2 Intermediate level skills crisis

2.1 The demise of the apprenticeship system

As a former colony, South Africa owes much of itseducational structure to that of Britain towards the end ofthe nineteenth century. In the British system pure sciencewas clearly demarcated from its applications in both schooland tertiary education. Pure or academic science wasregarded, like mathematics and classics, as valuable forits capacity ‘to discipline the mind’ rather than itsutility in solving practical problems. Applied science was the basis of technical education whichinvolved ‘principles of science and art applicable toindustry74’. In the original British model this suitedscientists who taught and examined applied science withoutany acquaintance with its industrial applications. It alsosuited industrialists who were not willing to open theirindustrial plants for educational purposes and riskjeopardizing their trade secrets. Lastly it suited thegovernment which did not want to be seen to be subsidizingspecific industries by financing training of their potentialworkers.In South Africa technical education excluded Africans andwas provided by racially exclusive technical colleges whichwere predecessors of what later became technikons. ThePeninsula Technical College was exclusively for Coloureds,the ML Sultan Technical College was exclusively for Indianswhile whites had several exclusive colleges scattered allover the country. Specific industrial plants employedrecruits and then sponsored their training through thework based apprentice system in terms of which they obtained

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practical training from experienced artisans and given dayor block release to attend off job theory instruction at acollege. Below technical education was what was called vocational ortrade education which was originally intended for indigentand ‘less able’ young people. They were only given practicalskills without any applied science. This education was laterextended to ‘difficult’ Coloured and, to a much lesserextent, African children. In African society this educationwas particulary despised because of its association withinferior ability. Unfortunately, because of lack of exposureto technical education, Africans tended to confuse it withvocational education. In any event there was job reservationwhich placed most technical jobs out of bounds for Africans.Job reservation created a tradition, in black society, interms of which children aspired for a matric certificate asa passport to a limited number of occupations as clerks,nurses, teachers and clergymen. The very ambitious couldonly choose between law and medicine. These were all ‘whitecollar service jobs’ which excluded blacks from anymeaningful participation in the economy except, of course,at the level of unskilled labour. In 1976 the government passed the Technikons Act whichprovided for the Technical Colleges to upgrade so as to beable to offer tertiary education in selected fields ofstudy. Many of these colleges became Technikons in 1979.Soon thereafter one or two Technikons were established forAfricans and, in 1981, apprenticeships were deracialized bystatute. In the more established Technikons, which had aprevious life as Technical Colleges, the full time studentsbegan to exceed the part time students who were inemployment as apprentices. This marked the effective phasingout of company sponsored apprenticeships, involving parttime theory studies, in favour of longer participation infull time study. Critics of the current not so successful SETA drivenskills development system tend to give the impression thatthe post 1994 government was responsible for abolishing the

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apprentice system. Nothing can be further from the truth.It will be recalled that up to the mid seventies SouthAfrica relied heavily on immigrants for its supply of higherlevel engineering skills. During the 1970s the net inflowrapidly changed into a net outflow of such skills. Thetechnikons were established to encourage and facilitate themigration of whites from old fashioned intermediate levelskills as artisans to higher level engineering skillsrequiring tertiary education. When whites lost interest in careers as artisans thecorporations also lost interest in sponsoring apprenticesexactly at the time when the system was deracialized.Researchers often warn about the impending disaster relatingto the ageing of white artisans whose average age iscurrently about 55 years. The arithmetic makes sense. Theseare people who were about 25 years old thirty years ago whenapprenticeship was effectively phased out by cutting offsponsorship.

2.2 Private FET colleges

One motivation for cutting off sponsorship for theapprenticeship system appears to have been the attraction ofshort term savings by the private sector combined withapartheid inspired lack of foresight. The apartheidleadership were of course sufficiently intelligent torealize that the economy needed more educated and skilledblacks. However the mean spiritedness of apartheid dictatedthat the costs of that education and those skills beextracted from blacks as much as possible. Furthermore,given that the staunchest apartheid supporters were bluecollar workers, it is unlikely that experienced whiteartisans would have been enthusiastic about the prospect oftraining the newly unionized and militant blacks to becometheir colleagues. During the early eighties, when the supply of new artisanswas cut off, the antiapartheid struggle was escalating,sanctions were being tightened every year and the economywas shrinking. Consequently the effects of this ill advised

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move was only felt after the political transition of 1994when the economy began to grow again. But this time theprivate sector were no longer prepared to sponsor thetraining of artisans. They complained endlessly of shortagesand demanded the relaxation of immigration rules. Thedividends expected by the workers and the private sectorfrom the 1994 political settlement were polar opposites. Theformer expected opportunities to gain skills while thelatter expected to source skills on the internationalmarket, cheaply and unimpeded, as representatives of arespectable country.The vacuum at intermediate level which had been left byTechnical Colleges when they upgraded to Technikons adecade and a half earlier, was rapidly filled by a deluge ofprivate FET colleges after 1994. It is this massive industrywhich stood to gain from the complex NQF and SETA drivenSkills Development System [SDS]. It was the fast talkingrepresentatives of this industry who had served asconsultants to create this lucrative system. For an industryof this nature, complexity always ensures more opportunitiesfor profit. For the government official, the same principlemeans that more bureaucracy translates into moreopportunities for corruption.A few companies tried to make the most of the situation bysponsoring apprenticeships registered at the FET collegesfor their theory. There were several problems: The entryrequirements included a grounding in basic literacy,mathematics and science but the school system was notproducing enough of these. The companies which wereinterested in sponsoring learnerships, includingapprenticeships, were put off by an incredible bureaucracyincluding a proliferation of SGBs [77], generalqualifications [640], unit standards [8425], provider basedqualifications [7804]. The private FET colleges had aneconomic incentive to produce large numbers of graduates inthe provider based qualifications which were obviously ofdubious value.

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In the original apprenticeship system the sponsoringcompany had a commitment to the apprentice as its employee.In the new SDS no one had any interest in the learnersexcept for the FET service providers and the SETAs since thelatter were responsible for establishing and monitoringlearnerships. As already mentioned, the private FET had acommercial incentive to see to it that the learnerssucceeded by hook or by crook. There was thus a built inwhip and a carrot to encourage the SETAs to collude withFETs and unscrupulous private sector third parties toestablish fraudulent learnerships whereby ‘learners’ workedas messengers and photostat machine operators in lieu ofpractical on the job experience.

2.3 Government FET colleges

It is somewhat confusing to talk of private FET collegesbecause they are not structured according to a fixed formatwhich might define them as FET colleges. Some of them offercourses varying from high school to tertiary level.Government FET colleges are more well defined. The FET bandcorresponds to grades 10, 11 and 12 and is therefore fed bygrade 9 at school or its equivalents in terms of the NQF.The website of the Education department of the Eastern Capestates:

The learner who completes an FET qualification, graduates after three yearswith an NQF level 4 qualification, the full equivalent of the senior certificate,but with a practical vocational qualification that can mean immediateemployability. At the same time, the curricula of the NC Vocational havebeen designed to permit qualified students to access higher education, sothey are not handicapped educationally, and without further opportunities.

But FET colleges were added as an after thought to theeducation system. They are few and far between. In a countrywith abysmal levels of literacy, skills, unemployment andhunger we have an educational system which takes a studenttwelve years before he can get the first certificate toprove that he has ever been to school. In all these yearsthe overwhelming majority of the students are taughtacademic subjects which do not prepare them for any

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particular vocations. A child who is a plumber, electrician,mechanic, bricklayer or carpenter at heart is treated as thestep child of our education system. More often than not heends up being an unemployed and possibly unemployable matricdrop out.At the end of every year we go through the same ritual ofexpressing profound disappointment with poor matric resultsas if we had jobs to offer successful candidates. When thisseason of disappointments passes we always start complainingabout the shortage of artisans. The government is oftenadvised to simplify immigration procedures to allowbusinesses to import artisans and thus export the few jobsavailable despite record breaking levels of unemployment.This amounts to self imposed job reservation where jobs forartisans are reserved for immigrants. It is politicallyunsustainable.

3 Tertiary level skills crisis

3.1Differentiation of opportunity in terms of class

In the African community decent education has always beenthe [almost] exclusive privilege of the middle class. Thosewho are over 50 today know that when they were teenagersthere were few high schools in townships and among thoseonly a handful provided decent education. Even though thoseschools are today shameful shadows of their former gloriousselves, they are still icons in the minds of the oldergeneration. They were exceptions to the anarchy whichreigned in the rest of the high schools. To avoid the negative influence of the township environmentmost parents [usually middle class] who could afford itsent their children to rural boarding schools. In the ruralareas high school education was confined to a few well knownmissionary boarding schools such as Healtown, Lovedale,Amanzimtoti, Ohlange, Inanda, Inkamane and others. The oldest tertiary institution for ‘non-whites’ is FortHare which was established in 1917. However ‘non-whites’were barely tolerated in ‘white universities’ until thepromulgation of the dishonestly named Extension of

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University Education Act during the late fifties when blacks[Coloureds and Indians included] were phased out of theseuniversities. During the early 1960s Fort Hare was joined bynew tribal universities to accommodate all blacks in theirrespective tribal bins. The Africans who went to thesetribal colleges were predominantly products of themissionary boarding schools, the cream of the blackmatriculants.The ‘independence’ of the Transkei in 1976 marked thebeginning of the proliferation of ‘independent’ Bantustansand their respective tribal universities for Africansbeyond the original three consisting of Fort Hare Universityin the Eastern Cape, Zululand University in Zululand andUniversity of the North in Limpopo. A significanteducational reform which occurred during the 1980s was thereopening of ‘white universities’ for blacks. Subsequentlythe ‘Black universities’ rapidly lost their best studentswho migrated to the Historically White Universities [HWUs].The 1970s also saw a rapid increase in the number ofgovernment high schools for Africans in townships and ruralareas. The special status of the missionary boarding schoolsbegan to diminish during the early 1980s when the rebelliousspirit of 1976 spread to these institutions and destroyeddiscipline. By this time the black elite or upper middleclass were allowed to send their children to expensivemultiracial private schools. Towards the end of the 1980ssome white government high schools [‘Model C’ schools] beganto admit black students. This marked the beginning of themigration of black children to the formerly white suburbs.It started with a trickle consisting of a few children ofthe black middle class. After 1994 and the introduction ofOBE it became a flood as what appeared to be anirreversible collapse of black education crystallized.The Historically Black Universities [HBUs] continued to besupplied by the black township and rural schools while theproducts of the formerly whites only schools and a fewexcellent Black schools went to the HWUs. It is thereforenot surprising that the relative state of education in HWUs

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and HBUs is a mirror image of the relative state ofeducation in suburban schools on the one hand and townshipand rural schools on the other hand. Despite the fact that the HWUs creamed off the best blackmatriculants they still found it necessary to instituteAcademic Support Programs [ASPs] in order to provide specialassistance to the lower echelons of the black freshers. TheASPs were irrelevant for the HBUs because the majority oftheir freshers were, in any event, at or below the level ofthose who needed ASPs in HWUs. This is why the HBUsgenerally had no ASPs. For instance a student who completeda three year degree in three years was looked upon as agenius, by his peers, irrespective of the grades heobtained in his pass. It was generally understood, but nevermentioned in civilized company, that their main programswere already geared for those whose unfortunatecircumstances had condemned them to be low achievers. Of course the highest priority ought to have given to thetask of fixing school education. As long as they survivedprecariously as scavengers who picked up those matriculantswho remained after the HWUs had had their feel, the HBUshad little room to clean up their act and produce decentgraduates. Their best chance was to stop pretending to beuniversities and focus on remedial tertiary education ascolleges offering at most three or four year degrees. Anopportunity for this transformation occurred during theearly 2000s when a commission was set up to restructurehigher education as part of what I have called ‘Mbeki’sGreat Leap Forward’. But alas! It was not to be. The prideof a few peacock ‘Vice Chancellors’ triumphed in the end.Mr Trevor Manuel, the former Minister of Finance, was nearlycorrect when, in a July 2009 radio interview, he said thatthese institutions exist for their own sake. More accuratelythey exist for the benefit of their overpaid and oftencorrupt senior managers. The biggest loser in this charadeis the serious poor black student who is compelled toattend a HBU for financial reasons. He works hard to get adegree which is better than most given the extraordinary

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determination it takes under the adverse conditions. Yet, atthe end of the day, he finds himself jobless because no onetakes his alma mater seriously. It is the cruelest blow thatthe poor can be dealt by an education system.

3.2 The private sector has no idea what it wants

It is clear that the HBUs do not offer good value for money.The number of decent graduates they produce is very smallcompared to inputs such as the first year intake and thefinancial resources they squander. But it is also a factthat some of their graduates go on to excel in their postgraduate studies in better resourced universities here andabroad. It is easy and cheap to condemn all the products ofthe HBUs without looking at individual cases. This is themanner in which the brains of racists function. It startswith wild generalizations such as the assumption that allblacks are the same, with identical views on every issue.There was a time when racists openly expressed the view thatall blacks look the same! These days they frequently askblack individuals to tell them the opinion of blacks on avariety of issues.A large proportion of the complaints we hear from theprivate sector about a shortage of skills, stems from anassumption that all products of HBUs are useless and theirqualifications are not worth the pieces of paper they arewritten on. Yet the organized business has no idea whathigher education should do in order to best serve theinterests of economic development and, not surprisinglyunder the circumstances, they are not even interested ininfluencing higher education policy despite many approachesby the Council for Higher Education. This was one of themain findings of a high level round table discussion75 whichwas hosted by the Center for Development and Enterprise[CDE], a business sponsored research organization.Let us put aside questions of race for a moment and considerthe career progression of a good science or engineeringgraduate at a typical South African workplace. If he has anambition to be somebody in life the graduate cannot afford

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to waste too many valuable years of his life developing hisscience or engineering skills through practice. A prudentscience or engineering graduate embarks on an MBA as soon ashe can after graduating. This degree wins a bad scientist orengineer the right to impose himself as a manager over hismore professionally competent colleagues. It is a peculiarly South African idea that you can supervisepeople in doing what you know little or nothing about.Because top management positions are overpopulated by peoplewho are not technically trained they do not know what tolook for when hiring a technical manager. So when requiredto hire they simply reproduce themselves. It is easy to justdemand an irrelevant MBA. This is why private tertiaryinstitutions in this country are now successfully marketing‘MBA degrees’ which do not require any degree as aprerequisite. They produce the kind of managers which thiscountry wants even though it needs them like a bullet in thehead.In this country we have this strange phenomenon ofthousands of jobless graduates when there is supposed to bea crippling skills shortage. One of the excuses which theprivate sector has been using to explain this anomaly wasthat these graduates lack experience and the firms could notafford to give them that experience. As part of the solutionformer Deputy President Mlambo Ngcuka went so far as toarrange for some of these graduates to be sent to India togain experience. Yet another favourite excuse for denyingblack graduates jobs was that there was a ‘mismatch’ betweenthe graduates and employers. Fortunately there is yet another CDE report76 on skillswhich is splendidly candid and helpfully unpacks a lot ofeuphemisms which have been clouding the skills debate, inthe guise of political correctness, for a long time.Referring to the term ‘mismatch’ the report says:

This term is sometimes used to explain why graduate unemployment hasincreased dramatically since the mid 1990s at a time of widely publicizedskill shortages. The argument goes that our institutions of higher educationproduce people with skills that the labour market does not need, This is

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simply not true, since the biggest contribution to the pool of graduateunemployment comes from graduates (mainly from institutions other thanuniversities) in business and commercial subjects. There is a counterpossibility that mismatch disguises a quality issue – that is, that someinstitutions of higher education, including some universities, certify manypeople who lack the language, analytical, and research skills, as well as lifeor work readiness skills that those with qualifications in these fields shouldhave.

This is an important revelation. It is strange that ajobless person who suffers from a fatal skills deficit inthe opinion of South African firms can be found perfectlysuitable for brief training in India after which he/shecomes back home to immediately get a skilled job. JimmyManyi of the Black Management Forum has been quoted assaying that the skills shortage is an urban legend. In thespirit of this hyperbole I would add that the urban legendwas concocted to justify importing skills of the rightcolour. The point I am making is that, while we may not behaving a deluge of skills and there may be serious‘mismatch’ situations, the skills problem is aggravated bythe racist inspired stereotyping of all blacks on the basisof these unfortunate cases. A legitimate question to ask is: if there is racistrejection of black skills then why is it that a few blackpeople are in such high demand that they are able to rapidlyhop from job to job multiplying their salaries each timethey do so? The question of racism which remains in theworkplace is discussed in more detail at the beginning ofthe next chapter where I argue that many workplaces havealways wanted a limited number of smiling black faces forpublic relations purposes. Their numbers had to be strictlylimited in order to retain the ‘white culture’ of theworkplace. The first generation of smiling black faces wererecruited towards the end of official apartheid and wereexpected to do nothing but smile. These days, the blackfaces have a lot more to deliver.Companies which hope to secure any form of business withgovernment departments or with government controlled

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institutions need smiling black faces. But, unlike thefirst generation of smiling black faces, today it isessential that these faces or heads have a lot moresubstantial assets than just smiles. The mix of usefulassets includes skills, the right surname failing which theright political connections may be an adequate substitute.The class divisions which are now emerging also make privateschool and historically white university connectionsvaluable. In other words the blacks who are in great demanddo not owe their popularity only to their skills, whichthey most definitely usually have. They may owe it more toother factors which make them good material for cooptioninto white workplace structures hell bent on maintaining thestatus quo. There is an elusive concept called ‘corporate culture’.People might say that an employee fits into the corporateculture of a firm, the way the firm does things. This mightrefer to matters of grave importance which determine thesuccess or failure of a firm such as the whole attitude ofstaff towards work. But corporate culture may also refer togutter issues such as whether a black employee shares thesocial and political perspectives of the numericallydominant white group at the workplace. In the tea room orcanteen gossip the poor black employee might be expected tomoan when the white group moans and to despise when there isa black leader they despise. The dominant white group at theworkplace embraces only those blacks in whose company theyfeel comfortable.

3.3 Government employers know exactly what they want

The attitudes which prevail in the private sector workplacemay be unfortunate but they are perfectly understandable onthe basis of our past. A bigger puzzle is the persistentlyhigh rate of vacancies in government departments when wehave these multitudes of unemployed graduates. It would beamusing if it were not so tragic to hear governmentrepresentatives mimicking the private sector and labelingpeople as unemployable as if government departments were

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paragons of virtue and competence who had nothing to do withour parlous state of education.The fact is that government jobs, especially the seniorpositions, are a means of dispensing political patronage. Inthose cases where corruption is rife, there might also be aspecial need for subordinates with a demonstrable record ofpliancy. The high unemployment rate also creates atemptation for those in powerful positions to reserve jobsfor friends and relatives. Where nepotism is the norm a jobmay remain vacant not because there are no suitableapplicants but because friends and relatives areunemployable in that job or an opportunity has not yetarisen for them to be sneaked in despite theirunemployability. Government employers know exactly whichapplicants they want and these are certainly not necessarilythe best candidates for the jobs.

4 Is immigration the answer?

4.1 ‘Oversees’ has always been associated with superior quality

An established post 1994 pattern is that the private sectortends to poach its high level black manpower from thegovernment. There are several reasons for this, the mostobvious being that - as I have already explained - thenature of the business of some private sector companiesforces them to value government connections. However suchblacks, as I have explained previously, are also needed fortheir skills. It is perfectly understandable that a privatesector with racial hang-ups would tend to stereotype blacksand find it difficult to independently identify potentialtalent in them. Blacks generally have to prove themselves ingovernment employment before the private sector can givethem a chance.Elsewhere in the preceding chapters I have pointed out thatsince the discovery of diamonds and gold, South Africadepended on immigrants, mainly from Britain, for high leveltechnical skills. This may be the cause or the effect ofAfrikaners like Jan Smuts being such insufferableAnglophiles. Actually the general view of most South African

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whites has always been that ‘oversees’ is synonymous withsuperior quality. Now if ‘oversees’ whites are looked up toby local whites what chance would local blacks have incompeting with them? Given this history, skilled blacks havea very good reason to be apprehensive about the opening upof immigration without conditions.The apartheid government was very fond of drawing amalicious distinction between local and foreign blacks,giving the latter a relatively elevated position in theapartheid scheme of things. For instance, at some stage,they were allowed into hotels which were out of bounds forlocals. A hilarious example of this differentiation was thegranting of the honorary white status77 to categories ofvisiting non whites. Perhaps we should have expected thisbecause whites had no dispute with foreign blacks. By thesame token blacks had nothing against foreign whites who hadno connection with local politics. In those workplaces whererace is still a factor the whites, by definition, seethemselves as having a dispute with local blacks. This oftenmanifests itself in preferential treatment of foreign blackswho obviously pose no threat. For this reason, at both thelower and the upper ends of the black skills spectrum, therehas always been a measure of disquiet about blackimmigrants.

4.2 Skills and immigration issues are a political minefield

I have already mentioned the remarkable lack of interest onthe part of the private sector to influence higher educationpolicy. This is consistent with the colonial history of theSouth African economy. The Universities of Cape Town andWits were established during the early years of the SouthAfrican mining industry to supply technicians for the mines.To the directors of the Minerals Energy Complex [MEC] thestatus of these institutions never really changed. Duringthe early years a tradition was established in terms ofwhich they sent their sons to British [later South African]private schools and then to Oxbridge and recruited highlevel skills from Britain.

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The sons of the oligarchs typically chose general nonprofessional and non technical academic areas such asphilosophy, to ‘improve their minds’, as the upper classBritons are fond of putting it. This is all that was deemednecessary to secure them top level management positions inwhat were, in reality, family corporations. Back in Britainthe pre industrial revolution family professions of theSmiths, the Thatchers and the Bookkeepers had sincegraduated into professional firms of engineers, architectsand accountants. It is such firms which supplied high leveltechnical manpower to ‘The Company’ in the colonies. TheCape Town and Wits Technical Colleges only providedassistants to these professionals.When the nationalists came to power in 1948 their strategywas to first take over state institutions and then use themto seize economic power. It took them years to consolidatethe first phase of their strategy so that they only made asignificant impact on the economy much later. ‘The Company’,with its reliance on foreign expertise remained dominantuntil the demise of formal apartheid. In fact, with regardto the encouragement of European immigration, there was aconvergence of interest between ‘The Company’ and theAfrikaners who were less concerned about the economiccontribution of immigrants than they were about theircontribution to increasing the white numbers.As I have indicated, the European upper classes have alwaysunderstood the generic skills, necessary for top managementpositions, which one obtains from a good general education.First world countries, in general, understand the genericskills, necessary for top technical or even managementpositions, which one obtains from a good science education.In South Africa there is very little appreciation of this.For instance, in this country, it is very unusual forscience graduates to be Chief Executive Officers even inscience corporations or government departments such as PBMR,Eskom, Denel, Department of Minerals, Department of Energyetc.

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There is this silly stereotype of a scientist as someone whois only capable of messing around with test tubes in thelaboratory. Consequently the country often produces asignificant number of scientists which it needs but does notwant; a case of casting pearls before swines. Since SouthAfrican employers do not really know what they want, itmakes sense that they would prefer to import people whoare already doing what could have been easily done by localgraduates with the same formal qualifications if only theywere given a chance. Given the high unemployment rate in South Africa, theeconomy is the underbelly of the post 1994 administrationand its enemies, who stoke the fires of residual racism,know it. The most cherished propaganda ammunition of theseracists is any apparent evidence that blacks are simplyincapable of running this country. On several occasions,after South Africa won the right to stage the 2010 worldcup tournament, these racist elements fabricated storiesthat FIFA was to move the tournament to Australia becausethe South African administration simply did not have theexpertise to see to it that we met the deadlines. This, ofcourse, resonates with the assertion that South Africa doesnot have skills to sustain economic growth.At this stage the exasperated reader may ask whether I amsaying that all the ‘problems’ in the education system andthe shortage of skills are mere malevolent fabrications ofracists. Unfortunately, in any analysis of human affairs onthe national scale there are never any easy answers. In facteach and everyone of many, and possibly mutuallycontradictory, answers may be correct in its restrictedarea of applicability:So is there a skills shortage and should we encourageimmigration? Yes and no to both. On the whole the education and trainingsystem is a disaster and failing abysmally to produce thequality and quantity of skilled manpower especially in themost critical areas such as artisans. However there arepockets of excellence in the system: institutions which do

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decent work despite atrocious conditions and individualstudents who triumph over adversity through sheardetermination. We owe it to them to give them a chance. Theydo not deserve to be condemned and rubbished, byassociation, in favour of immigrants. Encouragingimmigration may be unavoidable in the short term but in thelong run improved education and training is moresustainable. There may be serious problems with our education andtraining system but one must be ware of urban legends doingthe rounds that blacks generally can’t read or write. Peoplelike simple explanations to complex problems. During theapartheid years things were put more crudely. Whitesgenerally believed that blacks had the mental capacity ofbaboons while blacks generally believed that all whites wereevil. While there may be institutions which often issuequalifications of questionable value the temptation must beavoided to automatically condemn all products of thoseinstitutions without giving them an opportunity to provethemselves.

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Chapter 8Deregulation of immigration

“In your very presence foreigners devour your land;It is desolate, as overthrown by foreigners.”

A xenophobic battle cry in Isaiah 1:7

1 Xenophobia or competition for scarce resources?1.1 A conflict which was long overdue

Since the discovery of minerals in South Africa in thenineteenth century, long before union, migrant workers fromall over Southern Africa have always earned a living inSouth African mines. They usually never settled in SouthAfrica, their numbers were limited and they did not threaten

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anyone’s livelihood. The migrants were never viewed withanimosity. Indeed their hilarious attempts at speaking locallanguages with quaint accents were considered ratherendearing by the locals. During the 1990s there was apopular soapy named ‘emzini wezinsizwa’ which dramatized thisrelationship.The situation changed qualitatively during the late 1970safter the Transkei got its sham independence in 1976. Asmall trickle of professionals, such as teachers anddoctors, from the continent - mainly from Ghana, initially -started arriving in the Transkei. Soon there were guestsfrom all over the continents. However the locals could nottell the difference. They were all called amaGhana[Ghanaians]. In his usual high-handed manner of a tinpot dictator,Matanzima would dispatch a driver to take a Ghanaianteacher, in a government car, to a particular school withinstructions for the unconsulted principal to find a job forthe teacher. Of course, no principal in this position couldafford to argue with his excellency that the skills of thatparticular teacher were not needed in his school. Someprincipals I knew bitterly felt that the behaviour of theauthorities made the newcomers unbearably arrogant.The proportion of positions occupied by these migrants, atthe newly established university of Transkei, rose rapidly.They generally entrenched themselves by ensuring that oncea migrant became head of a department no South African evergot employment in that department. The Bantustan leadershipand their Pretoria bosses thought that the arrival ofAfrican professionals from the rest of the continent wouldsomehow lead to the recognition of the Bantustans by thecontinent. So these migrants were a particularly pamperedlot. It was soon noticed that many local women who had affairswith the foreigners were liable to die young after acquiringa strange condition which apparently rendered themvulnerable to every imaginable disease. At the timeheterosexual HIV transmission was still spreading southwards

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and Aids was not yet generally known in South Africa exceptpossibly in medical circles. In retrospect, it isindicative of the extraordinary tolerance of South Africanstowards fellow Africans that the combination of preferentialtreatment and this disease never fueled any animositytowards the guests.

When Nelson Mandela attended his first meeting of theOrganization of African Unity [OAU] as president of SouthAfrica one of the matters which came up for discussion wasthe cash flow problem of the organization caused bynonpayment of subscriptions by many member states. AfterMandela had addressed the gathering and thanked the OAU fortheir contribution to the liberation of South Africa, it isreported that many defaulting presidents apparently decidedto strike while the iron was still hot and seriously andpublicly suggested that South Africa should pay thesubscriptions of defaulters as a token of gratitude !Before 1994 the African migrants were mineworkers andprofessionals. After 1994 a flood of African migrants fromall over the continent started entering the country. A fewwere skilled but more were semiskilled and the overwhelmingmajority were unskilled. At the beginning of the 21st

century this flood of migrants became a torrent when theZimbabwean economy collapsed under an unprecedented mega-inflation which turned every Zimbabwean into a starvingbillionaire. By the time Zimbabwe collapsed, the borders hadalready been thrown open by discontinuing border patrols.By the time this torrent started Thabo Mbeki of the AfricanRenaissance78 fame was president of South Africa. There wasa number of armed conflicts on the African continent many ofwhich South Africa was helping to resolve. Many Africans,including South Africans themselves, tended to overestimatethe economic resources of South Africa. The gratefulness ofSouth Africa for the support of the rest of Africa duringthe struggle, which was often overdone by our leaders, alsoencouraged the obnoxious idea that South Africa owed therest of the continent a living.

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South Africa was also overeager to increase its influenceover an underdeveloped continent which viewed her withsuspicion, expecting her to either align herself withdeveloping and developed countries or to pursue her ownimperialist ambitions in Africa. South Africa was often madeto feel guilty even when engaged in innocent strengtheningof trade ties because of inevitable trade imbalances.Apparently, in South African diplomatic circles, increasedinfluence was seen as an essential precondition for thesuccess of the African Renaissance project. One of thereasons for throwing the borders open may have been adesperate attempt to gain this influence. Of course the mostimportant reason was to undercut local workers and thusliberalize the labour market by stealth.In 1994 South Africa already had a daunting backlog ofservice delivery to its own citizens especially in themetropolitan areas where the apartheid era townships hadrapidly deteriorated into health threatening slums and evenworse shanty towns were mushrooming on every empty plotaround towns and cities. The immigration free-for-all madean already difficult situation completely unmanageable.Nevertheless when protests against poor service deliverybegan at the turn of the twenty first century competitionwith foreigners for scarce resources was never cited as afactor by any of the protesters. Their tolerance for theirfellow Africans was truly amazing.It was only in the second half of the first decade of themillennium when sporadic attacks on foreigners were reportedin townships and squatter settlements around the country. Socomplacent was the government that even after these attacksthe looming danger does not seem to have been recognized.Then all hell broke loose in the middle of May 2008. It allstarted with furious attacks by locals on foreigners inAlexandra. Within days almost all squatter camps in Gautengwere ablaze. In a matter of days townships and informalsettlements around the country were battle zones. In a carnage which lasted for two weeks more than fiftypeople were killed and many more injured. Their possessions

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were looted and dwellings were razed with fire. Thousandstook refuge in police stations, churches and communityhalls. South Africa even saw a resumption of the horriblestruggle era practice of necklacing. No human heart couldhave remained untouched by the ensueing human tragedy ofseriously injured women with terrified cold and hungryinfants and toddlers who had to spend nights in the open inthe middle of winter with no possessions except for theclothes on their backs. .As if to prove the point that there can never be a winnerin the aftermath of such violence, the marauders alsoattacked Tsonga speaking South Africans who were mistakenfor Mozambicans and Venda speaking South Africans who weremistaken for Shona speaking Zimbabweans. Many South Africanswondered who was safe given that most of South Africanlanguages were also spoken in the neighbouring states. Thechickens had come home to roost sooner than anyone couldhave imagined.

1.2 A denialist response to the conflict

A succession of Cabinet Ministers drove their fancy cars toaffected areas where they made astounding speeches each ofwhich predictably advocated one or the other of a fewfavourite official explanations: Some declared that SouthAfrica had been living with foreigners in peace for manydecades and therefore it could only be criminals who wereresponsible for these attacks. Others, led by RonnieKasrils, the Intelligence Minister, felt that there was athird force, with nefarious aims, which was responsible forinciting the people. In fact the Intelligence Ministerclaimed that he had prior information that attacks weregoing to take place but still the scale of the attacks hadcome as a surprise to him. In short, everything else wasresponsible for the tragedy except for the conditions underwhich the people lived.On TV, in radio talk shows and in the newspapers middleclass community leaders, commentators and analysts, wholive in leafy suburbs, tried to outdo one another in

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finding melodramatic language to condemn what they calledxenophobia. The Black Lawyers Association even urgedlegislation to declare xenophobia a crime against humanity!New rules for political correctness were added to ouralready long list. Vincent Williams, a ‘migration analyst’at Idasa declared that it was no longer acceptable to referto anyone as an illegal alien. This tag contributed to anegative attitude towards people who were in fact ‘foreignguests’. Listeners, viewers and readers, in all South African media,were subjected to repetitive lectures about Zimbabweandoctors, engineers and bankers who were indispensable tothe South African economy as if doctors, engineers andbankers lived in squatter camps. We were reminded ad nauseamthat foreigners created jobs as if an unskilled Zimbabweaneconomic refugee had magical powers to create jobs which anunskilled South African did not have.One South African SAfm radio talk show guest wasparticularly eloquent in his misconception of what was goingon. He suggested that the attitude of the South Africanattackers amounted to irrationally begrudging foreignersfor breathing air which, they jealously and foolishlythought, ought to have been breathed by South Africans.This went to the heart of the problem. Just as thosepresidents at the OAU meeting thought South Africa’sresources were as unlimited as the air we breathe, manyordinary Africans including well-to-do South Africansthought the same. Tragically, even the South Africangovernment behaved as if they thought the same. One strongindication of this way of thinking was lack of planning. Theconcept of planning only applies to the use of limitedresources. One does not plan the use of unlimited resources.It is a waste of time. Conversely only a fool neglectsplanning when resources are limited. It could not be denied that there were many foreignAfricans who were genuinely making a measurable and perhapseven a very important contribution to the economy of thecountry. But these professionals were completely irrelevant

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to the outbreak of so called xenophobia because they did notlive anywhere near squatter camps. Of those immigrants whomade a useful contribution to the country it was thesemiskilled who were affected. Indeed they may have beenattacked precisely because they had skills which SouthAfricans did not have on account of an utterly unsuitableeducation system. Elsewhere I have noted that, for the purpose of earning aliving, the South African education system is completelyuseless to all but those who progressed to professionaltertiary qualifications. Our system is book oriented anddoes not produce, tailors, plumbers, welders, electricians,motor mechanics etc. These are precisely the skills whichAfricans from the rest of the continent tend to have. Thisenables them to survive without formal employment. But thebulk of the foreigners cause a strain on the infrastructurewithout contributing anything of value to the economy exceptundercutting locals, thus causing South Africa toeffectively import unemployment and export employment.The Minister of Police, Mr Charles Nqakula, was reported tohave told a group of traumatized foreign Africans headdressed at Primrose that the Freedom Charter said SouthAfrica belonged to all those who lived in it including hisaudience. It is difficult to imagine a more unhelpfulstatement. If South Africa belonged to illegal immigrantsthen what was the point of having border control and animmigration system at all? Of all the Ministers only TrevorManuel, the Minister of finance, understood that what washappening was a simple struggle for limited resources. Onthe 24th May President Mbeki declared that the attacks onforeigners were a humiliating disgrace for our nation. Buthe had his doubts about the causes for he went on to notethat if it were true that socioeconomic conditions were thecause, such hardships could never justify violent criminalbehaviour.The people struggled against apartheid before 1994. Afterthat they were struggle weary and expecting to enjoy thebenefits of voting their own government into power. There

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was no observable delivery. Instead they saw a never endingflood of economic refugees from elsewhere coming in to shareor take away the already inadequate resources such ashousing, land, water, sewerage systems, jobs, schools,health and welfare facilities etc. The advent of the political transition of 1994 saw SouthAfrican blacks becoming more assertive at the workplace andless inclined to tolerate the indignities of the past. Thisbrought discomfort to the white bosses who no longer knew1

Chapter 0

Preface

? There are a few exceptions such as ant species which do rudimentary farming such as tending fungus gardens and herding insects2 Ulrich Witt of the Max Planck Institute for Research into Economic Systems, called it ‘cultural knowledge’ and discussed this concept in a 2003 paper entitled “Evolutionary Economics and the Extension of Evolution to the Economy”, posted in the internet at www.econ.mpg.de/english/staff/evo/witt3 Later I shall have more to say about cultural knowledge. For now it will do to merely mention that technical knowledge is only a part of cultural knowledge.4 Richard Dawkins, “The Selfish Gene”, Oxford University Press, [1989]5Chapter 1

Ubuntu in Jericho

? Those who were born after the release of Mandela in 1990 are generallyknown as the born frees6 Jared Diamond, “Guns, Germs and Steel”, Vintage Books, [1997]7 During the subsequent industrial revolution machine power replaced animal power. But soon thereafter the industrial world needed intelligent machine power. It was information technology which provided this intelligence.8 Moeletssi Mbaki, Architects of Poverty: Why African Capitalism Needs Changing”, Picador Africa[2009]9 Frantz Fanon, “Black Skin, White Mask”, [1952]10 Thabo Mbeki, “The African Renaissance Statement”, SABC, Gallagher Estate, 13 August 199811 Joseph Stiglitz, “Making Globalization Work’, Penguin Books, [2006]12 Hosea 4: 6

how to relate to the newly liberated no nonsense blacks. Themuch more docile guest workers from elsewhere in Africa,most of whom were illegal, allowed the whites to return totheir old comfort zones and therefore the aliens becameincreasingly more attractive to the employers. Above all theforeigners tended to gratefully accept whatever paymentthey were offered. In every respect they warmed the heartsof unreformed racists.

13 The not so devout would call him Joshua, the bloodthirsty general14 Some would describe it as a career of incomparable brutalities15 Deputy President Thabo Mbeki, [ibid]16 Joseph Stiglitz, [ibid]17 India lagged behind China in introducing free market reforms18 Barack Obama, “The Audacity of Hope”, Canongate, [2006]19 Christi van der Westhuizen, “White Power”, Zebra, [[2007]20 President Thabo Mbeki, Nelson Mandela Lecture, Wits, 29 July 200621

Chapter 2

Centuries of globalization

? Adam Smith, “The Wealth of Nations”, Bantam Classic Edition, [2003]22 Jared Diamond, “Guns, Germs and Steal”, Vintage Books, [1997]23 Andre Roux, “Everyone’s Guide to the South African Economy”, Zebra. [2008]24 Adam Smith, [ibid]25 Gary Richardson, “Craft Guilds and Christianity in Late Medieval England: A Rational Choice Analysis”, www.religionomics.com/old/cesr_web/papers/cesr_workshops/Fall0526 Gary Richardson[ibid]27Chapter 3

Battle for Colonial Souls

? The only exception I am aware of are the Zulus who narrowly escaped having Zibhebhu imposed on them by the colonialists as their ‘legitimate’ king.28 Richard Dawkins, “The God Delusion”, Bantam Press, [2006]29 Quoted in an article entitled: ‘From Trade to Colonization – HistoricDynamics of the East India Companies’ which is part of: “South Asian History. Pages from the ‘History of India: The BEIC and colonization’ “ at http://India_resource.tripod.com. This article is the main source of

http://India_resource.tripod.com/

When the locals reached the end of their patience and losttheir collective temper they were told that they were goingto be lectured by some sophisticates from the suburbs aboutAfricanism to stop them exhibiting ‘symptoms of selfhatred’ as ‘political analyst’ after analyst put it. On the24th of May, the eve of Africa day, a SAfm talk show hostasked if it was still appropriate to celebrate Africa dayafter the ‘xenophobic’ attacks. Clearly the upper classeshad been scandalized!

information on the British Raj which I have used in this section. 30 Karl Marx, “The East India Company – Its History and Results”, an article first published in the New York Daily Tribune, July 11, 1853, http://www.hartford-hwp.com/gateway/31 Andre Gunder Frank, “Asian-based world economy 1400-1800: A horizontally integrative macro-history”, http://www.hartford-hwp.com/archives/32 Sanjay Seth, “Secular Enlightenment and Christian Conversion: Missionaries and Education in Colonial India”, www.ilng.in/pdf/educ_soc.pdf33 Vickie Langhor, “Colonial Education Systems and The Spread of Local Religious Movements: The Cases of British Egypt and Punjab”, http://faculty.virginia.edu/Langhor-paper.pdf34 Christi van der Westhuizen, “White Power & the Rise and Fall of the National Party”, Zebra [2007]35 Christi van der Westhuizen, Ibid36Chapter 4

The pedigree of the company

? Jared Diamond, “Collapse: How Societies Choose to Fail or Survive”, Penguin, [2006]37 Richard Dowden, “Africa: Altered States, Ordinary Miracles”, Portobello, [2009]38 These statistics are attributed to the Oxford Historian, Angus Madison, in an article by Manmohan Singh which was entitled “Of Oxford, economics, empire and freedom”, in the July 10, 2005 edition of “The Hindu”.39 Paul Roberts, “The end of Food”, Bloomsbury, [2008]40 Paul Roberts, ibid41 Paul Roberts, ibid42 Paul Chrastina, “Emperor of China Declares War on Drugs”, http://opioids.com/opium/history/index.43 Abbe de Pradt, “Les Trois Ages des colonies, Paris, 1902”, cited in ‘From Trade to Colonization…”, at http://India_resource.tripod.com

http://India_resource.tripod.com/

On Monday the 26 May there were reports that violent clasheshad broken out between Somalis and Malawians at a disastermanagement center called Soet Water in Cape Town. Later inthe week an alliance of Somalis, Ethiopians and Eritreansattacked cars doing relief work at another disastermanagement center in Akasia north of Pretoria. When thePretoria Metro Police intervened they were stoned andinjured. The unholy alliance said they did not want any helpfrom the South African government. They wanted to be handed44 Yilmaz Akyuz, ‘Global Rules and Markets: Constraints Over Policy Autonomy in Developing Countries’, published in the TWN Global Economy Series 10,45 Gretchen Gordon, “Food Crisis in the Age of Unregulated Global Markets”, Article posted on 18 April 2008 on the website of the Food First/Institute for Food and Development Policy46 Martin Khor, “Food Crisis, Climate Change and the Importance of Sustainable Agriculture” TWN.47Chapter 5

Spiritual Roots of the ‘New World Order’

? Michelle Goldberg, ‘Kingdom Coming’, Norton, [2007]48 Richard Dawkins, “The God delusion”, Bantam Press, [2006]49 Richard Dawkins, Ibid50 Mark Engler, “How to Rule the World: The Coming Battle over the Global Economy”, Nation Books, [2008]51 Mark Engler, Ibid.52 Moeletsi Mbeki, “Architects of poverty”, Picador Africa, [2009].53 Paul Roberts, “The end of oil”, Bloomsbury, [2004]54 Paul Roberts, Ibid55 Mark Engler, “How to Rule the World: The Coming Battle over the Global Economy”, Nation Books, [2008]56 Naomi Klein, “Shock Doctrine”, Penguin, [2007]57 Joseph Stiglitz, “Globalization and its discontents”, Penguin, [2002]58 Moeletsi Mbeki, “Architects of poverty”, Picador Africa, [2009]59 Allister Sparks, “Tomorrow is another country, Struik Book Distributors, [1994]60 Allister Sparks, “Beyond the miracle”, Jonathan Ball, [2003]61 Allister Sparks, Ibid.62 Ben Turok, “The evolution of ANC economic policy”, New Agenda, [2008]63 The Growth Employment And Redistribution policy 64 Business day, 28/06/2005.65

Chapter 6

over to the United Nations. They also attacked refugees ofother nationalities who were a mixture of Ugandans,Zimbabweans and Congolese from the DRC. The alliance claimedthey were on hunger strike but they were seen by theirvictims filching food and eating surreptitiously. Yet no onecalled this xenophobia though it was exactly the samephenomenon of competition for scarce resources!

The great leap forward

? Ben Turok, [Ibid]66 The nineteenth century Xhosa ‘prophetess’ who claimed to have received a message from the ancestors that all livestock should be slaughtered and crops destroyed after which the ancestors would drive the whites into the see. 67 Alan Beattie, “False Economy”, Penguin Viking, [2009]68 Brian Pottinger, “The Mbeki Legacy”, Zebra, [2008]69 “The National Qualifications Framework and Quality Assurance”, a SAQA document70 Mail & Guardian, December 14 to 20 200771Chapter 7

The elixir of discrimination

? SPT Malan, “The ‘new paradigm’ of outcomes-based education in perspective”, Journal of Family Ecology and Consumer Sciences, Vol 28, [2000]72 Brian Pottinger, “The Mbeki Legacy”, Zebra, [2008]73 Brian Pottinger, [ibid]74 Jeanne Gamble, “Curriculum responses in FET colleges”, HSRC Press [2003]75 “The future of South African Universities: What role for Business?”, Part II, CDE round table No 4, [2000]76 “Skills, Growth, and Migration Policy: Overcoming the ‘fatal constraint’”, CDE in depth, issue5/February 200777 What a pity no one had the good humour to poll these people to assessthe extent to which they felt honoured!78

Chapter 8

Deregulation of immigration

Of course we have a civilized constitution which protectsthe human rights of everyone within our borders. Besides ourcultural value system does not condone violence againstpeaceful and defenseless people. So every sensible SouthAfrican condemned the so called xenophobic attacks. But thestate was responsible for allowing a situation to developwhich made violent confrontation inevitable. South Africawas perfectly capable of policing the borders to enforce amore orderly immigration regime. Trained and highlymotivated guerillas had a hard time breaching the bordersduring the struggle days.Africa day was on a Sunday. Regular TV programmes wereinterrupted at 18h50 for President Mbeki to address thenation on the crisis. As expected, all he could do was tocondemn the ‘xenophobic’ attacks, express our sense ofshame, lecture the nation about the significance of Africaday, and remind the nation that African states had hostedthe ANC during struggle days. One of the more revealingcomments of his speech was that ‘the development of SouthAfrica depends on the development of other African states’.Presumably the borders had been thrown open to enable us toprovide our unlimited resources to develop other Africanstates.The presidential address had interrupted a TV talk showcalled ‘Asikhulume’ in which one of the guests was ProfessorShadrach Gutto, a UNISA academic and guest worker who hailsfrom Kenya. The professor took pains to emphasize thatother African states had taken a larger proportion ofrefugees in the past. South Africa was a part of Africa andAfrica was a part of South Africa. He lambasted SouthAfrica for not budgeting for the ‘four or five millions’illegal immigrants within her borders. Then he smiled like adirty old man who is about to make a lecherous suggestion toan innocent little girl. Whereupon, with a knowing twinklein his eye, he spoke approvingly of what he, as a matter of

? African Renaissance is a movement which Mbeki launched to promote a vision which underpinned his African foreign policy.

fact, announced as plans by the South African government togive financial grants to these millions! Talk of strikingthe iron while it is still hot! It would have been comicalif it were not so dangerously irresponsible.Many men of the world and freeloaders around the Africancontinent, including Robert Mugabe, knew that, despite hiseconomics training, Mbeki was an unrealistic dreamer atheart and they took full advantage of this. They knew theirman from his poetic speeches and writings such as his online weekly letter when he was still president of the ANC.For instance in one of these he wrote79: “Pixley Seme sawthe South African Native Congress, the ANC, as a common homenot only for our people, but also as the household of thepeople of ‘this sub-continent’. Accordingly, when it wasestablished …the congress spoke in the name of the colonizedAfrican natives, from as far afield as present day Zambia.”

2 A clumsy ride on the wave of globalization2.1 The unmistakable signature of the Washington Consensus

European countries only opened their borders to fellowmembers of the European Union [EU] after its formationtowards the end of the twentieth century. Countries had toreach a certain level of economic development before it waspossible to open the borders with them with the confidencethat no uncontrollable flood would result. In other wordseach of the 1st world countries developed its manpowerbehind a wall of protection from a potential flood ofunskilled immigrants. Elsewhere I have also pointed out thatthese countries grew their industries behind a wall oftariff protection from a flood of cheap imports. In bothsituations tariffs provided protection againstmanifestations of the same economic phenomenon.With regard to trade we are under unfair pressure from thedeveloped world to open up our economy by removing tariffprotection for our industries. With regard to immigration weare under unfair pressure from African countries to open upour borders by removing immigration protection for our79 ANC Today Vol 5 No 28 of 15-21 July 2005

workers. In both cases those who pressurized us aremotivated by selfish economic interest. The former want toboost the earnings repatriated by their multinationals whilethe latter want to boost remittances sent back home by theirmigrant workers. We are unwilling victims of the powerfuland willing victims of the weak. It was not surprising that the super rich80 BEEbeneficiaries who constitute the leadership of the ANC youthleague (ANCYL) jumped on the bandwagon to blame everythingon xenophobia. The greatest of ironies was that leaders ofCOSATU, the trade union federation, also joined those whoblamed everything on xenophobia. A cousin of mine who livesin Alexandra observed that, these days, COSATU comrades used‘big English words such as xenophobia, whatever that means,to insult the poor’. What was particularly bewildering about the stance of COSATUwas that, officially, they were vehemently against ‘flexiblelabour laws’, a euphemism for labour laws which permittedcasualization, low wages and license to dismiss workers atwill. Yet throwing open the borders was motivated by adesire to do just that and facilitated the emergence ofprecisely that labour regime. It was therefore notsurprising that the response of the local and internationalmedia to the crisis was to portray South Africa, withmalicious inaccuracy, as a country which was xenophobic. There were parallels between the manner in which SouthAfrica related to its northern neighbours, as a regionalpower in sub-Saharan Africa, and the manner in which theUnited States related to its southern neighbours. Just asSouth Africa had streets paved of gold in the eyes of itsnorthern neighbours, the Unites States was also seen as theland of opportunity by its Southern neighbours such asMexico which actually shares a long border with the US. The United States had a long history of trying to fight backthe constant tide of illegal immigrants who entered throughits southern border with Mexico. Bill Clinton was the first

80 Andrew Feinstein, “After the Party”, (Jonathan Ball, 2007), p 243

US president to see this immigration pressure as anopportunity rather than a problem. Since the last years ofthe New Deal era the US, with its expensive unionizedlabour, had been increasingly finding it difficult tocompete with rapidly growing Asian economies with theircheap labour.The US negotiated a free trade agreement, called the NorthAmerican Free Trade Agreement (NAFTA), with Canada in thenorth and Mexico in the south. This agreement, which wentinto effect in 1994, provided for the opening up of themarkets and the removal of trade barriers. Labour movementswere also eased, if not in law then, in practice. Withregard to the labour market, this did not have any dramaticimplications for the US-Canadian border since the latter isalso a developed country. However there were importantimplications in the southern border of the US. There are two related processes which sabotaged the power ofthe US trade unions. Firstly many US companies in theMidwest moved operations to Mexico where labour was cheaper.Secondly it became possible for many immigrants from Mexicoto enter the US, many as illegal immigrants, and undercutthe Americans on the job market. By 2008 there were as manyas 12 million illegal immigrants from the south. Tradeunions were agitating for their repatriation while theauthorities advocated ‘immigration amnesty’ ostensibly toavoid the daunting task of repatriating such large numbers.However the real reason was that major industries dependedon the cheap labour of the illegal aliens. The US gained more than a supply of cheap labour from freetrade with Mexico. It also gained unbridled access to thelarge Mexican market of more than 105 million people. Thesame applied to the Canadian market with its more than 30million people. NAFTA was designed to enable the US toexport employment of low level skills and importunemployment of such skills in exchange for creating skilledemployment at home. The net effect of NAFTA was the loss ofjobs by a dispensable underclass of low skilled Americanswhich was more than compensated for by a creation of skilled

jobs for Americans as countless product lines, which hadbecome uncompetitive, were resurrected by the increasedsupply of cheap labour.The equivalent of the NAFTA trade area is SADC with theimportant difference that the US did not associate witheveryone in the neighbourhood. They were selective. Theproblem with SADC was that membership of the club wasdetermined by accidents of geography. A minimum requirementand a necessary condition for clubs of this nature to besuccessful is that each leader be committed to doing thatwhich is in the best interests of his own country. A member which does not satisfy this minimum requirement isnot susceptible to any threats of punishment for badbehaviour. In fact such a rogue member can ironicallytransform economic weakness into strength by using it tothreaten, like Samson, to pull everyone down with him. Thestrength of Zimbabwe in SADC was its preparedness to dumpits entire population on its neighbours. This gave Mugabethe power to dictate terms to the rest of SADC.The problems for South Africa were further compounded by thefact that the border free-for-all was not even confined toSADC. The whole world was free to come. Where US companieslowered production costs by relocating to third worldcountries, the SA companies did so by having the whole thirdworld brought across the borders into SA. The result wasthat, unlike the US case where only a dispensable underclassof Americans was adversely affected, in SA the coreconstituency of the ruling party was severely affected.There were no measurable benefits to offset these negativeeffects. Yet in the aftermath of the ‘xenophobic’ violencethe authorities began to talk vaguely of ‘providing somedocumentation to undocumented foreigners’. This could onlybe a euphemism for the ‘immigration amnesty’ which the USapplied to keep its imported cheap labour.In August the protocol for a Southern African Free TradeArea [FTA] was signed in a SADC meeting held inJohannesburg. Thereafter the Department of Home Affairsintensified its efforts to prepare the public for the

legalization of illegal aliens. At the time of writing therewas no doubt that the advent of the FTA would sharpen thecontradiction between the internal politics of the rulingparty and its ambitions for continental leadership. We haveseen many examples of countries burning their fingersthrough ill considered deregulation of their financialmarkets. South Africa seems destined to become the primehistorical example of a country which ruined itself throughill considered deregulation of immigration.

2.2 The most dramatic realignment of classes in history

When the ANC was banned in the early 1960s the minister ofpolice was one John Vorster. The black townships wereregarded as labour dormitories to accommodate sub-humans andthe government was not prepared to provide them with decentservices. The latter were reserved for whites all of whomlived in the suburbs and belonged to a higher class thanblacks. During those days all protest by blacks in Alexandraand other ghettos was attributed to agitation bycommunists. The hardships which blacks suffered were notconsidered serious enough to justify protest. After the assassination of Verwoerd in 1966, John Vorsterreplaced him as prime minister. Vorster’s foreign policy,called détente, was to forge an alliance with anticommunistAfrican states to thwart what he saw as the strategy of theSoviet Union to create a string of Marxist states along theborders of this country with South Africa itself as theultimate prize. However, most independent African countries were reluctantto be publicly associated with apartheid South Africa,though a few were prepared to do so at a hefty fee. At onestage Vorster even went so far as to help His ExcellencyIngwazi President for life Dr Hastings Kamuzu Banda build anew capital though there appeared to be no money forservices in Alexandra and other ghettos of South Africa.There was even money to recruit white immigrants all overthe world and to help them settle comfortably in South

Africa: In fact there was an immigration free-for-all- forwhites.After 1994 the people of Alexandra and other ghettos stillhad to wait for services to come their way. But this timethe new head of government had a foreign policy calledAfrican Renaissance, a grandiose idea with neither a greatsalesman nor a large number of potential customers, as someAfrican president described it. At great expense, in termsof human and financial resources, South Africa toiledtirelessly in an attempt to resolve endless Africanconflicts deliberately fueled by self serving warlords. Deprivation at home was not given due attention. In returnfor this commitment to Africa north of the Limpopo, SouthAfrica was seen as an ideal destination for the export ofunemployment and homelessness. All this was done on thepretext of ‘integrating SADC countries at grass rootslevel’, as a diplomat from the Democratic Republic of Congo[DRC] put it in the aftermath of the violence. The newcomers competed with locals, in Alexandra and otherghettos, for resources which the locals felt they had foughtfor and they had already waited for an unreasonably longtime to obtain. The incident which triggered the carnage wasdescribed by Rowan Philip in an article entitled ‘Strangersin a strange land at the mercy of our government81’:

Here is what really happened in Alexandra. The renewal project clearsshacks on a block by block basis to make way for new schools, sportsgrounds and housing infrastructure. Everyone displaced in this process isallotted a basic – and supposedly temporary – house at a newly constructed‘transit village’. South Africans who qualify for subsidies are quickly movedon from there to their two bedroom RDP houses.

Undocumented migrants don’t qualify and are supposed to move from thetransit camp into rental units. The trouble was that the first batch of morethan 500 rental units weren’t yet ready for occupation, and so migrantstended to stay longer in the transit camp houses. To many South Africansstill living in shacks, it appeared as if migrants had been ‘given’ the smart

81 Sunday Times, 18 May 2008:

looking transit houses, or were there waiting for the completion of their RDPhouses in the new extension 7

The circumstances leading to the outbreak of violence andthe response to it were a manifestation of the mostdramatic realignment of classes which has ever occurred inthe history of South Africa. Former activists who mobilizedpeople in ghettos on the basis of grievances relating toservices had since moved to fancy suburbs. They were nolonger in a position to understand that conditions backthere at the shanty towns were bad enough to justify anger.They now felt that it was all the work of agitators. Howstrange! These selfsame former activists used to bedismissed as communist agitators by the apartheidgovernment.The extent to which the former activists had internalizedthe thought processes of the old apartheid establishment wasastounding. In the bad old apartheid days there was a unitof the security forces called STRATCOM (strategiccommunications) which was responsible for ‘winning thehearts and minds’ of the oppressed. STRATCOM was expected toachieve the feat of turning the communities against the‘agitators’ and convincing these communities that apartheidhad created a heaven on earth for them. Similarly, after the violence against foreigners, there wasa torrent of calls from the now multiracial upper classesfor the squatter communities to be educated about ubuntu andthe virtues of Africanism. Presumably a grasp of thesephilosophies would eliminate the pangs of hunger and theanguish of sleeping in a leaky shack in the zero degreetemperatures of a rainy midwinter night. The lack oforiginality was disgraceful. At the beginning of this chapter I have quoted a xenophobicbattle cry from Isaiah: ‘In your very presence foreigners devour yourland; It is desolate, as overthrown by foreigners’. I do not think thatin the winter of 2008 our people had reached this biblicallevel of xenophobia where the foreigners were regarded asthe aggressors who had usurped control. I think that ourpeople were really blaming their government for abandoning

them. The African foreigners happened to be the nearesttargets. Despite the ‘self hate’ and ‘Negrophobia’ theoriesof Africanists, I believe that if white foreigners were alsoliving in the squatter camps they would probably have beenthe first targets.Once calm returned to the country there was the problem ofwhat to do with foreigners who had taken refuge in policestations, churches and community halls and who wereunderstandably scared of returning to the communities wherethey had been violently evicted. The UNHCR provided tentswhich were used to establish refugee camps in safelocations, many of which happened to be vacant plots withinsight of posh suburbs. The brainwave for this idea musthave originated in a tumultuous meeting which Mr Jacob Zumahad addressed in one of the townships during the height ofthe violence. A resident had told Zuma: “When you leave youmust take all foreigners with you”. Clearly the destinationthe resident had in mind for the foreigners was a poshsuburb. The residents of suburbia wasted no time in protestingvehemently against what they saw as the establishment ofrefugee camps in their backyard. A caller from Alexandra toa radio talk show observed bitterly that “When poorresidents object to being crowded by foreigners in an arealike Alexandra, which is already crowded, it is calledxenophobia. However when rich residents of a posh suburb inMidrand object to what they call an ‘eyesore’ it is calledprotection of their property values”. There was also a lighter side to the tragedy. It is notclear whether Dr Mkhize, the MEC for finance, was involvedin a cultural occasion which took place at the sportsgrounds of the University of KZN to improve relationsbetween locals and foreigners. For the benefit of TV viewerswho had not attended the occasion the premier, Mr SibusisoNdebele, told of a presentation, by a DRC refugee, whichpresentation had thrown some light on Africangenealogies. It turned out that the well known Mkhize clanof KZN had its origins in the DRC!

To recap, all violence against foreigners was regrettableand it deserved to be strongly condemned by all decentpeople. However the reasons for its occurrence werebasically no different from the reasons why the townshipswere in turmoil during the 1980s. Conditions in Alexandraand other ghettos had deteriorated instead of improving withthe density of shacks, on illegally occupied tracts of land,reaching alarming proportions. The authorities were veryslow indeed in releasing land for proper settlement whilethey were quick to evict illegal squatters.

3 Emergence of South African agribusiness3.1 The end of the Bantu as a farming people

Pre colonial African culture is, naturally, rooted in alifestyle which was appropriate for the era before thedivision of labour when land was communally owned and notconsidered as a scarce commodity. The chief held the landin trust on behalf of the tribe. In present day terms theland was national property and more: it was a key aspect ofthe very definition of the tribe. The tribe consisted ofclans each of which was in turn defined in terms of itsgenealogy or ancestry. The graves of the ancestors were thetemples of a clan. It is therefore not surprising that inall African struggles against colonialism the most emotiveissue was land.Naturally there is no common history which applies to everypiece of land in South Africa. But in broad terms there weretwo historical phases of land dispossession. The firstphase occurred in conjunction with the wars of subjugation.Some of the Africans who became acquainted with Europeanways after conquest returned to buy their own land backusing livestock and thus acquired title deeds. Theinstruments which were used in the second phase ofdispossession, after the Union of 1910, were the Land Acts.To their eternal petrifaction, those who had title deeds didnot fare any better. After each wave of land dispossession the dispossessedAfricans were scattered and eventually settled either on

arid ‘native reserves’, on white farms as serfs or inslums near towns as the embryo of a future proletariat.Those who landed in native reserves established new‘ancestral homes’. These reserves, which gradually becameincreasingly overcrowded, served as labour reservoirs to betapped as and when cheap labour was required on the whitefarms and in the mines. As a matter of policy, the lives ofthose in the native reserves were systematically made barelytolerable in order to render them amenable to ‘persuasion’to sell their labour cheaply. For instance at one stagethey were forced to pay a heavy ‘head tax’ which, in Natal,led to the 1906 rebellion which was led by Chief BhambathakaMancinza of the Zondi clan. After the second wave of dispossession the only people whoremained on their genuine ancestral lands were the fewpeople whose original ancestral lands had always been inthe native reserves. Thus the link of Africans in SouthAfrican with their original lands was, by and large, brokenby colonialism and apartheid. This was reflected, forinstance, in the development of cultural-spiritual practicesto symbolically transport the spirits of the ancestors fromdistant, difficult to access, graves to where the peoplelived. However at the time of the transition in 1994 thesecond wave of dispossessions were still within livingmemory. Some of those victims had never had any title deeds.When they defended their claims for restitution theirpoignant plea would invariably be that the graves of theirforefathers, on claimed land, were their title deeds. Suchis the symbolism of land to the Africans.Obviously those who were dispossessed in the first wave hadbeen practicing ancient traditional methods of farming whichwould be of no use in today’s era of mass food production.It is only those who were dispossessed in the second wavewho were farmers in a manner approximating the modern senseof the word. However by the time the transition happened in1994 the generation who had those skills was either dead orof advanced age. The only remaining Africans who had any

knowledge of agriculture were the African serfs living onwhite farms.In terms of the political settlement of 1994 the governmenthad to respect property rights even if the property wasobtained immorally from its rightful black owners. In orderto carry out land restitution the government had to buyfarms from the current owners at market value on a willingseller willing buyer basis. However, section 25 of theconstitution provided loopholes for expropriating property‘…in terms of law of general application’. The first of the Land Acts passed in 1913 set aside only 7%of the land for Africans. It was much later, in 1936 whenanother 6% was added to this amount to make a grand total of13%. This is the part of South Africa which was later turnedinto Bantustans. Initially many whites (mostly Afrikaner)did not have the skills and the capital required to work thevast farms which they could acquire so easily by virtue oftheir race. There were African extended families who had theskills, the labour and the oxen to make good use of theland. By agreement with white farm owners many of thesefamilies remained on the farms as sharecroppers and labourtenants.At the beginning of the second world war South Africanrecruits of all races were promised substantial rewards, ontheir return, including farms for those with farmingambitions. Though the second world war could not have beenanticipated when the 1913 Land Act was formulated, itremains a fact that the maliciously created land hunger ofblacks was cynically used to entice blacks to sign up forthe war. When the black soldiers returned all they wereoffered as reward were bicycles.As the war was coming to an end the government establishedthe Land Bank in terms of the Land Bank Act No 13 of 1944.The statutes are not explicit on the matter but the bank wasclearly established to exclusively serve white farmers andin particular the white war returnees. To illustrate theracial bias, it is noteworthy that, in 1959, the Land Bankwas amended to allow the provision of ‘intermediate term

credit against the security of movables’. This would haveincluded sharecroppers and labour tenants if blacks wereallowed to be Land Bank clients but they were not.The government established an extensive network ofagricultural extension services to develop skills amongwhite farmers. These farmers were protected from theuncertainties of farming by means of more than twentymarketing boards for a variety of agricultural commodities.The farmers sold their products to these marketing boards atguaranteed fixed prices. These boards were in turn financedby the Land Bank.Using an approach reminiscent of the Land Grant Universitiesin the United States, strong faculties of agriculture wereestablished at Afrikaans colleges and universities whichincreased in number particularly after 1948. Theseinstitutions were popular to the sons of landowningAfrikaans families. This served the purpose of transformingfarming into a hi tech middle class activity. It is thesegraduates who established companies which drove farmconsolidation and built South African agribusiness To roll back the ‘beswartering van die platteland’ [‘blackening of thecountryside’ caused by black sharecroppers and labourtenants], the Land Bank provided easy loans to farmersduring the 1960s to finance mechanization which soonreduced reliance on black labour to allow the ‘whitening’ ofthe countryside.Farmers also used commercial banks to source finance. Manyoften borrowed extravagantly to finance inefficientoperations. The Land Bank often came to the rescue by buyingthe excessive debt from the banks, recapitalizing thefarmers and restructuring their debt for easy payments. Twoof these occasions were in 1983 and in 1992. The latterinstance was during the Kempton Park negotiations and it wasmisleadingly referred to as drought relief. It had theeffect of supporting farm prices just before the democraticgovernment took over and began to buy farms to initiate landreform.

3.2 Persistence of feudal conditions on farms The traditional pattern of land usage is determined by thecommunal nature of land ownership. A rural village isdivided threefold into a residential area, a common pastureand a planting area where each family is allocated a fieldfor planting crops, mainly maize and sorghum. In a classicalvillage the houses in the residential area are wellseparated with each plot large enough to accommodate asprawling collection of dwellings, a kraal for sheep, goatsand cattle and a large fenced garden for vegetables.However, the crop fields are usually not fenced off, itbeing the responsibility of shepherds to keep the live stockaway from the fields, except after the agreed last day ofharvesting when the cattle feed on the remaining maizestocks.Clearly a rural village is effectively a communal farm whereeach family do their own separate farming, if they so wish.The headman acts as the manager who allocates plots andgenerally adjudicates disputes and regulates matters ofcommon concern. This is how rural villages have historicallyoperated before and after the era of native reserves. Evencommunities which had title deeds operated their communalfarms essentially in the manner described above. This isthe elysium which some of the current policy makersromantically imagine they can recreate ‘to push back thefrontiers of poverty’ by simply handing over more land tothe rural Africans and then forgetting about them.Now a communal farm is a splendid arrangement provided ithas flexible borders which can expand indefinitely as thepopulation expands. This was the situation in pre-colonialSouth Africa when land was abundant in relation to thepopulation of those days. Otherwise the land available foruse by each family keeps shrinking as the number of familiesincreases. Eventually a point is reached where each plotbecomes too small to be economically viable.This unsustainable increase in population density actuallyhappened in the native reserves. A point was reached whenthe land, which was of poor quality in the first place,

could not sustain enough cattle for each family to enablethem to raise a span of oxen for ploughing. Hiring oxen ortractors was no longer an economically viable option inareas where land was , in any event, of such poor qualitythat expensive inputs were required in order to obtain adecent harvest.Many people then stopped plowing and became entirelydependent on remittances from relatives working in thecities and on the mines. This led to a breakdown in thediscipline necessary to protect unfenced crop fields becausetoo many people no longer had a stake in doing this. So,even those who could have continued ploughing their fieldshad no choice but to stop. In many villages today land is soscarce that even the crop fields have been overrun byresidential areas.The phenomenon of loss of farming skills which occurredafter the second wave of dispossession has again occurred inthe native reserves. The current generation have lost eventhe humble skills necessary for subsistence farming. Thosefields which are still in existence have been lying fallowfor many years It seems obvious that if these people weregiven good land today they would either not know what to dowith it or not be interested in doing anything with it orboth. This is the ignominious end of the Bantu as a oncegreat farming people. The preference of the youth,especially, is for jobs in the urban areas. As will beexplained below, this is not necessarily a bad thing seeingthat land is a finite resource.The land usage patterns of the white community correspond towhat obtains in industrialized countries. A house in town isa tradable commodity which can also temporarily serve as ahome. To the black community a house almost anywhere is ahome. It is supposed to be handed over from generation togeneration.The only whites who live in rural areas are those who make aliving from farming. A farm is either owned by a singlefamily or a company in the case of some large commercialfarms. In the latter case everyone who lives on the farm is

an employee. Where a family owns a farm they consider it abusiness and not just a place to stay. In the long term thefarm is either sold or inherited by a single member of thefamily who continues to run the business while everyone elsemoves elsewhere so that the population on the farm can neverescalate. The farm remains a business and not just a placeto stay. When a black family owns a farm, the farm tends to be a homefirst in which some business happens to be taking place. Itis particularly significant that a farm can provide suchfacilities as a private family cemetery. Once the patriarchsand matriarchs of the family lie buried there it would beparticularly difficult for a black family to sell that farm.If the farm passes to a generation who have no interest infarming the farm is likely to degenerate as a business andbe kept only as a ‘home’ which occasionally hosts familygatherings of all the descendents of the matriarchs andpatriarchs who are buried thereWith time, a farm which was originally owned by a ‘family’in the white sense is likely to end up being a villagebelonging to a clan. The European and traditional Africanconcepts of ‘home’ are drastically different. So, in thelong run, black owned farms are likely to end up going outof production and possibly reverting to subsistence farmingas they become principally ‘places to stay’ for extendedfamilies. A related, though different, phenomenon is the currentproblem of farm workers who have lived for generations onwhite farms as little more than serfs. These workers aresometimes dismissed or, when the farm changes hands, thenew owner might not be interested in the resident workers.In either case the workers end up with no place to stay. Thepost 1994 government has enacted laws which allow theworkers to upgrade from tenancy to freehold even against thewishes of the farm owner. It is not a solution but the easyway out, a cop out. It amounts to forcibly dumping adestitute and often aggrieved family on a hostile landowner. This is possibly the best example of the most callous

legally sanctioned decisions which are possible under theSouth African constitution. The economic effect is the sameas my prediction of the transformation of black owned farmsinto residential villages.

4 Banking on change82

4.1 The apartheid era Land Bank

When the ANC was established in 1912 the Union of SouthAfrica was only two years old and the African elites werenot yet used to the idea of belonging to this new countrythey had had no say in establishing. The original membershipof the new organization included African leaders from allover Southern Africa. The non South Africans did not poseany threat to South Africans as they did not compete for anyresources with them. Over the decades the non South Africansgradually turned their attention to their local politics andthe ANC became, for all practical purposes, an exclusivelySouth African affair. With its reputation as a gold rich country, South Africareceived many immigrants not just from other SouthernAfrican countries but also from abroad. Amongst theseimmigrants were trade unionists such as Clemens Kadalie, aMalawian, revolutionary communists such as Joe Slovo, aLithuanian, brilliant human right lawyers such as GeorgeBizos, a Greek, and right wing demagogues such as HendrikVerwoerd, a Dutchman who came to South Africa via Rhodesia.What gave the ANC the urge over other liberation movementsduring the apartheid days was its ability to tap all theleft wing talent in the country. Creative destruction saw tothe flourishing of the ANC because of its superior humancapital and to the demise of their competitors. After the ANC was banned and forced into exile it became,in effect, a government in exile and received ‘immigrants’in its own right. These immigrants included people like MsHelena Dolny who married Joe Slovo in exile. Again theseimmigrants did not pose any threat to South Africans as theydid not compete for any resources with them. Indeed they82 Helena Dolny, “Banking on Change”, Viking, [2001]

were assets rather than liabilities because they brought tothe movement sorely needed skills. The subsequent fortunesand misfortunes of Ms Dolny illustrate how comradeship wassometimes destroyed by greed in the course of competition,among the elites, for scarce lucrative positions in StateOwned Enterprises [SOEs]After the liberation movements were unbanned, Dr Dolny, anagricultural economist, moved to her adopted country andcontinued her participation in the preparations of themovement for office. In 1994 she was appointed to apresidential commission, called the Strauss Commission,which had been conceived by the Department of Agricultureand Land Affairs [DoA& LA] with the objective ofinvestigating the feasibility of establishing ruralfinancial services. The terms of reference of the commissionincluded the formulation of a new mandate for the Land Bank.In essence the new mandate which the Commission recommendedwas that the bank should transform itself from a bank whichexclusively served the interests of white farmers to a bankwhich served the interests of all farmers. In particular thebank had to make a special effort to develop suitable anduser friendly products for the female and lower incomemarket. It was Dr Dolny who later got the job to carry outthis mandate as the Managing Director [MD] of the bank.When the new MD arrived at the Land Bank she was told thatthe idea of transformation was not entirely new at the bank.Way back in the pre-1994 era the Codesa negotiations hadbeen watched so keenly at the bank that “…the pattern ofrecruitment of black staff had mirrored the ebb and flow ofthe progress of [the political] settlement [CODESA] talks atKempton Park. When the talks were in progress, blacks wereactively recruited; but when the talks stalled, so did the‘affirmative action’ at the Land Bank.” The result of thisso called transformation was that the bank was already ‘Onethird white male, one third white female and one thirdblack’, the informant proudly told the bemused new MD as ifblacks were gender neutral. ‘The white men are mainly

technical, the white women mainly administrative and theblacks are sundry staff.’Apart from racism there was the problem of unbelievablyantiquated sexist attitudes at the bank which were acceptedas normal by everyone including Afrikaner women. Forinstance only women were required to wear a uniform at work.On Fridays they could wear what they wanted excluding pants.Who knows what amount of suppressed resentment wasprovoked, in decent Boeremeisies and the rest of thecommunity, by the disgusting fact that the female MDappeared to defiantly ignore this time honoured regulation?After all one could only expect trouble from a communist.

4.2 Transformation of the Land Bank

Ms Dolny went about overhauling the Land Bank in a thoroughand systematic manner. Like all apartheid era SOEs, the LandBank had a military culture with rigid hierarchicalpersonnel structures. These hierarchies were supported byconventions which were designed to underline the centers ofpower. For instance an awful lot of significance wasattached to occupancy of an office on the eighth floor ofthe Land Bank head quarters. Ms Dolny pointedly invited one of the formerly marginalizedblack agricultural economists to use an office at thehallowed floor. Soon thereafter she appointed a riskmanager and a human resources manager both of whom wereblack. These two managers and a white communications manageralso joined her on the eighth floor as the core of her‘Strategic Management Team’ [SMT]. This was only thebeginning of transformation at head quarters which wasfollowed by the transformation of branches. The jobdescriptions of branch managers were changed so drasticallythat the 52 positions had to be re advertised openingopportunities for the removal of deadwood. The nature ofbranch business was overhauled and the manner of doingbusiness was modernized with the result that many positionsbecame redundant.

The pace of change in general and the plight of the branchmanagers in particular intensified an atmosphere ofuncertainty and acute job insecurity. This sparked hostilelunch time protests especially at the head office but alsoat branch offices around the country. It was felt that thehead office staff had not been prepared for change asintensively as staff in branches. To ameliorate theanxieties the transformation consultants suggested a rerunof a series of seminars on Leadership, Alignment andDevelopment.When the seminars failed, the MD resorted to counseling. Forthis purpose she hired Rudolf Meyer and Gerard le Roux who‘…were well versed in liberation theology and had beenclosely associated with Beyers Naude, who had become anoutcast in the Dutch Reformed Church because of hisuncompromising view that the racism practiced by the stateand church was wrong.’ Rudolf and Gerard offered both individual counseling andgroup seminars dubbed ‘Power of Change’ workshops. ‘Thecounseling included, if the person so wished, a selfassessment exercise to get people to begin to realize theirstrengths and weaknesses and what they might endeavour toachieve in their lives. The overriding reaction to the workof the counselors was positive.’Dr Helena Dolny does not reveal what statement, if any, shewas consciously making by introducing counseling. In my viewit was a master stroke which made a profound statementwhether or not it was intended. The statement it made wasthat no amount of resistance was going to stoptransformation. The MD was sympathetic to those who feltthreatened by it but it simply could not be abandoned. Themost that could be done was to provide spiritual andpsychological wherewithal to enable staff to live with thetransformation. It was a powerful statement that could onlybe conceived by a virtuoso transformer such as Ms Dolny.

5 The xenophobia of the elites

5.1 Review of remuneration policy

Ms Dolny assumed duty at the bank as MD and chairman in May1997. An interim board called the transformation board hadbeen appointed with effect from the previous month with theMD as chairman. After the arrival of Ms Dolny thetransformation board adopted a punishing schedule of onemeeting per month. Meanwhile new legislation was beingdrafted to separate the positions of the MD and thechairman.It soon became clear to Ms Dolny that the workload of thetwo positions was beginning to overwhelm her so she went tothe consultants drafting the new legislation for advice.They proposed the appointment of a chairperson designate toassist with the work of the board. Ms Dolny approached theMinister of Agriculture with the idea and subsequently MrBonile Jack was appointed to the proposed position inNovember 1997. Mr Bonisile Jack was a former DirectorGeneral [DG] of the department of agriculture of the Ciskeihomeland. He had been a member of the old board and hadalso been appointed to the interim board of the bank.Furthermore Jack had been one of the applicants for theposition of MD to which he had been beaten by Dolny.The issue of reviewing remuneration for the staff of theLand Bank had been under discussion since 1994. Twoconsulting firms, FSA Contact and McGee, had completedremuneration policy proposals between 1994 and 1997. Duringthe board bosberaad of July 1997 the question ofremuneration and the relative merits of a variety of jobrating systems were discussed. The board decided to restartthe remuneration review much to the displeasure of the oldguard top managers who felt that the matter had been delayedfor too long. However the MD felt that much restructuringneeded to be done before the review of remuneration couldmake sense.On the 16 January 1998 Mr Jack wrote a letter to all staffmembers as his first official act as the chairman designate.In this letter he briefly reviewed 1997 and characterized itas having been highly challenging. Then he turned to the

main point of his communication: He raised his awareness andconcern about ‘unresolved issues’ centered on ‘the neverending promise of a new pay system, performance-linkedbonuses, as well as a demand for clarity on the terms andconditions of retrenchment packages’.In the board meeting of January 1998 Mr Jack pledged thatthe issue of remuneration was a priority for ‘activeengagement’ in 1998. He talked at length about theimportance of market related salaries to attract and retainhigh caliber staff. As he warmed to his topic he lambastedthe cavalier treatment of board members and urged thereintroduction of business class travel for them. Mr Jack, who was now in his element, went on to suggestthat the board should consider renting VIP suites for rugbyand football matches. The board secretary was requested toget information with regard to a variety of major stadiums.‘It was argued that sports occasions provided informalnetworking opportunities, potentially of great value.’According to Dolny: ‘Board remuneration was almost as muchan issue as employee remuneration.’It was probably Mr Jack’s unsurpassed enthusiasm forremuneration matters which landed him the chairmanship ofthe board’s remuneration committee. In her book, Dolnyreports that his ‘active engagement’ strategy on the salaryissue led to regular meetings of the committee from early1998. She further recounts the outcomes of the January 1998meeting of this committee as follows:

It was agreed that the salary review should be holistic, including even thepost of managing director which should not be considered in isolation. Thebank was to design a ‘consistent policy’; its principles should apply toeveryone. It was acknowledged that the retention of high-caliber employeesrequired salaries pegged to market rates.

However it was not sufficient for the bank to commit itselfto pegging salaries to market rates. The bank would have totake a decision regarding where in the range of marketsalaries it wanted to make its pitch. There were three

levels to choose from: namely the lower quartile, the medianand the upper quartile. At the July 1998 board meeting Jack expressed interest in aremuneration policy set at the median both for the employeesand the board. It was at the November 1998 board meetingwhere a formal resolution to this effect was passed andsigned by Mr Jack in his capacity as the chairman designate.The only proviso was that the upper quartile would be usedin exceptional cases either to attract scarce skills or toreward excellent performance.Job evaluation proposals by two different consultingcompanies - namely: FSA and PE Consulting, were presentedto the board meeting of the 23 rd March 1999 . The problemwith FSA figures was the gross underpricing of many middlelevel jobs which would lead to anomalies. This was tracedback to failure to use statistical data which was specificto the financial sector. The PE Consulting figures did not have such anomalies andtheir evaluation was higher than FSA at all levels, as mightbe expected, since they were based on financial sectorspecific data. In particular, for the managing director thefigures were quoted as follows:

Jobtitle

L/BankActual

FSAMedian

FSAUQ

PEMedian

PEUQ

MD R650k R1046k R1196k R1411k R1721k

The job pricing determined similar salary jumps for manyother positions including the top six positions in the bank.The board, many members of which appeared not to haveanticipated this situation, were dismayed. The executivemembers of the board, including the MD, were asked to leavethe room.On their return, Jack informed the executive members thatthe board had chosen the FSA proposal. Dolny argued

strenuously against this choice explaining the anomalieswhich would sow discontent. Eventually the board settled forthe PE figures but, with regard to the top six executivepositions, they now reneged on the prior decision to pegsalaries at the median. The top positions were to be peggedat the lower quartile.One of the board members, a Ms Kate Moloto, raised theconcern that the board did not have the powers to take thedecision to approve new salary structures. The MD explainedthat according to the legal opinion she had sought the boardwas within its rights. Dolny notes that: ‘The Boardacknowledged that the process had been properly mandated andexecuted.’

5.2 Betrayal and Kwerekwere bashing at the Land Bank

The tenure of the transformation board ended in March 1999.In late April cabinet approved a memo which included namesof members of the new board. The memo was not only quietabout the chairman but it excluded Bonile Jack, the Chairmandesignate from the list of the new board members. He hadbeen dumped. After the election the Minister, Derek Hanekomwas also dumped from the cabinet and his deputy, ThokoDidiza replaced him.It is customary for directors general and chief executivesof state corporations to be invited to state functions. Inthe wake of the national elections there were several statefunctions in May and June but Ms Dolny was suddenly isolatedand excluded from invitation lists. It was clear that the MDhad fallen out of favour with very powerful people indeed.It did not augur well for her future at the bank.Ms Didiza was not particularly fond of Ms Dolny. As one ofher first acts in office, on the 21st June 1999 the newminister invited Ms Dolny to a meeting, which was to be onthe 23rd June, for ‘a briefing on salient issues’. Dolny’swritten briefing was an overview of the progress made onrestructuring including: the negotiation of the retrenchmentpackage and the completed work on remuneration – anddocumentation was attached. The cover letter alerted the

minister to the outstanding need to revise the delegation ofpowers and rules and regulations of the bank, both of whichrequired ministerial approval. The meeting turned out to be an ambush. All the heads ofparastatals reporting to the minister of Agriculture andLand affairs and the directors general were there.Unexpectedly, the minister announced that pending issueswere no longer going to be discussed as announced in theinvitation. She now suddenly wanted briefings aboutperformance on delivery. Dolny was required to be the firstto do a presentation after which there was a question andanswer session. The overall impression Dolny got was thatshe had been set up and picked upon.In July 1999 Ms Dolny was on holiday abroad when shereceived a message from her secretary that she was ‘all overthe papers, on the radio, on the TV. You are accused ofracism, nepotism, mismanagement…’ The newspaper which wasorchestrating the campaign was ‘The Star’. Later it wasrevealed that the editors had ordered deviation from thestandard ethical procedure of getting the other side of thestory before publishing because the story of a corrupt whiteprovided ‘a brilliant antidote’ to a spate of blackcorruption stories which were then regularly appearing inthe Mail & Guardian. Dolny had to abort her holidays andreturn home. The sensational story which spoiled the MD’sholiday was based on what came to be known as the Jackletter which Bonile Jack had written to Mbeki who was thenthe Deputy President. Later, I shall come back to thecontents of this letter.Before the sensational story appeared in the press - theacting MD at the bank, Mr Adriaan Toms, the general managerfinance – had received a letter from the minister addressedto the MD. It was headed ‘Review of Salary Increases forStrategic Management Team and Staff’ and it pointed outthat the minister had been informed that there wasdisagreement within the board about this matter. Theminister directed that the matter should be put on hold and

she indicated that she needed to familiarize herself withthe issues. The minister’s letter implies that she never perused thebriefing documents which were submitted by the MD to boththe minister and her deputy at the ambush meeting where theMD was picked upon or else the minister would not feel theneed to familiarize herself with the issues. This behaviourwhere incompetent action of a supervisor is turned upsidedown, distorted and used as ammunition to blame a faultlesssubordinate is characteristic of workplace bullying. When Dolny came back she found that the board and theministry were united against her. The board appointed thefirm Edward Nathan & Friedland [ENF] to supply threeattorneys to investigate Dolny’s alleged misconduct underthe leadership of Professor Michael Katz. The terms ofreference of the Katz commission were a summary of the Jackletter. The commission was to investigate the followingallegations:

1) Dolny fallout with the Board and secret agendas inthe Ministry2) Poor working relationship with Ministry officials

affecting business with black farmers3) Board inundated by complaints of racist treatment by

staff, the ‘flushing out’ of black managers, andappointment of white employees despite lack ofqualifications because they are allegedly members ofa liberal clique

4) Appointment of friends as consultants in aclandestine manner, and paid exorbitant amounts ofmoney.

5) Limited size of loan book to black farmers6) Racism in the land bank branches7) Legitimacy of loan to Rutec8) Award of Rutec loan: as a further demonstration of

racism

9) Nepotism in award of grant to the KwaZulu NatalPoultry Institute: Refusal of grant to NAFU.

10) Mismanagement: Unilateral decision to make postsredundant thus incurring liability of R33 million.

11) Mismanagement: Retrenchment at the time ofelections

12) Salary increases – Insistence that Ministerialapproval not a prerequisiteThe Katz team found the first eleven allegations to becompletely without foundation. On the contrary the reportwas full of praise for the sterling work which Dolny haddone to achieve the difficult task of successfullytransforming an organization which had been a bastion ofapartheid. With regard to the twelfth allegation, however, the teamfound that the MD ought to have heeded the concerns of theboard about the PE benchmark she was using. This wasmanifestly unfair to Ms Dolny. A possible explanation forthis finding is that some crucial evidence was missing andthat the Katz team was being diplomatic, not wishing toblatantly expose the entire Jack letter as the malicious andlibelous rubbish it was. This is corroborated by the factthat at his presentation of the team’s findings ProfessorKatz said there were no grounds for disciplinary action. Headvised the managing of an effective healing process andurged: ‘Get this out of the minds of the public. Straightenthe record.’ Within a few days of the release of the Katz report ‘TheStar’ predicted a disciplinary inquiry on the basis ofinformation obtained from ‘sources close to the bank.’ Soonafter Dolny left the bank it became clear that, in herposition as MD of the Land Bank, Dolny had been standing inthe way of local elites who felt they were more entitled notonly to the legally accessible comforts of that position butalso to opportunities for looting public coffers. But thiswas still in the future.

Despite her virtual exoneration by the Katz commission Dolnywas harassed relentlessly and eventually he was suspendedpending a disciplinary hearing for contravening herfiduciary duties by ‘unilaterally and without approval ofthe board [determining the remuneration of the top six’.Dolny assembled a formidable legal team led by the renownedAdvocate George Bizos. She further secured the services ofProfessor Mervyn King, the world authority on corporategovernance to testify on the soundness of her decisions asMD of the Land Bank. Her detractors got such a fright thatthe board changed its tune. It now sent a letter to Dolnyadvising her that on the basis of new legal opinion it wasno longer desirable to hold a disciplinary hearing. The Katzinvestigation had established the guilt of Dolny in exactlythe manner contemplated by the pending charges. Dolny was therefore instructed to attend a boardsubcommittee meeting to be held in the afternoon of the 25th

November where she would be given an opportunity to plead inmitigation before sanction was passed. George Bizos and theteam prepared an application for a High Court interdict toprevent what Bizos called the ‘sanction hearing’. Dolny wonher application with costs including the costs of twocounsel. In his judgment, Judge AJ Coetze finally expressedthe long overdue criticism of Jack’s letter when he opined:‘Mr Jack wrote a letter to the then deputy president, MrMbeki, in which letter defamatory and baseless allegationswere made against the applicant’. It was a completeexoneration of Ms Dolny. But the final word on her career atthe Land Bank was spoken by George Bizos:

“We may have won a battle but we we have not won the war. They haveshown they don’t want you – to the extent that they were prepared to beunconstitutional to get rid of you. Yes, you can go on to the disciplinaryhearing in the new year. Yes, you may well be cleared by the disciplinaryhearing – that’s what they were afraid of and that’s why they tried tocircumvent it. And then what? They’ll fire you anyway. They’ll say there wasan ‘irretrievable breakdown of relationship’. You’ll be out on the streetwithout a job, waiting your turn in a ten-month queue for the labour court.You’ll win the case of constructive dismissal – but will you want to go back

to a job that has been filled in the meantime? Sure, it’s a job you loved andyou put everything you had into it with a passion – but it would not be thesame any more. Do you wish to continue working with this Minister and thisboard who have displayed such a lack of support? Why would you wish tocontinue working with people who have reviled you? Is that the way youwant to spend the year 2000? You don’t need this in your life; better tostomach the idea of settlement. Walk away. There will be life again after theLand Bank. Get on with the rest of your life”. AMEN.

Chapter 9 The Nongqawuse promise

“The important person is the man who has control of economicpower,

Not the man who has a fraction of nominal ownership”Bertrand Russell in ‘The Taming of Power’

1 Black economic empowerment4.1The ‘empowerment’ legislation

In chapter 6 I mentioned the Skills Development Act [SDA]which was intended to give effect to the aims and objectivesof the National Qualifications Framework [NQF] with regardto work place skills development. The Act was intended toempower the working class with marketable skills. To benefitthe black middle class the government institutionalizedAffirmative Action [AA] policies in the Employment EquityAct [EEA]. This Act stipulated that, all else being equal,employment preference be given to ‘designated groups’ whichwere defined as everyone else excluding white males. As

might have been expected, the Act benefited white womendisproportionately. I shall now look at legislation whichwas intended for the benefit of the elites. The Black Economic Empowerment [BEE] policy entailed astrategy to deracialize ownership and control of theeconomy. This strategy was based on the recognition thatthe government was the largest buyer of goods and servicesin the economy. This purchasing power could then be used asan instrument to influence whites to share ownership,management and operation of business with blacks. Carefullytargeted preferential procurement policies were devised toguide the wielding of this purchasing power. This aspect ofBEE policy has evolved over time beginning with thePreferential Procurement Policy Framework Act (PPPFA) of2000. This Act prescribed a formula for setting aside apercentage of each contract to be awarded on the basis ofBEE considerations. This percentage was 10% for contractsabove R500 000 and 20% for contracts between R30 000 andR500 000. The problem with this act was that it allowedcompanies which did not contribute to BEE to win tenders.In 1997 the government appointed the BEE Commission (BEECom)under the chairmanship of Cyril Ramaphosa. As the nameimplies, the mandate of the commission was to researchstrategies for bringing about economic transformation. Itsreport was released in 2000. Vuyo Jack83 describes84 thecontribution of this commission as follows:

The BEE Commission report (“BEECom report”) expressed an urgent need toadopt a comprehensive BEE strategy for transforming the South Africaneconomy, in view of the failure of various earlier initiatives to deracialize the

83

Chapter 9

The Nongqawuse Promise

? Vuyo Jack is a Chartered Accountant by training and he is also the founder Empowerdex, a black economic empowerment rating company.84 Vuyo Jack, “Broad Based BEE : The Complete Guide”, (FrontrunnerPublishing, 2007)

economy. It provided targets for Black participation in various economicassets, including business, management and land.

An important definition provided by the BEECom report was that ofcategories of companies which were determined in terms of the extent ofblack participation as follows:

In a “Black-owned” company, Black people hold over 50% of the ownershipand management activities.

A “Black-empowered company has more than 25%, but less than 50%,Black ownership and Black management.

A “Black-influenced” company has anything between 5% and 25% Blackownership and Black management.

The BEECom report provided the framework for the extensionof BEE to Broad Based Black Economic Empowerment (BBBEE).The report also set the scene for the comprehensive BBBEEstrategy document which was released by the DTI in 2003.Vuyo Jack is one of the consultants who played a major rolein the development of BBBEE. In his book he providesvaluable insights into the thinking behind this policy.Below I again use his own words85 to describe BBBEE:

The outcome of the BEECom report was to address initiatives that couldstimulate transformation at all levels of the wealth chain. Narrow based BEEprovided a pull factor. The wealth generated by the success of a few heroes demonstrated the possibility that was open to black people.

Broad based BEE is about supporting the pull factor with push factors bycontributing from the bottom up. Broad based initiatives address the middleand lower income groups, offering a practical opportunity for people at theseincome levels to take part in the economy.

Indeed the few multimillionaire and even billionaire black“heroes” Vuyo Jack is referring to are today householdnames. Later in this chapter a section will be devoted tothis curious notion of a “hero”.

4.2 Post Washington Consensus reincarnation of the Freedom Charter

In the Freedom Charter there is a clause which declaresthat: “The national wealth of our country, the heritage of85 Vuyo Jack, Ibid.

all South Africans, shall be restored to the people.” Thereis a further even more radical clause pertaining toparticular sectors of the economy: “The mineral wealthbeneath the soil, the banks and monopoly industry shall betransferred to the ownership of the people as a whole”.In 1998 the Department of Minerals and Energy (DME)introduced the idea of formulating a “Charter” for eachsector of the economy. Below is an explanation of what ismeant by a charter as given in the BBBEE strategydocument86 of 2003:

Government recognizes that its BEE strategy will not be effective ifgovernment acts alone without the support of the private sector….Partnerships…represent a key vehicle for the formulation and implementationof BEE programs…Partnerships refer to structured collaboration betweengovernment and the private sector for the sustainable achievement of BEE…

Sector and enterprise-based charters are one form that such partnershipscould take. Such charters would need to include specific mechanisms toachieve BEE objectives in that sector or enterprise in a comprehensive andappropriate manner, as well as provide measurement indicators andtargets….

Government will issue a Code of Good Practice outlining in detail the coreelements that should be incorporated into sector and enterprise-basedcharters. Wherever possible, charters should incorporate the following:

The BEE challenges in that sector/enterprise,

The sector’s/enterprise’s vision for achieving BEE targets and timetables,

The specific mechanisms to be used to achieve BEE targets includingfinancing instruments, skills development and employment equity,preferential procurement, and enterprise development, as well as anyadditional mechanisms appropriate to the specific sector/enterprise,

An assessment of the financing required to fund BEE transactions,

The institutional and management mechanisms that will co-ordinate,facilitate, monitor and evaluate the implementation of the charter.

86 Dti [Department of Trade and Industry], “South Africa’s Economic Transformation: A Strategy for Broad Based Black Economic Empowerment”, (www.dti.gov.za, 2003)

http://www.dme.gov.za/

The target which was specified by all charters for thevarious sectors was 25% black ownership, the threshold of a“Black Empowered” company as defined in the BEECom report.Thus Vuyo Jack (op. cit.) was led to the definition: “BEEis a structured buyout of 25% of the South African economyby black people”Actually, in terms of the BEE Act the beneficiaries were“designated groups” so that “black people” in Mr Jack’sdefinition should really read “designated groups” whichincluded white women. It was not surprising that after thepublication of the Mining Charter white share holdersstarted selling their interests to their wives in order fortheir companies to remain white but still comply with thetargets of the charter. The Codes of Good Practice (which I shall henceforth referto merely as Codes) were developed to give effect to the BEEAct. These codes were really a framework for the measurementof BBBEE in a given enterprise taking into consideration allrelevant factors such as Ownership, Management Control,Employment Equity (EE), skills development, procurement etc.At least one truly ambitious government department wentbeyond merely encouraging business partnerships betweenwhite entrepreneurs and black people. In 2005 the Departmentof Agriculture and Land Affairs [DoAgric&LA] released whatit called its draft AgriBEE framework which amounted to atimetable for the handover of Agribusiness on a plate bywhites to black people. The following is a summary of thisdraft which appeared in research report number 14 of theCenter for Development Enterprise [CDE].

AgriBEE’s ambitious targetsThe AgriBEE framework sets out ‘guiding principles’ for black economicempowerment in the agricultural sector. Released for comment in July 2004 bythe minister of agriculture and land affairs, Thoko Didiza, the draft frameworkwas based on consultation with major role players in the agricultural sector;however, several stated that they had been adequately consulted. A reviseddocument is being prepared for submission to the cabinet for adoption in linewith the Broad Based Economic Empowerment Act of 2003.

The draft seeks to commit the established agricultural industry – which it definesas ‘individuals, groups, co-operatives, or companies which existed prior to 1994and had a predominantly white management, ownership, and control structure’– to the following targets:

To help ensure that 30% of agricultural land is transferred to black SouthAfricans by 2014;

To make available an additional 20% of ‘high potential agricultural land’for lease by 2010 [according to Agrisa, this is land included in, and notadditional to, the previous two targets]; and

To make available 10% of ‘own’ agricultural land to farm workers for theirown farming activities.

The draft seeks to commit all enterprises in the agricultural sector toprogressively achieving a:

30% representation of black people in executive management by 2006;

50% representation of black people in senior management by 2008;

60% representation of black people in middle management by 2008;

10% representation of black women in executive management by 2006

25% representation of black women in senior management by 2008;

30% representation of black women in middle management by 2008;

45% representation of black women in junior management by 2008; and

source 50% of all procurement from BEE companies by 2010, and 70% by2014.

It seeks to commit the established industry to ensuring that:

o 35% of existing and new enterprises are owned by blacks by 2008;

o 10% of investment initiatives in Africa are allocated to black SouthAfricans;

o 30% of export market opportunities accrue to black owned enterprises by2007; and

o 10% of farm level enterprises are owned by farm workers by 2008.

It also seeks to commit the agricultural sector (defined as the entire value chainof agricultural business) to a series of targets aimed at eliminating illiteracyamong farm and other workers.

This document clearly abdicates the governmentresponsibility to produce a plan for agrarian reform whichis not driven by paternalism and to empower black peoplewith the necessary education and training. This is but onemanifestation of the BEE mentality which is discussed in thenext chapter. It is of noteworthy that the leadership which conceived suchBEE policies at the Department of Agriculture and LandAffairs were in fact the same people who were responsiblefor getting rid of Helena Dolny at the Land Bank a few yearsbefore. In the next chapter I shall argue that, in essence,BEE is abdication of control by blacks to whites. Thisraises the interesting question whether a white comrade wasironically seen as a stumbling block to this abdication.

2 The financing of BEE deals

2.1 Consortia and Special Purpose Vehicles

The first question that comes to mind after an explanationof what BEE is all about is the following: How does a buyoutof 25% of the economy become reality given that blacks haveno capital and no collateral to access capital on themarket? A BEE deal can either be financed by the companyselling part of its equity (vendor finance) or by a thirdparty such as a bank. The BEE party pays the debt by meansof dividends which accrue by virtue of the purchased equity.If the dividends exceed the interest repayments then theBEE party gets the balance. However if there is a shortfallit is added to the outstanding capital. So a BEE party maywell be faced with an increasing debt depending on theperformance of the company.In practice things are not as simple as in the scenariooutlined above. Banks do not part with large amounts ofmoney without collateral. The company would also not exposeitself to the risk of its failure to perform at levels thatensure debt repayment. Furthermore the BEE party oftenconsists of several people who usually constitute themselvesinto some kind of ownership structure for purposes of

entering a BEE deal. BEE adopted the use of consortiums todiversify the risk inherent in large deals.According to Vuyo Jack (op. cit.): ‘A consortium is formedwhen a group of people or companies come together to carryout a specific venture. The difference between a consortiumand a joint venture is that a consortium does not have jointcontrol. Members’ control is limited to their individualvoting rights. Consortiums usually hold shares in a companythrough a special purpose vehicle (SPV). The consortium’sparticipants then hold shares in the SPV’The best structure to protect the interests of the bank andof the original shareholders in the company in which BEEequity is being purchased in a SPV. This is a vehicle formedspecifically to facilitate financing of a BEE party wherethe party needs, in general, a combination of bank, vendorand equity finance. The latter finance will be explainedbelow.Suppose a company sets aside a portion of its equity forBEE. It often happens that the BEE party includes aninvestor, such as a pension fund, who merely wants to investin the equity of the company. The bank therefore comes intothe deal only to finance the purchase of the equity setaside by the company less the equity purchased by the equityinvestor. The term BEE party usually excludes the equityinvestor. This party gets ordinary dividends as a return onits investment.I shall now outline the mechanism for the protection of theinterests of the bank. The business of a bank is tomaximize its return through lending money at minimum risk.In a BEE deal the bank lends money to purchase equity and inreturn it receives ownership of that equity and in additionit receives periodic repayment of the loan on the followingterms: The bank receives dividends to cover interest on the loan atthe prime rate plus an additional risk factor up to a totalknown as the hurdle rate. Over the hurdle rate the returnsgo to the BEE party. If the returns are below the hurdle

rate then the shortfall is capitalized. In most large dealsthe bank reserves a percentage of any upside for its ownprofit in addition to the hurdle rate. The net effect isthat most of the profit goes to the bank. Thus the realbenefit of a BEE deal where SPV structures are used isderived by the bank rather than the BEE party. All that theBEE party acquires are voting rights. The SP Vehicle seldomcarries blacks very far.Before discussing an example I shall now review a littledetail regarding the well known concept of shares: Ordinaryshares or equities are securities, issued by commercialundertakings and other bodies, which entitle their holdersto receive all the net profits of the company after intereston loans and fixed-interest securities [such as preferenceshares] has been paid. So there may be instances where,after parties holding preference shares are paid,nothing remains for ordinary share holders. Annexure 3 in chapter 12 gives an example whichdemonstrates just how profitable BEE deals are to banks. Themain conclusion which can be drawn from these examples isthat, since the banks can always be relied upon to demandthe biggest chunk of the dividends and the transfer of allrisk to the BEE party, an empowerment beneficiary has thebest chance to accumulate assets instead of debts only ifthe shares are acquired at a massive discount at the bottomof an economic cycle. A BEE deal can be extremely expensive to the BEE party. Ihave not even mentioned the huge expenses that are incurredto pay a phalanx of consultants at the initial stage offormulating the deal. Yet there are a few lucky people whohave been empowered beyond their wildest dreams, becomingalmost instant multimillionaires and even billionaires fromBEE deals. I shall now examine how this can come about.

2.2 Once empowered always empowered

I have shown that if one enters into an empowerment deal bymeans of an SPV at the correct phase of the economic cycleone can strike a jackpot provided the SPV is not too heavily

loaded against the BEE party. In fact there are quite a fewexamples of people who made their fortunes this way: MziKhumalo through his empowerment consortium, Simane, made asubstantial profit from selling shares in gold producerHarmony Gold. Women Investment Portfolio Holdings (WIPHOLD)realized value by selling the shares they held in Bidvestand Alexander Forbes.The companies involved felt let down by the exits becausethey would have to seek new empowerment partners in order toregain their BEE credits. The direct result was theintroduction of lock-in mechanisms in subsequent BEE dealsto prevent empowerment partners from selling. While theselock-ins were clearly self serving on the part of the whitecompanies they were also consistent with the empowermentprinciple of long term ownership of the economy by blacks.Furthermore the lock-ins put pressure on companies to sellshares at a reasonable discount to black empowermentpartners. There is simply no logic in a lock-in if theshares have been acquired at market value.Unfortunately the lock-ins had serious drawbacks for BEEparties. Many BEE deals locked black investors into holdingthe shares for long terms before the expiry of which theywere prevented from selling these shares or borrowingagainst them. Even after the expiry of the lock in periodthey were prevented from selling their shares to non blackpeople. Thus even after the lock in period had expiredempowerment black shareholders had limited liquidity becauseof the limited black market for resale of shares. This runscounter to the basic principle of investment in terms ofwhich one should be free to maximize and realize gains madeon one’s investment. Black shareholders were forced to watchtheir paper wealth increase and decrease without beingallowed to cash in.The solution favoured by white business was what came to beknown as the “once empowered, always empowered” principle.In terms of this principle the company would retain all theempowerment credits even if the BEE party sold all itsshares in the company. This principle encouraged the white

companies to enter into unsustainable empowerment dealsheavily loaded against the BEE parties who would soon haveto bail out either empty handed or with heavy debts. Thiswould then leave the company with BEE credits inperpetuity.Eventually the DTI accepted a compromise set of principlesin terms of which liquidity was allowed through selling aportion of the investment while retaining a shareholding inthe company. Furthermore the quantum of credits retaineddepended on the level of transformation achieved by thecompany prior to the partial equity sell-off by the BEEparty. The company may receive continued recognition forownership where the BEE party exits the deal through sale ofshares or defaults on borrowing against the shares in theentity. However conditions apply.

3 The barn door for a few but the eye of a needle for most

3.1 The multimillionaire heroes?

BEE policy and the associated legislation enjoin whitebusiness to go into business partnerships with blacks ifthey wish to be considered for government procurement. TheBBBEE strategy document describes the nature of theenvisaged partnerships in the following terms:

Economic growth, development and BEE are complimentary and relatedprocesses. Government’s approach is that BEE must be an inclusive processand not an exclusive process. No economy can grow by excluding any part ofits people and an economy that is not growing cannot integrate all of itscitizens in a meaningful way. As such this strategy stresses a BEE process thatis associated with growth, development and enterprise development, and notmerely the redistribution of existing wealth.

In practice the question of whether a BEE partnership isassociated with growth or mere redistribution is determinedby the type of BEE partner. Obviously no two people are thesame. There are therefore as many types of BEE partner asthere are black people who get involved in such deals.However all BEE partners can be classified into four broadcategories according to the nature of the BEE deal:

Broad based partnersIn this case what is brought to the company are funds whichare used to buy equity. These are jointly administered fundsbelonging to a large number of black people, the “broadbased partners” who should really be considered as mereinvestors. Examples are union funds, development trusts andbusiness association funds.Operational partnersOperational partners are usually black entrepreneurs andseasoned businessman in their own right who establishedtheir own businesses independently. They then merge with orbuy into white businesses in the same sector in which theyhave experience. Operational partners get involved in thecore business of the merged company with their whitecounterparts.It is the BEE deals involving operational partners which aremost likely to spur growth resulting from new markets andthe synergy of combined experience. It is the operationalpartners who deserve to be regarded as heroes, seeing thatmost of them got into business at a time of our history whenblack entrepreneurship was resolutely and systematicallysuppressed. Even those who started their businesses after1994 did so with hardly any access to capital. Regrettably,but not surprisingly, there are few examples of operationalpartners. I can mention Benjamin and Isaac Mophatlane ofBusiness Connexion and also the Kunene Brothers Holdings.Influential partners : The ‘heroes’It is reasonable to assume with Jack [op. cit.] that:“Business seeks empowerment partners who can bring new benefits in the formof access to political influence, increased finance, increased operational capacity,access to new markets, new product lines, expertise and so on”. Nowgovernment is supposed to be a neutral referee who ensuresthat businesses operate on a ‘level playing field’.Therefore it is questionable whether it is ethicallydefensible for business to seek access to ‘politicalinfluence’.

Jack goes on to say: “Through their ‘struggle credentials’, influentialpartners wield a considerable amount of political influence with their extensivenetwork of contacts. This influence is highly valuable to business, particularly inunderstanding and potentially influencing political direction. Politicalconnections also create the possibility of gaining access to, and generating,substantial new business”. At what stage do we say there is ‘agenerally corrupt relationship’ between a businessman and apolitician? In other words influential partners peddle politicalinfluence. This clearly explains why business suitors fallover themselves to recruit every top politician or seniorcivil servant who resigns his government job. Is itunreasonable to suspect that ‘influential partners’ may beresponsible for the government’s reluctance to criminalizeprice fixing? Everyone admires people with ‘strugglecredentials’ but I do not know whether the manner in whichthey acquire their riches is admirable.I have already pointed out the special meaning ofempowerment which appears in the BEECom report: ‘A blackempowered company has more than 25%, but less than 50% black ownershipand management activities’. Clearly the principle ‘Onceempowered, always empowered’ refers to this definition ofempowerment. People with casual acquaintance with BEE thinkthat this principle states that once an influential partnerhas been enriched or empowered in a BEE deal all lucrativeempowerment deals in the future will come his way. There is a widely held perception that all lucrativeempowerment deals are always secured by a few well knowninfluential partners. It is said that the more deals aninfluential partner concludes the more bankable he or shebecomes as a deal maker and the stakes get higher. Whilethis may be true to a limited extent, it is a rather unfairaccusation against these well heeled gentlemen. The truth isthat private sector companies regularly fight for theprivilege to enrich each and every top ANC technocrat orpolitician who exits public service. This usually takesplace under a cloud of questionable ethics prompting the ANCto promise a ‘cooling off period’ for the umpteenth time.

Compound interest accumulates debts exponentially for theordinary BEE participants while it accumulates richesexponentially for the influential partners. These richesare usually stashed away in what are called black investmentcompanies with names such as Nail, J&J Group and Safika. Infact the influential partners usually do BEE deals throughtheir investment companies.It is not surprising that a large proportion of companiescontrolled by blacks are investment companies. This has beenthe trend from the earliest empowerment deals of which NewAfrica Investments Limited [NAIL] is a prime example. Thiscompany had its beginnings in 1993 when Sanlam sold itscontrolling interest in Metropolitan Life (Metlife) to theblack shareholders of Metlife Investment Holdings (Methold),a consortium formed by prominent black business people andcommunity leaders. The consortium eventually transformeditself into the investment company NAIL with Dr NthatoMotlana as chair and Digkang Moseneke one of the topexecutives. The purpose of an investment company is to acquire equity inall sorts of carefully selected companies in order toaccumulate wealth for its investors. According to Jack: “Itoffers no skills to the operational companies in which itholds shares. An investment company does not create realvalue outside investment banking. It transfers value fromthe operational companies to the investors and holds aportion of the profit on the transaction but does not createsubstance for anyone other than itself. Thus the essence ofa BEE transaction with a black investment company isredistribution of wealth to the black investors”. So muchfor the BBBEE strategy document which promotes BEE which is‘associated with growth …and not merely the redistribution of existing wealth’.Investment companies basically manage share portfolios. As amatter of fact the superrich in the first world have alwayspackaged inheritances for thoroughly spoilt good for nothingoff spring in terms of share portfolios. The off springthen spend their lives siphoning off the earnings

The conclusion is that we have not even made a beginningregarding acquiring experience in running the economy ofthis country. Our multimillionaire empowerment heroes arereally semiskilled businessmen who are suffering from severeboredom on account of being underemployed. You do not go towork every day just to give political advice all day or tostare at the performance of distant operational companies inwhich you have invested but in which you have no say. Thatis probably the reason why BEE millionaires spend so muchtime in politics. Our multimillionaire heroes are certainly not outstandingexamples of entrepreneurship which anyone would like to holdup to the youth to emulate. The only useful purpose theyhave served is to save the president the embarrassment ofhaving to gallivant the world establishing trade ties withonly white businessmen in tow.

3.1 Here comes Nongqawuse again

There are three legal ways in which an entrepreneur,starting out with no cash, can make lots of money. Thefirst way is to raise initial capital by working for it andaccumulating savings. The second way is to convince someoneto provide capital at little or no cost and the third wayis to borrow the money at some commercial rate of interest.Next, and this is the crucial and most difficult part, theentrepreneur must have an idea how to use the money to gainprofit. Thereafter it only takes a repeated application ofthe wealth generating idea to achieve a compound growth ofthe initial capital. However borrowing money at interestonly makes sense if the idea conceived by the entrepreneurgenerates wealth at a higher rate than the interest payablefor the loan.The number of possible entrepreneurial ideas to growinitial capital is unlimited. However, for those who arenot entrepreneurs the only possible way is gambling. One canraise the objection that entrepreneurs are all gamblers too,because every wealth generating idea entails uncertaintiesand risks. But the difference is that the entrepreneur has

much more control over the risks he takes than the gambler.In fact the gambler has minimal control, if any, over therisks he takes. A non-entrepreneur can try to grow capitalwithout engaging in gambling but that would mean having toput the capital in secure investments such as savingsaccounts. However the return on investment in such a secureaccount is necessarily less than the interest rate payablefor borrowing the capital.For all participants in the economy the general rule isthat the higher the returns on investment the higher therisks. But the prospects for the entrepreneur are not asbleak as they are for the ordinary participants in theeconomy. In fact one can define entrepreneurship as theability to engineer circumstances which allow returns on aninvestment to be maximized while risks are minimized. Thusentrepreneurs are the only economic participants who havesome control over the risks. So the promise of riches forordinary BEE ‘beneficiaries’ was illusory. It was aNongqawuse promise.Nevertheless the ordinary people took important lessonsfrom the BEE schemes: the first lesson is that somewherethere is this inexhaustible source of untold riches which isonly accessed by a chosen few. The second lesson is thataccessing this source of riches has nothing to do with hardwork. It is all a matter of being at the right place at theright time and having the right connections. This is BEEphilosophy to which I shall set aside a whole chapter.When Thabo Mbeki was the president he often lambasted thesuper rich BEE beneficiaries for their conspicuousconsumption. The people would have noticed that it was notthe fact of being filthy rich per se which embarrassed thepresident. It was only the public display of such riches. Itis difficult to see how else Mbeki expected people to spendtheir lives if they made their substantial fortunes bymerely siphoning dividends.Given that apartheid had the economic motive to use thenatural resources of the country and the cheap labour ofblacks to enrich whites, it is understandable that

political discourse in South Africa is permeated by negativereferences to wealth. The reality is that, in order tosecure its political future, the country has to createwealth at an accelerated pace. It is a great pity that theconstant negative references to wealth certainly do notcreate a favourable atmosphere for wealth creation whichrequires entrepreneurs are, by definition, unlikely to bepoor. Unfortunately, with so many BEE millionaires around,it is difficult to convince people to admireentrepreneurship.During the 52nd National Conference of the ANC which washeld in Polokwane in December of 2007, one of the discussiondocuments dealing with ‘Revolutionary Morality’ was entitled‘Through the eye of the needle’. Clearly some tycoons werebeing warned of possible difficulties in entering some doorswith their riches. Many would swear that money has areputation for opening doors instead of closing them. One of the main theses of this book is that a lot of what iswrong with this country can be explained in terms of what Icall the BEE philosophy one aspect of which is a culture ofentitlement to unearned riches. I shall come back to thistheme in the next chapter which is dedicated to this matter.

4 The bling generation

3.2Various species of BEE millionaires

The wealth of the fabulously rich ‘champions’ was based onblue chip shares in top companies which were at the core ofthe Minerals Energy Complex [MEC] first mentioned in chapter6. They all established investment companies to administerthese share portfolios. For future reference I shall call‘the champions’ category 1 millionaires. The enrichment ofthis category of millionaires appears to have been part ofthe original political settlement in which the MEC played aprominent role.The second category of black BEE millionaires were those whomade their money from big business deals between thegovernment and the private sector. Some of these big dealshad to do with the privatization of state asserts which was

prescribed in terms of the Washington Consensus. Thefollowing example will give an idea of the nature andmagnitude of some of these deals: The first post 1994 Director General [DG] of the departmentof communication was one Andile Ngcaba. Among hisachievements at the department was to pilot the‘corporatization’ of Telkom, the state telecommunicationscorporation, in preparation for its privatization. WhenNgcaba left the department, around 2004, he declared that hewas about to make lots of money for himself and his family.He then became part of a BEE consortium appropriatelycalled the ‘Elephant Consortium’ which bought Telkom sharesworth R 9 billion. Public pension funds managed by thePublic Investment Corporation [PIC] were used to ‘warehouse’the shares while Ngcaba and his friends organized finance.One of the members of the consortium was Smuts Ngonyama, theformer spokesman of Thabo Mbeki [in his then capacity aspresident of the ANC] who once famously declared that hedid not join the struggle to be poor. Telkom owned 50% of the mobile phone company, Vodacom. Theother 50% was owned by the British company, Vodafone. In2008 or the beginning of 2009 Telkom sought and obtained thego ahead from the Independent Communications Authority of SA[Icasa] to sell 15% of its shares in Vodacom to Vodafone.With the new ownership Vodacom was scheduled to list on theJSE on Monday the 18 May 2009. The elephant Consortium wasexpected to produce several instant billionaires from thedeal. To everyone’s consternation, days before the listingCosatu, the trade union federation, persuaded Icasa towithdraw its approval of the deal and then filed an urgentHigh Court application during the weekend to prevent theMonday listing. The application was dismissed with costs.The press speculated that the new ANC leadership, in thewake of Jacob Zuma’s displacement of Mbeki, were behind theCosatu move and their intention was to deprive the elephantof its rich and generous meal.There were established small or medium sized white owned andwhite run companies which were engaged in sectors of the

economy in which they depended almost entirely on statetenders. Some of them were family businesses and otherswere small partnerships all of which had no interest intaking on extra partners simply because it did not makebusiness sense to do so. When BEE procurement came intoeffect such businesses were threatened with closure unlessthey got new partners they did not want. The third categoryof black BEE millionaires seized the opportunity to imposethemselves on such businesses as unproductive partners whoseonly value was to use their contacts to secure the tendersthe companies desperately needed.The fourth category of black BEE millionaires made theirfortunes by establishing shell companies with absolutely nocapacity to deliver any product or service except forguaranteed access to state tenders at central, provincial orlocal government levels. A ‘civil engineering company’, forinstance, would find a genuine, usually white owned andwhite run, engineering company to do the job as a‘subcontractor’ at a fee, add a hefty mark up to the fee andthen invoice the government for a princely sum of money. The fifth category of black BEE millionaires were out andout thieves and blatantly corrupt officials who used theirpositions in government or in State Owned Enterprises [SOEs]to defraud the state and the public. This category includeda number of local government politicians and officials whosecorruption and incompetence were rudely brought to theattention of the country by sporadic countrywide protests,against poor service delivery, which began during the secondhalf of the 2000 – 2010 decade.The problem was not only that money intended for servicedelivery was feeding corruption. Municipal officials tendedto be woefully unqualified for their positions because animportant consideration to the employers was party loyalty.Qualified candidates who were not part of the in-group werenot even considered because the ruling party had a policy of‘cadre deployment’ in terms of which resources had to becontrolled by its members. It was the nepotism of theelites. Some of the corruption happened because those in

charge were semi literate and therefore not in a position toexercise control. There were similar problems in SOEs whichI shall now illustrate in terms of the Land Bank.

3.3The Land Bank after Helena Dolny

In chapter 8 I recalled the xenophobic persecution of DrHelena Dolny which forced her to leave the Land Bank, in ahealthy financial state, in 1999. No sooner had Ms Dolnyleft than the bank sunk into a deep mire of corruption whichwas tolerated with amazing equanimity by government even asbillions of rands were disappearing at an alarming rate.Somehow this massive looting never warranted the urgentattention of the political leadership which Ms Dolny’s ‘poorjudgment’ case had received, at the highest level. In 2008 aSunday Times87 article by Mpumelelo Mkhabela had this tosay:

On April 13 2005, then Land Bank chief executive, Alan Mukoki, appearedbefore angry members of Parliament’s standing committee on PublicAccounts (Scopa). He was on a charm offensive and insisted that he wouldturn around the hitherto troubled bank…

What was perplexing for Scopa members, particularly the ANC’s PierreGerber, was that the more the financial standing of the bank deteriorated,the more the executives were paid. In 1999, the bank’s CEO earned R560 000a year. By the time Mukoki took over, the position was worth R2.26-million ayear plus a bonus of a million rands…

Fast forward to May 2007. Mukoki failed to show up for a Scopa hearing todiscuss the latest audit report. The bank’s chairman, Lungile Mazwai,reported that Mukoki was “stressed” and had gone abroad with his family torelax. The reason for Mukoki’s stress lies in the multimillion rand landdevelopment deals which the bank entered into under his leadership…

The bank undervalued the land it financed and the scheme created [in trueBEE fashion] instant millionaires. At the time the beneficiaries of the dodgyschemes were about to sell the land for housing or golf estate development,the bank would exit the deal. “The principle about it,” Mazwai told Scopa,“was to finance agricultural land which could, after being financed, bedeveloped for purposes which may not be agricultural.

87 Sunday Times, 18 November 2007

It will be recalled that when the charge sheet against MsDolny was finally formulated during her Land Bank troubles,the main charge concerned the salary increments the boardhad approved in March 1999. Furthermore the board hadintroduced a discrepancy which lowered the new salaries ofthe top six officials by placing them at the lower quartilewhile the rest of the salaries were pegged at the median. It bears repeating that Ms Dolny went through legitimate,transparent and lawful procedures to revise salaries forlegitimate business reasons and got crucified for this88. Soimpeccable were the principles Ms Dolny applied that evenProfessor Mervyn King, the authority on corporategovernance, was prepared to testify on her behalf. Yet theadvocate representing the minister of agriculture memorablyremarked that: “My client [the minister] questions nothonesty but judgment. Ms Dolny is not a fit and properperson to be a Land Bank chief executive”. Governmentretribution was swift, as if she had committed a heinouscrime. Yet a year later, after Ms Dolny had left the bank thesesalary increments, which had caused such a seriousquestioning of Dolny’s judgment, were not only confirmed,with back pay to the previous March, but they were raised toremove the discrepancy. Ms Dolny’s successor was to earnR1.4 million instead of the R1.1 million which Ms Dolnywould have earned. All of this stands in sharp contrast to the astounding scaleof the corruption which subsequently took place at the bankwithout causing any panic in government circles. Aheadline in the Sunday Times89 screamed that a billion randshad been looted from the land bank. In a follow up article90

entitled “Heads roll for loans to fat-cat buddies” on the 18November Wisani ka Ngobeni reported as follows:

Scorpions investigators probing multibillion rand fraud at the Land Bankseized documents from the bank’s Tshwane headquarters during raids. The

88 Helena Dolny, ‘Banking on Change’, Penguin, [2001]89 Sunday Times, 11 November 200790 Sunday Times, 18 November 2007

crime fighting unit was called in after a forensic investigation revealedmassive fraud at the Land Bank…. The audit found that bank officialssiphoned off more than R2-billion to fund investments by close friends andbusiness associates. These included golf estates, an equestrian estate andresidential developments

This massive fraud happened at a time when the strugglingemerging black farmers needed finance more than ever before.The First National Bank (FNB) had recently announced a R300-million deal with the United States development agencyUSAid. In terms of this deal the agency would guarantee halfthe loans the bank extended to black farmers. In other wordsthe Land Bank management had abdicated its responsibilitiesto the private sector in violation of its statutory mandateand unlawfully found other uses for the money intended toassist emerging farmers. In a press article91 entitled “Newdeal to help farmers” Barrie Terblanche reported on theFNB-USAid deal:

But when approached for comment on the deal, emerging farmers voicedwhat appears to be deep seated resentment against the style of agriculturallending that has developed in South Africa. Bank loans come with advisorswho are appointed to help the farmer and protect the bank’s investment. Butfrom the farmer’s perspective, these advisors take over the running of thefarm.

“It’s just a glorified farm workers’ arrangement,” says Gideon Morule, amaize and livestock farmer from North West; the bank’s advisor has thepower to decide where to buy equipment and raw material.

This is to ensure the loan is not spent on wasteful lifestyle items, such asluxury vehicles, but – coupled with suspicions that the advisor bases hisbuying decisions on supplier kickbacks and not on the best interests of thefarmer – is seen as a humiliating loss of control.

So from the up market beneficiaries of multimillion BEEdeals down to the lowly small farmers, ownership byAfricans was decoupled from control and consequently therewas no development of professional experience. Thecorruption at the Land Bank also illustrated an aspect ofthis point. The SOEs were an ideal training ground for top

91 Mail & Guardian, November 30 to December 6 2007

level African managers. However this opportunity wassquandered by applying affirmative action only in favour ofparty elites leaving out other more deserving Africans.The elites could not but be corrupt because the exclusiveaffirmative action from which they benefited instilled aculture of entitlement. It is as if, in their subconsciousminds, they had rewritten history such that only the partyelites were responsible for ending apartheid. They wereknights in shining armour who liberated passive people whoshould for ever be grateful to them and understand why theyshould always be in the front of the queue. The obscenelyconspicuous consumption for which the elites were known wasalso a symptom of this conceit. The essence of this African culture which currentgenerations were likely to pass on to future generations aspart of their economic legacy was already evident in theactivities of the leadership of the youth league of theruling party. Though they seemed allergic to all forms offormal education, especially at tertiary level, they hadthought they had magic cures for all the economic ills ofthe country. These delusions may have been encouraged, atleast in part, by the fact that these spoilt youths werestrongly represented in all categories of BEE millionaires.They had more money than they had sense and had no peerswhen it came to conspicuous consumption. Indeed they werethe first generation of Africans to graduate directly fromToys “R” Us to Porsche show rooms. They knew all aboutconsumption but knew absolutely nothing about production.They were the ‘bling’ generation. This is the most seriousexample of a missing class in African society. If the trendpersists it means Africans will be subordinate inperpetuity.

4 African Renaissance4.1 Dead Aid

After the end of colonialism the economic situation ofAfrica rapidly deteriorated until it became the poorestcontinent on earth. Its inhabitants have come to be known as

the bottom billion. Once upon a time the poorest countriesof the world were spread over many continents andcollectively known as the third world. Africa was once partof the third world but everywhere else the situationimproved until Africa became the third world. The NSeconomy of Sub Saharan Africa has been developing at theexpense of the real economy. This has happened despite [somewould say because of] the vast amounts of financial aidwhich Africa has received since the end of colonialism.In her book92 Dambisa Moyo , a Zambian born economist ,discusses the history of aid to post colonial Africa and herfirm and unambiguous conclusion is that it has been anunmitigated disaster. Moyo distinguishes betweenhumanitarian emergency aid which is dispensed to countrieswhich have suffered disasters such as tsunamis orearthquakes on the one hand and grants or loans provided onhighly concessional terms on the other. She approves of theformer and strongly disapproves of the latter. She arguesthat these loans are often forgiven and therefore they areroughly equivalent to grants. Therefore when Moyo speaks ofaid she lumps together outright grants and concessionalloans.Moyo contends that African governments have tended to seeaid as a permanent, reliable and consistent source ofincome. The aid donors invariably took the policymakingdriving seat in these African countries. This removed theincentive for long term financial planning and encourageddependency which reduced Africans to “children [who areconsidered to be] unable to develop on their own or growwithout being shown how to.” As she puts it “In most poorcountries today, aid is in the civil service, aid is in thepolitical institutions, aid is in the military, aid is inhealthcare and education, aid is in infrastructure, aid isendemic. The more it infiltrates, the more it erodes, thegreater the culture of aid-dependency”.

92 Dambisa Moyo, “Dead Aid: Why aid is not working and how there is another way for Africa”, Allen Lane, Penguin, [2009]

Third world countries were often governed by corruptdictators. But even those countries which later put inplace multiparty democracies often lacked the institutionalinfrastructure to support good governance, in general, andmonitor aid, in particular. In addition the lack of skillsmight mean lack of capacity to spend donor funds for theintended purposes such as physical infrastructuraldevelopment. These unused funds became an irresistibletemptation to the third world elite who soon got addicted tothis source of self enrichment and saw it as theirbirthright. Thus the ever accelerating downwards spiral ofcorruption began. It is in this context that Moyo writes:“In 2004, the British envoy to Kenya, Sir Edward Clay,complained about rampant corruption in the country,commenting that Kenya’s corrupt Ministers were ‘eating likegluttons’ and vomiting on the shoes of the foreign donors”.There are aspects of the flow of aid, from first worlddonors to African countries, which are obviously similar tothe flow of tax payers money from the first world sectionof the South African economy to the internal third world:the reliance on whites for policy making, the lack ofcapacity to spend money for intended purposes, the cultureof entitlement - to ill gotten wealth - which prevails amongthe elite. Many a passage, in Dambisa Moyo’s book, couldeasily be an accurate description of what is happening inSouth Africa. Consider the following gem:

Endemic corruption also targets public contracts. In these environments,contracts which should be awarded to those who can deliver on the bestterms, in the best time, are given to those whose principal aim is to divert asmuch as possible to their own pockets. What ensue are lower-qualityinfrastructure projects, and enfeebled services, to the detriment of growth.

Similarly, the allocation of government spending suffers as corrupt officialsare likely to choose projects less on the basis of public welfare and more onthe opportunities for extorting bribes and diverting funds. The bigger theproject, the greater the opportunity. Projects whose exact value is difficult tomonitor present lucrative opportunities…

Sadly, one has to conclude that the South African BEErelated bling culture is the local manifestation of a third

world cancer which has condemned the Africa continent tothe fate of an ever deteriorating economic situation.

4.2The downwards economic spiral3

I shall now take a closer look at how the African eliteshandle their economies. The economic concepts in thissection build directly on the material presented in chapter2 in the section entitled ‘National income and the wealth of anation’. There I introduced the Gross Domestic Expenditure[GDE] and the Gross Domestic Product [GDP] and showed thatthey are related as follows: GDP = GDE + Export of goods and services – Import of goods and services + External cash borrowings

Now the Balance of Payments [BoP] is a measure of the extentto which a country lives within its means. Ideally the BoPshould be positive, i.e. a country should produce a lot morethan it consumes and use the balance to accumulate capitalstock so as to grow the economy. The BoP is defined as thedifference between the GDP and the GDE and it followseasily from the GDP relation given above that: BoP = GDP – GDE = ( Export – Import) of goods and services + External cash borrowings

The BoP is positive when production is greater thanexpenditure and negative when expenditure is greater thanproduction.The BoP is not to be confused with the Balance of Trade [BoT]which only involves goods. It is the difference between thevalue of exported and imported goods.BoT = Export of goods – Import of goods

3 As in the corresponding subsection of chapter 2, a reader who isallergic to concepts which have numbers associated with them can safelyskip this subsection which I included mainly because I felt this was theappropriate place to apply the concepts and it would be a pity not toapply them since they have already been developed in chapter 2 albeit inan optional subsection.

A country which exports more goods than it imports has apositive BoT and if it imports excessively at some stagethe BoT becomes negative. One question the BoP definition raises is why would acountry want to borrow cash externally when it can printmoney? It is a question which confuses money with wealth. Acountry can print as much money as it likes but if the extramoney does not represent wealth it is artificial money andtherefore useless. The simple fact is that a country cannotspend wealth it does not have. If its expenditure is greaterthan domestic production then the country has to make up forthe balance through borrowings. If the GDP is less than theGDE then the BoP is negative which means that the countryis living beyond its means and therefore it cannot avoidborrowing offshore to pay for the negative balance. Theamount borrowed must be such as to make BoT = 0 so thatExternal cash borrowings = ( Import – Export) of goods and services An isolated country which does not engage in any foreigntrade can only consume what it produces and therefore GDEeither less than or equal to GDP, i.e. GDE ≤ GDE. Thecountry as a whole necessarily lives within its means byconsuming no more than what it produces. However there willbe individuals who consume more than their income. Suchindividuals have to borrow in order to make up for thedeficit. This is only possible if there are individuals wholive within their means and save their surplus. In anisolated country the total deficits of those who live beyondtheir means must be exactly equal to the surplus of thosewho live within their means. This means thatTotal of {borrowings} = Total of {savings}

However if the country is not isolated then the borrowingscan exceed savings by the amount borrowed externally inwhich case we have:Total of {borrowings} = Total of {domestic savings} + Externalborrowings

In chapter 2 where I introduced the GDE I expressed it as asum of expenditures which can obviously be regrouped into

the following three categories: consumption by householdsand by government, replenishment of inventories and capitalformation where the latter is expenditure on infrastructureand factory machinery:GDE = Consumption + Inventories + Capital Formation

Capital formation can only be financed from domestic savingsor external borrowings. Assuming that borrowing is not usedto finance consumption we have:Capital Formation = Domestic Savings + External Borrowings

4.3Financial mismanagement

It is not wise to finance consumption with debt becauseconsumption generates no wealth while debt generatesinterest. So financing consumption with debt is the surestway to get into an inescapable debt trap caused by an everescalating debt. However some post colonial Africangovernments have been known to finance consumption withborrowings, usually to pay agitated civil servants who wereusually driven to rebellion and ever rising wage demands bythe conspicuous consumption of the elites who just could notresist imported luxury goods.. There were also post colonial cases where the limitedforeign exchange earned though meager exports was divertedfrom replenishing inventories of essential imported goodsand used instead to import luxury goods for the elites. Theproblem was that almost all consumer goods weremanufactured abroad so when it became impossible toreplenish inventories by imports the shops had nothing butempty shelves. In extreme cases businesses were nationalizedand fell into the hands of predatory party officials whocould not tell the difference between turnover and profit.Before long they could not replenish inventories.An economy can only grow if it is continually generatingmore income than consumption, that is savings, so that thesurplus can be used not only to reverse depreciation ofcapital but also to increase per capita capital stock tomake up for population increase. In annexure 1 in chapter 12I have worked out a simple numerical example to demonstrate

how sufficient or insufficient savings plus OfficialDevelopment Assistance can cause growth or a poverty trap. The essence of that appendix must be discussed here.

Chapter 10Peacocks beget Peacocks

“Narcissists live in a fantasy land of their own in which they are the center of the universe.”

Dr Sam Vaknin in ‘Malignant Self Love’

1 Educating the next generation

1.1 Failed massification of education

In this penultimate chapter I have begun the process ofconcluding the brief history of the economic developmentof the Bantu which has been the main theme of this book. Inchapter 8 when I commented on the end of the Bantu as afarming people I mentioned the use of head tax to force theAfricans to work for cash by joining the white economy whichneeded their cheap labour. The suppression in 1906 of thesubsequent Bhambatha rebellion marked not only the end ofresistance to white rule by the traditionalists but it alsomarked the end of an independent economic life for theAfricans.

The leadership of the Africans finally passed, once and forall, to the mission school educated elites who establishedthe African National Congress in 1912. By this time theAfricans had little if anything of economic value to pass onto new generations. Formal education was in the hands of themissionaries who were the mentors of the most admiredleaders of the African people. The only training whichAfricans had access to was in the low level trades such asbasic carpentry, shoe repair work, and sewing. Access toeven this low level training was so limited that Dr JohnLangalibalele Dube was moved to establish Ohlange instituteto provide precisely this sort of training. Hi tech trades such as metallurgy, chemical, electrical,mechanical, civil and mining engineering were completely outof bounds. Consequently, Africans were completely ignorantof the capital stock which embodied the technical knowledgeof their time. They also had no experience of runningsubstantial organizations engaged in production andcommercial activities. The result was that the Africansnever developed the social classes which normally assumesuch responsibilities in a nation. This state of affairsstill obtained almost a century later when apartheid ended.Given the rapid advances in science and technology duringthe twentieth century, by this time the knowledge gapbetween the Africans and the whites was truly wide. Only the lower levels of school education were everdominated by African teachers during the twentiethcentury. For the greater part of the century, decent highschool education, for Africans, was available mainly atmission boarding schools where it was accessible mostly tochildren of the middle class. Even after 1948, when thegovernment began to take over mission schools from thechurches, as part of its Bantu Education policy, theycontinued to be run by whites. From the 1950s to the 1970sthe number of township high schools gradually increased butthey catered mainly for the children of the working class.Many middle class parents still sent their children to ruralboarding schools where there was a lot more discipline.

There were two major disruptive forces which interferedwith education in township high schools: the townshiphooligans and the department of Bantu education. Whenfeeling bored, the hooligans sometimes invaded schools,threatened teachers and abducted school girls. When feelingbored, the politicians and officials of the department ofBantu education were fond of harassing black students andteachers by devising and enforcing all sorts ofeducationally unsound policies motivated only by a desireto remind everyone that the Afrikaners were in power.Apart from the Bantu education policy itself, the mosthistorically significant educational policy which wasintended to project Afrikaner power was the enforcement ofAfrikaans as the medium of instruction in Gauteng schoolsduring the mid 1970s.This was a critical period oftransition when high school education was beginning to betaken as a necessity by the masses instead of being mainlythe preserve of the middle class. The subsequent riots of1976 aborted this transition and the African community havebeen battling with the adverse consequences ever since.In chapter 7 I recalled the subsequent development of aspirit of rebellion against all forms of authority whichfollowed the Soweto riots. The rebellion was not confined totownship schools. It reached the formerly church owned ruralboarding schools most of which were now run by thegovernment. By the mid 1980s quality education for blackshad been almost completely destroyed. At this stage liberalwhite private schools began to open their doors to blacks. It was mostly the children of the black upper middle classwho could afford private school education though it must bementioned that there were admirable philanthropists whofinanced the education of a few outstanding children of verypoor parents in these schools. . By the end of the 1980s alot of formerly whites only schools in white suburbia wereopening their doors to black children. Again the blackmiddle class benefited disproportionately from thisdevelopment because they could afford the transport todistant suburbs and the high fees charged there. Later many

black middle class people actually moved to the suburbs.Poorer black parents made great sacrifices to send theirchildren there as black rural and township schoolsdeteriorated relentlessly even after 1994. As a patheticattempt to boost matric results despite the lack of decenteducation in black schools the government lowered standardsuntil students in proper schools could manage more than tendistinctions.To recapitulate, quality school education for Africansstarted in white run missionary schools where it wasaccessed mainly by the black middle class. In the periodleading to the transition to mass education African teachersplayed an increasingly important role in African education.However this transition was aborted in 1976 by greatpolitical upheavals from which black teachers neverrecovered. Black run schools became little more than ameans to provide employment to people who were teachers onlyin name. These schools also became little more thanunreliable day care centers for young people who werestudents only in name. Subsequently quality education forAfricans became available almost exclusively in white runschools in formerly whites only suburbs. Again it was theAfrican middle class which had easy access to thiseducation.

1.1Outrageously expensive peacocks

The nineteenth century missionaries initially sent thebrightest African matriculants they produced to tertiaryinstitutions abroad. However, in 1917 missionaries, ofvarious denominations, established Fort Hare UniversityCollege, the first nonracial tertiary institution is SouthAfrica. After the nationalists came into power in 1948 andintroduced their Bantu education, most universities becameexclusive white institutions, tribal colleges were built andFort Hare was declared a Xhosa institution. From the time Fort Hare was established it admitted the bestproducts of mission schools from all over Sub SaharanAfrica. Even when Fort Hare became a tribal college,

together with other institutions, the best Africanmatriculants still went to these institutions especiallybecause by that time the other South African universitieswere no longer accessible to anyone who was not white.The massification and deterioration of African high schooleducation during the 1970s coincided with the massificationand deterioration of university education which started withthe transformation of tribal universities into Bantustanuniversities and the establishment of more of them to matchthe proliferation of Bantustans. Soon thereafter thewhites only universities reopened their doors to all racegroups and from that point onwards, most of the best blackmatriculants chose to attend the formerly whites onlyuniversities. These opportunities were mostly open to theupper middle class because the historically whiteuniversities [HWUs] were relatively much more expensive.As black education deteriorated relentlessly the now blackrun Historically Black Universities [HBUs] were underpressure to improve throughput. Given the quality of theirstudents, their only option was to quietly lower standards.It was a conspiracy of silence involving the students, thelecturers, the university authorities and the educationauthorities. The result was that the HBUs became littlemore than a means of providing employment for over paidmanagers and people who were academics only in name. TheHBUs also became little more than expensive centers foryoung people to have a good time before joining the ranks ofthe unemployed.It is fair to conclude that, on the whole, the currentgenerations of African adults have no formal knowledge ofvalue to transmit to future generations. We are almostentirely dependent on other race groups to provide thisservice. This is yet another example of a critical socialclass which is missing in African society. This may soundabsurd given that there are tens of thousands of Africanteacher in South Africa. The point I am making is that theoverwhelming majority of these teachers do not belong to an

appropriate social class to be proper, dedicated andeffective teachers.A teacher who belongs to the appropriate social class has anannual plan for his class. Throughout the year his constantconcern is to do justice to the work which is planned forthat year. While such a teacher might engage in decent payprotests he would also show some concern for his students.This is the ethos which gives people the right to callthemselves professionals. He would certainly not stoop solow as to proudly go about disrupting teaching activities inother schools in full view of national television cameras.Such disgraceful behaviour by African teachers has become anannual event The situation in HBUs isn’t any better. There is an almostcomplete lack of integrity. People are wasting scarceresources pretending they are offering university educationwhen they know perfectly well that they are doing nothing ofthe sort. All that matters to them are their huge salariesand those opportunities to parade their colourful gowns likea whole lot of peacocks. They are not men and women ofsubstance. They are also part of the bling culture.

2 Portrait of a narcissist2.1The African affliction

In the preface I said knowledge is to the currentgenerations of a nation what genes are to a living organism.The educational process of transmission of knowledge by anation to a new generation is analogous to the biologicalprocess of transmission of genes by an organism to itsprogeny. In this chapter I have, effectively, argued thatAfricans have failed to accumulate knowledge that willmake them economically competitive, and to develop capacityto transmit this knowledge to future generations. In otherwords, we do not reproduce as an economically viable nationbecause we have defective genes. Only the bling seems to bemaking an impression to our youth. The pageantry of apeacock has a very useful biological function, which is to

attract females to facilitate reproduction. Peacocks begetpeacocks.The most common underlying reason for the genes of anorganism to render it incapable of reproducing is when theorganism itself is illegitimate, in the sense of a mulewhich is a cross between two distinct species which aresomehow incompatible. Is there a sense in which the currenteconomically active generations of Africans are mules? WhatI am talking about here are cultural pathologies which areeither analogous to the ambiguous ancestry of a mule. Themule metaphor needs a little more clarification becauseAfricans give birth to children like everyone else, oldgenerations die off and younger generations replace them. I shall paradoxically explain the mule metaphor in terms ofan even more drastic metaphor of death. As an economicorganism Africans, as a collective, are like a dead organismbecause the economic situation of new generations tends tobe worse than that of their parents. This is analogous tothe gradual degeneration of a dead organism. Africans do notaccumulate enough knowledge and dynamism to breatheeconomic life into the collective skeleton so that they canstand on their own feet and compete in the economic arena onequal terms with other nations. The lifeblood of anindependent economic life is knowledge which Africans do nothave.So the mule metaphor merely means that Africans have noviable economic culture to bequeath to new [biological]generations just as a mule has no viable genes to propagateto its offspring. What we propagate successfully to newgenerations is bling culture which masquerades as economicculture. It makes sense to focus on the African elites inorder to identify the cultural pathologies responsible forthis sorry state of affairs since it is these elites who arethe economic leaders of their people. As a matter of factsif there is anything which the elites of Sub Saharan Africahave in common it is their obscene bling culture and theircomplete lack of an economically viable culture to bequeath

to future generations. I shall cite a few examples beforeattempting an explanation.The ultimate icon of the bling culture was President Mobutuof the Democratic Republic of Congo [DRC] which he renamedZaire. Mobutu regarded the treasury of his country as hispersonal bank account. When international financialinstitutions loaned his country money he used it all tofinance his opulent lifestyle. Indeed he treated the countryas its founder, King Leopold, had done: as his privateestate and the people as his slaves. According to RichardDowden93 :

[Mobutu] stayed in power by leasing out state contracts, offices and positionsto other political players. In return they had to pay him a percentage. Allofficials, from ministers to soldiers, were allowed to steal whatever theywanted through bribes or theft from the ordinary people.

Mobutu built a palace in every major town in Congo. But inhis mother’s home village, Gbadolite, he built three. Therest of the town was simply there to serve these palacesincluding an international-sized airport which his familyoften used when they hired Concorde to go shopping in Europeor America. The extravagant extent to which Mobutu cravedpraise and adulation can be gleaned from his full officialtitle which was a selection of the choicest lines normallyrecited by his praise singers: ‘The cock that covers all thehens, father of the nation, guide, helmsman, Chief, Messiah,the all-powerful warrior who goes from conquest to conquestleaving fire in his wake’. It does not take a trained psychotherapist to suspect thatthe bling culture is associated with a condition known asNarcissistic Personality Disorder [NPD]. According to Dr SamVaknin94, to qualify as a narcissist a person has to satisfyat least five of the criteria given in appendix 3 chapter12. Next I shall present a portrait of a narcissist forwhich I am largely indebted to Vaknin.93 Richard Dowden, ‘Africa, Altered Atates, Ordinary Miracles’, Portobello, [2009]94 Sam Vaknin, ‘Malignant Self Love: Narcissism Revisited’, Narcissus Publications, Prague & Skopje [2007]


2.2 Addiction to narcissistic supply

Everyone is likely to know at least one narcissist. The Zuluword for this interesting character is intandakubukwa whichliterally means an ‘attention seeker’. Traditionally peoplewith this condition are a source of amusement and they havenever been associated with evil. They have been known toparade their expensive and flashy clothes, cars, houses andall their possessions. They ‘flaunt them, consume themconspicuously, praise them vocally, draw attention to themcompulsively and brag about them incessantly’. A learned narcissist tends to be in love with the languageand with his own voice. To paraphrase Vaknin, hisinfatuation with the former and with his own sound leads toa pyrotechnic sort of speech which sacrifices its meaning toits music. ‘He pays more attention to the aesthetics than tothe content. He is swept by the poetry, intoxicated by itsperfection, inebriated by the spiraling complexity of itsforms. Here language is an inflammatory process. It invadesthe healthy cells of reason and logic, of cool headedargumentation and level headed debate’. Whether learned ornot, narcissists tend to have highly developed persuasiveskills because, as we shall see, the main if not the solefocus of their lives is cultivating adulators.In appropriate contexts, all of these are rather endearingcharacteristics of what we superficially understand by anarcissist. However what is going to emerge in this portraitis that the fundamental causes of these rather quaintbehaviours are also at the root of character traits whichare traditionally associated with those who are possessed byevil spirits or demons, to use scriptural language.Narcissus, the character of Greek mythology, was a beautifulman who disdainfully spurned those who loved him and thusinvited the wrath of the gods. His punishment was to fall sodeeply in love with his own reflection in a pool that hewas condemned to ceaselessly staring at it and could notleave it until he perished. The legend is somewhatmisleading in that, at least in terms of beauty, it was asubjective as well as an objective fact that Narcissus had a

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substantial self to fall in love with. By contrast thefundamental problem of a narcissist is that his subjectiveself is insignificant. He has a low self esteem. NPD is apathology which arises as a pathetic way of compensating forthis low self esteem.The defining characteristic of a narcissist is that hecraves attention as a drug addict craves his regular fix.Just as drug addiction tends to escalate to ever morepotent drugs the narcissist’s addiction to attention alsoescalates in terms of preference for ever more dramaticexposure to attention. Where a drug addict marshals all hiseconomic resources for procurement of drugs a narcissistfocuses all his energy in general and social intercourse inparticular on the procurement of attention. When attentionbecomes such a compulsive obsession it warrants a specialname. Thus the broad spectrum of forms of attention which anarcissist craves are referred to as Narcissistic Supply [NS].The most valued NS is generally associated with fame andmay take the particular forms of admiration, adulation andall sorts of affirmation. Just as low quality drugs arepreferable to an addict than no drugs at all, narcissistsprefer lower quality NS to no NS. Low quality NS isgenerally associated with notoriety and the particular formsit may take include seeking indications that he is feared,or general affirmation that he has the power to cause greatharm. An alcoholic seeks alcohol ultimately, whether it befrom expensive champaign or cheap wine.A narcissist over compensates for his low self esteem byinternally creating a false picture of self with exaggeratedimportance, abilities, skills, talents, accomplishments andpower. In short the false self pretends to be a perfecthuman being. A cerebral narcissist perceives his perfection asbased on his extraordinary brain while a somatic narcissistreckons he has a perfect body and extraordinary sex appeal.Thus a narcissist is a pathological liar whose whole lifeis based on a huge contrived lie: his false self. As aresult narcissists are entirely comfortable with lies andthis makes them highly skilled liars who are not betrayed by

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body language like normal people. They feel completelyjustified and at ease when lying to others. Vaknin [ibid]contends that: “Often they believe their own confabulationsand attribute to them ‘retroactive veracity’”. This is aidedby the narcissist’s uncanny ability to filter outinformation which contradicts his false self image.The narcissist is however not entirely out of touch withreality. In fact his psyche is dominated by the grandiositygap between the false self and the real self. The cravingfor NS is an attempt to regulate violent swings between twoopposite poles: feelings of grandiosity and feelings ofworthlessness; the inflated view of self and the pitifulview of the despised self, the insubstantial true self. Heoften loses his grip on the false self and when faced withthe real self he plunges into a helpless, depressed stateof self loathing. Thus a narcissist is driven to procure NSas a means to desperately claw his way up away from thisdepressing state at the bottom of a slippery slope. Anarcissist is a truly tortured soul.

2.3 The demonical superego

There is a set of brain functions, called the id bypsychologists, which is defined as the deepest part of theunconscious mind and which represents the most basicnatural human needs and emotions such as hunger, anger andthe wish for pleasure. I assume that all animals have theid. These emotions and needs are responsible for behaviourtraits which are inherited, i.e. genetically determined.Examples are basic fight or flight reflex reactions when aperson is faced with danger and sexual attraction. Theformer is to do with the biologically important ‘instinct’of self preservation while the latter ensures the equallyessential biological imperative to reproduce in order topropagate own genes. The behaviour of nonhuman animals isdetermined only by the id which I will unofficially refer toas animal spirits.There is another set of brain functions, called thesuperego, which psychologists define as the part of yourmind which knows what is right or wrong according to the

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rules of the society in which you live, and which causes youto feel guilty when you do something wrong. Therefore thesuperego represents learned norms governing behaviour. Inplain language the superego is simply culture. Finally theego is that part of the mind which determines actualbehaviour by mediating between the id and the superego. For instance, as a member of the animal kingdom, a virilemale in a crowded beach might feel the urge to induce, bywhatever means necessary, a particularly attractive femaleto copulate with him on the spot. This is what animals do.If he allowed himself to do this he would be succumbing tocontrol by his id. In a normal person the ego modifies thedemands of the id by reference to the superego to determinefinal action which is consistent with morality and norms ofsociety. Since what we call personality is based onbehaviour patterns, it is determined by the ego. It istherefore justified to loosely refer to ego as personality.The ego can be regarded as the executive who implementspolicy determined by the board which consists of the id andthe superego; the genes and socialization; nature andnurture.With equal validity one can view the situation from thestand point of the superego. We might say that, in effect,the role of the conscience or superego is to constantlynudge behaviour away from the base demands of the idtowards what is consistent with an ideal ego, an idealpersonality. The ideal ego would always manage a perfectreconciliation of the id and the superego. Some religiouscreeds identify believers whose life long behaviors isjudged to have been in sufficiently close correspondencewith the ideal ego to warrant recognition. They are calledsaints.The fundamental cause of narcissism is a malfunction of thesuperego, a malfunction of the manner in which imbibedcultural norms guide behaviour. The low self esteem and theself loathing are fueled by a demonical, punishing andunrelenting superego which is always chastising, beratingand criticizing the narcissist. This is why a narcissist is

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so terrified of a reprimand or even mild criticism. Hereacts to is furiously as if he thinks it is sadisticallyintended to amplify the torment of the demon. He adapts tothe relentless onslaught of the demon by placing a false egoor false personality as a buffer between the sadisticsuperego and the ego; a false self as a buffer between thejudgmental superego and the true self.

Figure 1This impostor is created as a means to still the incessantcondemnatory voices of the superego which are directed atthe true self. However the false self is always on aslippery slope between the ideal self and the true self. Itis NS which enables the narcissist, using the vehicle of thefalse self, to sustain a continual struggle to claw his wayup towards the ideal self to avoid slipping down to thetrue self. The NS makes it possible to avoid reality andsustain a false image in an energy draining, life long drama

idSuper ego

Ego ideal

Ego

Ideal self

True self

False self

NS Reality

Representation of the inner struggle

Personality

False ego

The top level of the diagram above represents the deepest parts of the mind. In a normal person the true self would be at the bottom level, displacing the false self which interacts with the world in the dysfunctional case of the narcissist which is represented by the diagram.

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in which the narcissist is acting the false self. See figure1.In terms of the business metaphor the false ego is ahopelessly incompetent Chief Executive Officer [CEO] whoonly excels in the grandiosity with which he promoteshimself as one of the seven wonders of the world. Heshamelessly claims credit for fantastic victories he neverwon and on this basis he loudly and recklessly promisesgreat future victories which will never be won. He is fondof rubbishing true achievers and contrast their concoctedfailures to his imagined successes.While it is true that normal people, quite naturally,present a façade to the world which serves to camouflagetheir vulnerabilities, the public persona never differsradically from the true self. People gradually becomethemselves with increasing familiarity. In the long run whatyou see is more or less what you get. When it comes to anarcissist his only mode of interacting with the world isthe false ego. The [true] ego has been overshadowed by thefalse ego for so long that it atrophied. It was deprived ofopportunities to grow through experience. The ‘experience’obtained by means of social intercourse through the falseself is hardly relevant because it applies to the artificialcharacter being acted out.

3 The abusive narcissist3.1Narcissistic abuse

The narcissist is necessarily abusive to those around himbecause he constantly demands that they play supportingroles in the great play which is the sole focus of hislife. These unfortunate people are said to constitute thenarcissist’s Pathological Narcissistic Space [PNS], hisstomping grounds. He relentlessly mines them for NS. Infact a narcissist is in the full time business of procuringand consuming NS. To say that he is obsessive in his pursuitof NS is a gross understatement. His intentions are focusedand his enthusiasm is often manic. He views other people,including close family, as dispensable objects whose value

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is determined entirely and only in terms of the NS they canprovide. If necessary he thinks nothing of riding roughshod over other people’s rights and dignity in order toobtain his NS. A perculiar aspect of a narcissist’s life is the prodigiousamount of work which is directed at expanding hisnarcissistic space, a task for which he invariably developsformidable skills. A narcissist can be exceedinglyentertaining, charming and charismatic. After all this ishis fishing paraphernalia. A narcissist is a predator. Buteven as he charms people out of their psychological defensesthere are always telltale signs of pent up abuse which arealways realized by his victims in retrospect. These signalsusually indicate zero tolerance for those who contradicthim. However in a charming setting it usually seems a tadchurlish to dwell upon such apparently minor weaknesses. Inreality this is part of the subtle ‘training’ to which hesubjects his recruits to turn them into reliable suppliersof only what he wants to hear, namely: admiration, praiseand adulation.The narcissist is possessed of an uncanny ability to assessthe character of a prospect in order to determine potentialas a recruit to his PN Space. He has a gift for penetratingthe psychological defenses of others by faking empathy. Ifthey buy his fake, larger than life self image it does nottake him long to assume control of his victims. To anarcissist people tend to be idealized as perfectly good ordevalued as completely bad depending on their usefulness asproviders of NS. Accordingly people are either idealized ordevalued depending on their services in this regard. Themost recent additions to the narcissist’s PN space areusually idealized until they outlive their usefulness as NSsuppliers at which point they abruptly get devalued.The narcissist is a control freak. He has a psychologicalneed to have complete control over those in his PN space.This is because, as an NS addict, he depends entirely onthem. It is of course natural for the narcissist to desirecontrol, at all costs, over supplies of a commodity of such

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vital importance to him. The narcissist is driven to playgod over his primary sources of NS. He is akin to a weirdcult leader. No! he is the leader of a cult in which heplays the role of god. The control which the narcissist exercises affords him anopportunity to monitor his PN space closely. His knowledgeof the dishonesty surrounding his own life, enables him toanticipate the end of his credibility with a particular,formerly productive source of NS. He shoots first,reflexively, to avoid being rejected. He devalues the sourceoffhandedly. He inflicts pain and abuse on them anddiscards them unhesitatingly. To derive maximum NS whileinflicting this pain and abuse the narcissist needs anaudience. The important role of the audience is to applaudand thus affirm the superiority of the narcissist over thevictim. If the source of NS in question is a spouse thismarks the end of the honeymoon and the beginning of a lifeof intensive and relentless abuse. A narcissist genuinelydoes not know what it is to be human. Empathy, loyalty,commitment and love are completely alien to him. He is adeptat being consistently and completely unavailable,emotionally, to those who are supposed to be his loved ones.However the behaviour of a narcissist is not consistent. Hemay capriciously change from the idealization to thedevaluation phase. He is prone to be angry. His anger isalways sudden, raging, frightening and without any apparentprovocation by the victim. The same innocuous act whichelicits a smile from him if done by those he idealizes canelicit rage if done by those he devalues. And his rage isalways stage managed for the benefit of an audience. Yet anarcissist never forgets a slight he suffers in front of anaudience.One of the techniques which a narcissist uses to maximize NSis to ring fence sections of his PN space in concentriccircles through manipulation by means fair or foul includingmalicious gossip or flattery. Family is in the inner circleand after that are the relatives who may also be separatedinto own family and in laws. The next ring consists of

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friends who may also be separated into own and those of thespouse etc. This neat compartmentalization of PN spaceenables the narcissist to abuse party A and use this togain admiration from party B, by telling the truth or evenexaggerating it, and empathy from party C by lying andmaking himself out to be the injured party.Thus the persona which interacts with the abused keepsshifting, normal in the morning and devilish by midday. Thepersona which takes delivery of NS also shifts from theangelic to the devil. Thus in one part of his PN space thenarcissist might have the reputation of an angel while hehas the notoriety of a devil in another part. In that partof his PN space where the narcissist is an angel hisinnocent victim is known as the devil. The narcissist workson this constituency by projecting all his evil self ontohis wretched victim. Sam Vaknin [ibid] explains how anarcissist manages to live with such an evil self asfollows:

The narcissist simply “knows” that his closest, nearest and dearest should beheld responsible for his reactions because they have triggered them. Withsuch an entrenched state of mind, the narcissist is constitutionally incapableof admitting that something is wrong with HIM.

But that does not say that the narcissist does not experience the perniciousoutcomes of his disorder. He does. But he reinterprets this experience. Heregards his dysfunctional behaviours…as conclusive proof of his superiority,brilliance, distinction, prowess, might, or success.

Rudeness to others and bullying are reinterpreted as efficiency. Abusivebehaviours are cast as educational…His rage is always justified and areaction to injustice or to being misunderstood by intellectual dwarves.

The narcissist attributes his failures and mistakes to circumstances andexternal causes…Conversely, the narcissist traces other people’s errors anddefeats to their inherent inferiority, stupidity, and weakness. Their successeshe dismisses as “being in the right place at the right time” – i.e., the outcomeof luck and circumstance.

To the narcissist the truth about past events is alwaysrapidly mutating to meet NS procurement contingencies. Theshifting illusions of truths and falsehoods are the most

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maddening aspect of the narcissistic character which hasbeen known to induce the uninitiated to doubt their ownsanity when subjected to these antics. To him skills,knowledge and even truth have no purpose other than theprocurement of NS. If it takes persecutory delusions tomarshal these for NS procurement so be it. The additionalattraction of such delusions is, of course, that theybolster the grandiose view of self as perfect.It is estimated that seventy percent of narcissists aremale. It is amazing that the narcissistic condition receivesso little attention despite their formidable talent forattracting attention. They are everywhere: in politics, inchurch, at the workplace and, God forbid, even in your ownhouse. In the latter case you cannot miss them. No curse inhell has greater capacity to inflict torment. When theyare at a distance we usually see only the more endearingaspects of their character. The antics of these ubiquitousscoundrels are facilitated by a ready supply of invertednarcissists.

3.2The inverted narcissist

I have pointed out that the fundamental cause of narcissismis a malfunctioning superego. Instead of acting as a guideit operates as a demonic voice which constantly torments himwith criticism, disparagement and negative evaluation. Inpsychoanalysis the standard explanation for such amalfunction is defective upbringing which instilled negativeself perception especially during formative years.The defective upbringing may involve brutal physical abuseof a child accompanied by psychological torture. As Vaknin[ibid] puts it: “Instead of being provided with theunconditional love that he craved the narcissist wassubjected to totally unpredictable and inexplicable bouts oftemper, rage searing sentimentality, envy, prodding,infusion of guilt and other parental emotions and behaviourpatterns”.The second form of abuse which is often practicedinadvertently by loving parents is not so obvious. They

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smother, spoil, overvalue, and idolize children with tragicunintended consequences. ‘Narcissists who are the sadoutcome of excessive pampering and sheltering becomeaddicted to it. Narcissists of this variety simply refuseto grow up. Vaknin observes that some of them even use achildish tone of voice occasionally and adopt a toddler’sbody language. This sits well with a somatic femalenarcissist.A child who is brought up by a narcissistic care giver maybe socialized to accept abuse and develop skills to complywith the capricious whims of a narcissist. Such a childlearns to endure idealization followed by devaluation. As anadult such a child craves relationships with narcissists andderives her narcissistic supply from being submissive to anarcissist. In short she may become what is called aninverted narcissist, a thoroughly conditioned adulator.

4 Government by narcissists4.1 Illicit trafficking in narcissistic supply

Earlier in this chapter I have asked the question whetherAfricans are mules in the sense of having no viable economicculture to bequeath to new generations. Indeed we are nowready to identify the nonviable economic culture whichrenders us mules as the incessant demonical superego whichis responsible for misguiding our narcissistic elites. Atthe end of chapter 1 I cited a speech in which PresidentThabo Mbeki also identified one manifestation of thisincessant demon with the words: “Thus every day and during everyhour of our time beyond sleep, the demons embedded in our society, that stalkus at every minute, seem always to beckon each one of us towards a realizabledream and nightmare”. Citizens have a duty to pay taxes. Having done so, they areentitled to expect a specific set of services from thestate. The state receives taxes and in return it deliversservices commensurate with the collected taxes. This is acomplete business transaction involving the purchase ofservices. The compact between citizens and a legitimatestate comprises this tax-services transaction as well as a

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commitment by the citizens on the one hand and the state onthe other hand to obey the laws of the country. Goodcitizenship entails an activist approach to this compact.The main thesis of this chapter is that the fundamentalflaw in governance which is at the root of the failure ofAfrican economies is that tax, in the tax-servicestransaction, is not considered to be the full price ofservices. There is always an undeclared outstanding amountwhich has to be paid in the narcissistic supply currency.Another way of looking at it is that government services,which have already been fully paid for in terms of taxes,are resold to the public in exchange for narcissistic supply[NS]. What is worse is that, as I shall show, thisnarcissism is institutionalized. This means that Africangovernment representatives tend to demand narcissisticsupply both as individuals and as representatives of rulingcollectives.A typically African phenomenon is a type of bully who is anabsolute menace to members of the public who have to accessservices from public offices. As is the custom of allbullies, they are engaged in a constant psychological warwith the public to humiliate them and cow them intosubmission. As part of their one sided battle forsupremacy they think it their right to ignore the publicaltogether when it suits them After all what right do thepublic have to disturb their peace? In fact they are apt toregard the public as a nuisance. When pressed to offerthe service, for which they are paid, they can be reliedupon to do it with extreme abhorrence which they make notthe slightest attempt to hide. The facial expression of distaste and the irritated tone intheir speech is intended to dissuade members of the publicfrom any attempt to complain about the quality of theservice or even to seek clarification regarding the excusefor a service being rendered. A mere enquiry is regarded asextreme provocation which calls for an appropriately ruderesponse in retaliation.

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Their favourite targets are the uneducated masses,especially the most vulnerable elderly and sickly men andwomen. Somehow the mere sight of these innocent citizensis enough to remind public bullies what highly educatedsophisticates they are. And so it comes about that ruralgrannies and granddads get their indifferent service inEnglish, typically rendered with a ridiculous pseudoAmerican twang.It is in the nature of a public bully to gain perversepleasure from misleading members of the public. However evenwhen he is on his best behaviour his instinct is to givefalse information rather then say “I do not know let me asksomeone who can help”. This would be intolerable humiliationfor he sees himself as being above the members of thepublic. That is why he is particularly hostile to members ofthe public who demonstrate any understanding of the servicethey are entitled to. The public bully is forever engagedin a one sided contest to browbeat such members of thepublic.If any gift can be singled out, which the public bully isgenerously endowed with, it is insensitivity to otherpeople’s suffering. A member of the public might be anobviously indigent person who has traveled hundreds ofkilometers to get a service. If the office closes within anhour and the bully has decided to spend the rest of the dayat the office gossiping then the indigent will be told tocome back next week.Members of the public are accustomed to this behaviour bypublic servants. They have long since realized that one hasto choose between indifferent service and one’s dignity.When the public bullies decide to be difficult only aliberal serving of NS can persuade them to change theirminds. The only NS value the desperately poor can offer isprostrating themselves before the public bullies. Those whocan afford it offer their NS in the form of rands and centseven though the bullies have been known to squeeze fortunesout of the desperately poor.

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Superficially bribery looks as if it is a differentphenomenon, an act belonging to a different criminalcategory. But on closer inspection a financial bribe is NSof the highest order. It is really a way of telling thepublic bully that his power is awesome and therefore throughthis small consideration he is being beseeched and imploredto take pity on the humble servant [i.e. member of thepublic] and favour him with the service.The maxim: ‘customer is king’ is of course anathema toanyone who takes his NS seriously. Even in the privatesector Africans, in positions where they are supposed toserve the public, have been known to demand that customershumble themselves before them. Consequently, in many sectorsof the economy it is an open secret that Africans prefer tobe served by other race groups.

4.2 Institutionalized narcissism

The challenge of abolishing the levying of NS from thepublic by civil servants looks like a simple question ofworkplace discipline. Indeed this would be the case ifnarcissism were not institutionalized. This is why theSouth African Batho Pele [people first] campaign, whichattempted to address the problem, was an unmitigatedfailure. I now turn to a general exposition of thisinstitutionalization. In the process I shall endeavour toestablish a direct link between narcissism and pooreconomic performance in Africa.In her recent book95 Antoinette Handley did a four countrycase study on South Africa, Mauritius, Ghana, and Zambia toexplore the connection between the relative strength ofgovernment and business on the one hand and the success ofeconomic reforms during the neo-liberal era on the otherhand. In the first two cases Handley attributes relativesuccess to the separation of the business and politicalelites and to the well matched balance of power betweenthese classes. In the case of South Africa the politicalelites are of course almost all black while the businesselites are almost all white.

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In the case of Ghana and Zambia the reforms were sabotagedby the nature of their respective governments which Handleycalls neo-patrimonial. Handley attributes the followingdefinition of neo-patrimonialism to Nicholas van derWalle’s:

Outwardly the state has all the trappings of a Weberian rational-legal system,with a clear distinction between the public and the private realm, withwritten laws and a constitutional order. However, this official order isconstantly subverted by a patrimonial logic, in which officeholders almostsystematically appropriate public resources for their own uses and politicalauthority is largely based on clientelist practices, including patronage,various forms of rent-seeking and prebendalism.

What Handley calls a neo-patrimonial state is what I preferto call a narcissistocracy. It results when a small educatedelite accedes to power after leading a protracted struggleagainst an oppressive, ethnically based regime. The elitemust be part of a distinct largely illiterate majority withno entrepreneurial class. This uniqueness of the elite setsthe stage for a narcissistic mindset among them which leadsthem to view the majority as their primary source ofnarcissistic supply.Because the antics of narcissists are well known, theadvantage of my standpoint allows easy explanation ofbehaviour which would otherwise require further analysis. Agood example is what I have called the institutionalizationof narcissism. The institution representing the elite is ofcourse the liberation movement which takes power afterliberation. When engaged in political sloganeering it iseasy to impute godlike powers such an omnipotence andomniscience to the liberation movement without soundingunacceptably immodest. However, in reality, it is theleadership who bask in the grandiosity of the movement. Themovement becomes the government and before you can saynarcissistocracy the government becomes the state. Andfinally the narcissistic leadership becomes the state.Once the liberation movement has license to do as it pleasesthen the leadership has license to do as it pleases. Howeverthis license tends to cascade down the ranks much faster

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than the top leadership realize. In any organization it doesnot take much effort for the leadership to initiate aculture. Whether a culture takes root or not is determinedby whether the culture carries with it lucrativeopportunities.

5 The narcissistic supply economy5.1 Ethical forms of narcissistic supply

In essence a narcissistocracy is based on a dual economyconsisting, on the one hand, of the usual economy in whichgoods and services are traded at prices measured in thecurrency of the country. On the other hand is the dual ofthis economy comprising the narcissistic supply market inwhich NS can also be measured in terms of the ordinarycurrency. The two economies operate parallel to each other.There are ethical and unethical forms of NS. I shall beginwith the former. Now narcissistic supply is a feeling of wellbeing which anarcissist gets under a wide variety of circumstances. Asubjective monetary value can always be placed on suchcircumstances. In the ordinary economy a particular new carhas a given monetary market value irrespective of who buysit. In the NS economy the value of the same car depends onthe buyer and in that sense it is subjective. Let meexplain.A car is basically a means of getting from point A to pointB. A lot of the extras we pay for - such as fancy paint,expensive leather upholstery etc. - serve no useful purposeexcept to provide us with narcissistic supply. While a fourwheel drive capability might be absolutely essential for afarmer it may be of no practical use whatsoever for a cityworker. It is reasonable to assume that actuaries would beable to select an ideal vehicle which is the best value formoney to suit the income, occupation and the way of lifeof any particular individual. The difference between theprice of the car a man actually buys and the price of hisideal car is the money the man is spending to buy NS withregard to car transport.

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The price of NS is measured by the excess one pays for anitem above one’s needs and station in life. Obviously, if aman actually buys a car that is cheaper than his ideal car,then the man suffers a narcissistic loss for buying a carwhich is below his status, but he gets compensation forthis loss which is equivalent to the money saved. A personmay overspend on some items and under spend on others andstill live within his means, on the whole. Now by definitiona narcissist is a person who has a proclivity fornarcissistic behaviour. Therefore a narcissist can beexpected to live way beyond his means. People differ in their appetite for NS. A person with zeroappetite for NS might be called a narcissistic teetotaler.Such a person would suffer no narcissistic loss whatsoeverwhatever clothes he wore and whatever car he drove as longas the latter took him from point A to point B without anyinconvenience and as long as the former were clean andcovered his body adequately in terms of prevailing socialnorms. All of us have some desire for NS. The difference isboth qualitative and quantitative. The quantitativedifference is that a narcissist needs a lot more NS than theaverage person. The qualitative difference is that hecraves it and he has absolutely no control over hiscravings. A further qualitative difference is that anarcissist’s cravings include immoral forms of NS to whichI will return later.As I have already intimated, I do not believe that anyonecan honestly claim that he is a narcissistic teetotaler.However the communist creed is: from each according to hisability and to each according to his needs. Communists arethus enjoined by their own creed to renounce NS. Therefore,in practice, this creed allows for a very limited gapbetween the lowest and the highest salaries. In other wordsthere is a very weak link between a person’s station in lifeand that person’s income. For instance the difference instatus between a manual worker and a technocrat cannotjustify a vast difference in the incomes of the two. Thedifference in their ideal cars would therefore be determined

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mainly by their practical requirements which may well beidentical. Honest socialism is only viable in a societywherein the NS market can be extinguished. Hence anycommunist who is worth his salt is necessarily anarcissistic teetotaler.Liberal capitalists are generally unapologetic aboutprocurement of NS in terms of an opulent lifestyle. Howevertheir true passion is the maximization of profit rather thanthe maximization of NS. Through marketing they spend largeamounts of money to increase global appetite for NS inorder to boost demand for the most expensive goodsirrespective of their functionality. In a way marketing isall about getting people hooked on the NS drug.

5.2Unethical forms of narcissistic supply

Civil servants also procure and consume unethical forms ofNS through blatant abuse of members of the public. Amoderate amount of ethical NS is part of human nature andsome may even say that it is healthy. But any amount ofunethical NS is an indication of a pathology. A monetaryvalue can also be placed on this form of NS.Consider a company executive whose benefits include freemembership of a decades old club of parachutist who practicetheir hobby regularly on weekends. On the basis of thesafety record of the club and other similar clubs, actuariescan estimate the chance that a club member will loose hislife in a parachute incident. On the basis of thisprobability, insurance premiums can be computed such thatthe sum assured is the income the insured was likely to earnduring the expected remainder of his life. As a generalrule, the higher the risks, the higher the premiums. Thepremiums can be regarded as the cost to the executive of thethrill of parachuting. Similarly a civil servant who enjoys the thrills of abusingthe public at work runs the risk of being overlooked forpromotion, demoted or even dismissed. A premium for aninsurance policy covering the client against financial lossassociated with these eventualities can be computed. Where

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the abuse is in the form of demanding bribes then the costof the NS is the net premiums which are premiums minus thevalues of the bribes received. These net premiums can beregarded as the cost of the NS which the narcissistic civilservant enjoys. Clearly where bribes or similar forms of corruption areinvolved cost of NS can be negative if the risks arerelatively small. This means that instead of paying for NSone gets paid for consuming NS. In other words NS can becheaper than free. In these conditions NS comes with afinancial incentive to procure even more NS. This is apositive feedback mechanism which leads to runaway demandfor NS which manifests itself as runaway corruption.

5.3 Competition for narcissistic supply

In a narcissistocracy the focus of the work and life of theruling elites is the procurement and consumption of NS. Ishall now define a narcissistocracy by paraphrasingNicholas van der Walle’s definition, which I cited above, inthe language of narcissism:

Outwardly the state has all the trappings of a rational constitution basedlegal system, with a clear distinction between the public and the privaterealm. However this official order is constantly being subverted by a logicpremised on the tacit assumption that the fundamental raison d’être for theofficial order is to facilitate the procurement of narcissistic supply for theruling elites.

Thus in a narcissistocracy, the NS economy takes precedenceover the ordinary economy. In fact the only economicactivity which the ruling elite get seriously involved in iscompetition for NS instead of facilitating the creation ofwealth. Indeed where the creation of wealth interferes withthe procurement of NS then the former is invariablysacrificed. In many an African country, the emergence of anentrepreneurial class has been thwarted by the fear of theruling elites that rich entrepreneurs would stealnarcissistic supplies due to them. Even within the rulingclasses gifted and technically competent leaders have been

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ejected for fear that they would commandeer narcissisticsupplies reserved for the top elites.A narcissistocracy is an orgy of gluttonous NS consumptionwhere nothing else matters except this activity. Africansknow that what is wrong with their continent is a mentalsickness which they find embarrassing to discuss inpublic. Unfortunately the mental sickness manifests itselfin a public orgy which is happening in full view of the restof the world. The dirty linen is already hanging in public.We might as well wash it in public. At least the world willknow that we are doing something about it.

Chapter 11Stilling the Incessant Demons

“We know it is a matter of fact that we have it in ourselves as Africans to change all this. We must, in action, say that there is no obstacle

big enough to stop us from bringing about a new African Renaissance”

Nelson Mandela

1 The self loathing masses1.1 The mouth that never utters falsehoods

To understand the character of governance in Africa it isnecessary to study various strata of African society and howthey interact with one another. At the apex is the Big Man,the president, who emerges from the ranks of the rulingelites. Usually, but not always, the ruling elites emergefrom the ranks of the lower middle classes, the petitbourgeoisie, for the bourgeoisie are a negligibly small

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class in Africa. The next layers are of course theproletariat and the peasantry. Broadly speaking Africangovernance unfolds according to either of the followingthree scenariosScenario 1: In countries where the president is chosendemocratically, by universal suffrage, he still has to befirst chosen by the elites of some party to be theirpresidential candidate. There is therefore a sense in whichthe outlook of a democratically elected presidentrepresents more or less the consensus within the rulingelites. His general world view is some kind of averagewhich is representative of the prevailing mindset amongmembers of the elites. Scenario 2: The other extreme is a country where a dictatorusurps power and imposes himself on his countrymen. In thiscase the only ruling elites who survive in that class arethose who already had the worldview of the dictator andthose who adapt rapidly to this worldview. In other words adictatorship has the effect of flushing out all principleddemocrats from the ranks of the ruling elites. All thatremains are spineless inverted narcissists and, possibly, aself serving support group consisting of strong characters,drawn from the inner core of the elites, who have a vestedinterest in the dictatorship.Scenario 3: A third possibility is midway between the twoextremes. A president gets elected democratically intooffice. But somehow he changes gradually acquiringdictatorial tendencies. The elites around him also undergo agradual metamorphosis tending towards ever more obsequiouspraise singing and before you know they have declared theirleader the life president. In other words the circumstancesin the second scenario are arrived at by stealth.As suggested at the beginning of this section, each of thesescenarios can be understood in terms of the dynamics of themutual interactions of the following five classes: the BigMan, the ruling elites, the middle classes, the proletariatand the peasantry. I suppose the top one man class, the BigMan, is a peculiarity of Africa. It harks back to an era

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when the king - Umlomo ongathethi manga [i.e. the mouththat never utters falsehoods, as Zulu kings weredeferentially referred to] - was all but infallible andruled by divine rightToo many of the first post colonial governments in Africafollowed the route sketched in the third scenario. Thispaved the way for the emergence of military dictatorshipsvia the route of the second scenario. In recent years thenumber of dictatorships has appeared to decline but this isonly because circumstances have forced dictatorships to takethe trouble to find innovative ways to legitimizethemselves through rigged elections. In this chapter I shalllook at the peculiarities of Africa which create idealconditions for such political developments to take place.

1.2 The reincarnation of ancient kings

There were dictatorial ruling families in Europe until theseventeenth century when the era of enlightenment began. Itwas the golden era of philosophy when the European middleclasses questioned every aspect of received authority andsubjected all the assumptions which underpin social andspiritual conventions to rigorous reasoning. The minds ofthe literate classes were unshackled to openly debatehitherto taboo subjects such as skepticism, atheism andmaterialism. A number of eminent thinkers ‘contributed to anevolving critique of the authoritarian state and tosketching the outline of a higher form of socialorganization based on natural rights’. The main social significance of this intellectual revolutionis that it marked the end of the mental enslavement ofsociety by the alliance of the nobility and the clergy. AsSteve Biko said, the most potent tool of the oppressor isthe mind of the oppressed. So the intellectual revolutionmarked the beginning of the end of feudal relations betweenthe nobility and the clergy [European traditional leaders]on the one hand and the rest of European society on theother hand. In some countries this sparked bloody uprisingsagainst absolute monarchies such as the French revolution.

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In other countries it served as a catalyst to speed up thedemocratization of society and the concomitant reduction ofthe powers of monarchs. One of the major factors which bolstered the intellectualmovement is Europe was the attitude of the middle classestowards learning. The main purpose of a universityeducation was not considered to be imparting skills for afuture vocation. That was catered for by a separate andelaborate training system which natured craftsmanship andservice sector trades. Tertiary education was intended ‘toimprove one’s mind’. So the European middle classes viewedit almost as a duty to participate in the intellectualmovement. It was what was expected of educated people asopposed to technicians.The oppressive character of the pre enlightenmentrelationship between the nobility and the rest of theEuropean classes was exacerbated by the severe shortage ofland. By contrast land was plentiful in Africa until thebeginning of colonialism. Consequently, when colonialistsimposed racial feudal systems on Africans, they replacedAfrican absolute monarchs who had been benevolent dictatorsin comparison to their pre enlightenment Europeancounterparts, though they were of course repugnant tyrantsby the standards of the late twentieth century and the earlytwenty first century.The loss of power and prestige by African kings when theywere subordinated by the colonialists symbolized the loss ofAfrican sovereignty. In each colony this power andprestige was to be regained by the first post colonialAfrican president. Indeed copious servings of narcissisticsupply [NS] - through official praise singers, for instance- which were originally reserved for kings were nowchanneled to the president. In the minds of ordinaryAfricans, through ostentatious display of opulence, theirpresident demonstrated that he had regained power andprestige on their behalf. It was a symbolic restoration ofdignity to their nation. The more power and prestige their

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president had the more respect the nation would command, soit was thought.Lack of capacity to display sufficiently extravagantopulence is one important factor which may disqualify acandidate for political office in the eyes of many Africans.Clearly Africans do not like a leader to be like them.Expensive accessories are presumably needed in order to setthe leader apart from the masses. It was different withwhite men during the colonial era. White men areconspicuously different and their appearance has always beenassociated with superiority so they did not need expensiveaccessories. In fact the African elites got accustomed to expensiveaccessories precisely because they hoped these accessorieswould enable the colonialists to distinguish them from theAfrican riff raff and treat them differently, with somedignity, especially in the presence of the latter.Therefore the admiration for leaders who indulge inexpensive displays of opulence is a manifestation of lowself esteem and self loathing by the African masses. Inother words the narcissism of the leadership is in itself asource of narcissistic supply for the masses [invertednarcissists] in that it boosts their low self esteem. This explains why even politicians who claim to besocialists are as likely to engage in ostentatious displaysof wealth as anyone else not only because of their love forsuch displays but also because otherwise people would say:‘If he can’t even look after himself how can he look afterus?’ That is the crux of the problem. A leader is viewed inthe same light as the ancient kings. To criticise such anational miracle is the height of insolence. It is to becomethe enemy of the people. And so it was that even Africanpresidents whose consciences were not particularlycomfortable with excessive adulation and luxury to beginwith, were subjected to pressure to get used to thesethings.It was inevitable that the NS riches would be lavished notonly on the presidents but also on the rest of the ruling

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elites who would constitute the new royalty. In fact NStrickled down from the level of the elites to even pettygovernment functionaries. Thus Africa created for itself themost expensive elites to maintain. During the euphoria ofuhuru such matters had higher priority than anything elseincluding economic transformation. In other words the NSeconomy took precedence even in the opinion of those whoneeded economic transformation most urgently.What I am arguing is that the preoccupation with restorationof national dignity created a mindset, among all classes,which contributed significantly towards getting the eliteshooked on a regular diet of rich NS thus turning them intonarcissists and the rest of the African classes intoinverted narcissists. Africans did not only get the leadersthey deserved, but they also helped transform reasonable meninto monsters; they created the leaders they deserved. Narcissistic leadership may be bad for the economies ofAfrican countries but it is good for the generalnarcissistic supply economy [see chapter 10] of thosecountries. The elites may be enjoying a monopoly in wealthbut everyone gets his fare share of narcissistic supply. Itnever occurred to Africans that destroying, or at leastconstraining, the narcissistic economies might be aprecondition for building the real economies of theircountries. After all even the real economy cannot functionproperly without a regulatory regime.

2 Rules based governance2.1 A colonial legacy

In chapter 2 I outlined the history of thecommercialization of Europe and how this was facilitated bythe enforcement of morality through moral blackmail based onthe horrors of purgatory. When this superstition wasdiscredited by the reformation, the enlightenment movementhad already begun condemning political power derived fromthe so called ‘divine rights’ of royalty and advocatinggovernment deriving its authority from the consent of thegoverned. This movement further condemned government based

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on whims and advocated governance based on rational rulesobserving fairness and recognizing equality before thelaw and universal human rights. The negative inducement to obey rules on pain of sufferingin purgatory was thus smoothly replaced by the positiveinducement to obey rules in order to make the new democraticorder work for the common good. The new democraticgovernments were run by the bourgeoisie who had invented theeconomic functions of modern government in the guilds. Theystill had self serving motives to make government orsociety work in terms of rules which facilitated economicactivities.Pre colonial Africa had semi feudal societies in whichgovernance was not rules based but more or less dependent onthe whims of the aristocrats. In colonial times governancewas rules based but of course the rules were not based onobservance of fairness and recognition of universal humanrights. The rules were discriminatory and as such they wereresented and never accorded any respect by the natives.In Europe the rules which were devised to govern thecommercial society which was emerging were generallyrational and non discriminatory. The negative inducement ofpurgatory was used to enforce rational rules whichmanifestly advanced the collective interests of the guilds.By contrast colonial governments used the negativeinducement of violence to impose on Africans discriminatoryrules which manifestly harmed the economic interests of theAfricans.It was therefore natural that Africans would make it theirbusiness to find ways to circumvent the rules. Surely it wasnot immoral to find illegal means to obtain a pass to enableone to find a job in urban areas if the pass was an officialmeans of denying people opportunities, on a racial basis, inthe first place. Indeed Africans who found ways and means tobeat the colonial system were always highly admired by theircommunities, especially if they enriched themselves in theprocess. It always seemed rather churlish and mean tobegrudge a man his wealth, even if he obtained it through

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dishonesty, if it was all at the expense of the avariciousand oppressive colonialists. Thus a culture of subvertingofficial rules took root. Furthermore, even among the Africans, the oppressive rulesof the colonial system seemed to apply more strictly to thepoorest of the poor. For instance the migrant labour systemdid not apply to professional blacks and there were manyother exemptions they enjoyed. Of course at the top of theperking order were the whites to whom no rules seemed toapply at all. They could literally get away with murder. Theexample of a rules based society which colonialismintroduced to Africa was one in which rules applied strictlyonly to the lowliest. Conversely, in order to advance inlife, one had to find ways to bypass the rules. Rules were ameans to keep the despised down.This negative view of rules governing society was furthercompounded by the super exploitative form of capitalism interms of which colonialists introduced Africa to commercialsociety. After all, the essence of colonialism was toconfiscate land from the Africans at gun point and to extorttheir labour to exploit the resources in the land for thebenefit of the colonial masters. This banditry was labeledas capitalism thus making it politically impossible for thefirst post colonial African governments to advocate thiseconomic system. Kenneth Kaunda, the first post colonialpresident of Zambia, once declared that: “As humanists, wecannot allow Zambians to develop into capitalists at all”.This anti capitalist attitude was typical of his generation.2.2 Constitutional democracy in Africa

For all these historical reasons, even after the advent ofconstitutional democracy, the majority of Africans,including presidents, never internalized the concept of arules based society. Rules were often seen as a nuisance, animpediment to be evaded or pushed aside at everyopportunity. Africa needed its own enlightenment in order todevelop the culture of a rules bases society and torecognize the danger, to society, of interfering with rules.

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In all societies it helps to know the right people in orderto open doors but in Africa this principle is taken toextremes. For instance there might be official criteriawhich a student must satisfy in order to qualify for abursary but in Africa this counts for nothing. The personresponsible for allocating bursaries thinks his firstresponsibility is to dispense bursaries to children offamily, friends and acquaintances before anyone else can beconsidered. The same applies to jobs and many other goodiesthe state has to offer. Officials responsible for such nepotism are often peoplewho consider themselves morally upright and who would neverask for a bribe. For them the rule which probably takesprecedence is the expectation of society that one feedsfamily before one can feed friends, acquaintances andstrangers, in that order. And so it is impossible to issuebursaries or jobs or anything else on merit.At the highest level governments often waste scarceresources on expensive projects which cannot be justified interms of expected returns on investment. The real reasonfor such apparent stupidity might be an innocent feeling bythe president that he had to plow something back to thecommunity which produced him. It is the same phenomenon asbursaries and jobs going to relatives, friends andacquaintances.Richard Dowden96 cites the example of Andrew Sardanis, abusinessman who was appointed by president Kaunda of Zambiato run parastatals, with a mandate to do so ‘for profitwithout political interference’. Yet ‘the president andother ministers continually sent him notes telling him togive X a job or give a loan to Y’. All of this is, ofcourse, perfectly consistent with narcissism but I wanted toshow that it has a colonial origin. It is at the core of thereasons for governance and economic problems of thecontinent. A constitutional democracy is the ultimate rules basedsociety. It is a form of government which is specificallydesigned to limit opportunities for abuse of power by

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forcing those in power to conform to transparent rules whenmaking decisions. It was specifically designed to combatnarcissists in positions of power and it is based on theassumption that the general population are aware of thesafeguards intended to enable them to protect their rightsand are capable and determined to use them to do just that.If this assumption is false it is doubtful that aconstitutional democracy is viable in the long term.Amongst the indigenous Africans the only class which iscapable of using the instruments of a constitutionaldemocracy to challenge power are the middle classes who arenot members of the elites. However, for this practicalpurpose, this class is as good as non existent for a numberof reasons:

As I have already explained few Africans, even in thisclass, ever internalized the notion of a rules basedsociety.

Many members of this class are forever dreaming thatone day they will be absorbed into the ranks of theelites. Therefore, at best, they are careful not tooffend the ruling elites and at worst they use theirskills for praise singing such as writing fawningbiographies of powerful people.

When colonialists left they imposed constitutional democracyon Africa, an instrument designed to combat narcissism whichAfricans had no intentions to do. An African Renaissancewill begin the day the intelligentsia starts campaigning tobring narcissism down to levels which will allow thebourgeoisie class to emerge, grow and eventually take overgovernment.

3. A national democratic revolution 3.1Our constitution is a white elephant

In our constitution we have an excellent foundation for arule based society. It is a prohibitively expensivedocument which cost scores of thousands of South Africa

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lives. Unfortunately the document is, in many ways, a whiteelephant not because of its deficiencies but because thepeople it was intended to serve either have no idea how tomake use of it or have no resources to do so.

Now lawyers recognize only two categories of disputes:criminal and civil. For our purposes we shall split civildisputes into political disputes and ‘the rest’ and reservethe label ‘civil disputes’ for ‘the rest’. So ourconstitution sets down rules for settling criminal, civiland political disputes.

Political disputes are basically about who has the right torun various strata of government and as such these disputesare more fundamental than the criminal and civil disputesbecause the resolution of the latter presupposes that thereis a functioning and legitimate government in power.

In criminal and civil disputes it is on the basis of thestatutes and ultimately the constitution that it is decidedwho is right or wrong. The judges are only there tointerpret the law as it applies to the case before themafter hearing both sides. By contrast, in political disputesit is on the basis of the vote that it is decided who hasthe right to govern. The judges are only there to interpretthe will of the voters as determined by the constitutionalrules for expressing that will.

It is the voters who choose the bricks in terms of which agovernment is constituted and without the capacity toconstitute a government you have no state but a shell, afailed state. Statehood depends critically on the capacityto constitute a government. This highlights the importanceof the vote in a constitutional democracy.

Constitutional democracy is very expensive. It is itsbenefits which make it all worthwhile. The most fundamentalbenefit which is supposed to be brought about by the vote isthat it provides a peaceful, orderly and constitutional way

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to get rid of a government which the people feel is notserving their interests. Without this fundamental benefitthe whole machinery of a constitutional democracy is acompletely unnecessary expense. It is in this sense that Isay that our constitution is a white elephant.

In twenty years of constitutional democracy there has neverbeen any serious attempt to educate people about the vote.It suits narrow short term interests of the ruling partythat most voters appear to equate voting with tickingopposite the ruling party on the ballot box. But the highprice we have to pay for this shortsightedness is that thepeople are not aware that constitutional democracy offers analternative to the use of violence to express frustrationwith government performance.

It never occurred to the majority of South African voters[and apparently to the ruling party] that the fear of beingvoted out of office might be a powerful incentive forgovernment officials to take service delivery seriously. Themost severe threat which these voters think they can useagainst the governing party is to abstain from voting whichof course guarantees the reelection of the underperformingpublic representatives and so political violence escalatesfrom election to election.

3.2An intellectual movement for cultural innovation

The literature of the ruling party is replete withreferences to something called the National DemocraticRevolution[NDR] which I do not claim to understand. HoweverI have my own notion of something I would call a NDR. Itwould be spearheaded by a national movement for thepromotion of a culture of democracy. It would be part of agreater movement for cultural innovation.

From the beginning of this book I have highlighted theproblem of missing classes in Africa. Culture in progressivenations has always been dynamic. From medieval Europe to theindustrial revolution and on to modern Europe a lot of

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cultural innovation took place under the leadership of theintelligentsia. European intellectual movements tended to beconcerned with universal values such as liberty and the ruleof law.

Traumatic social processes and events, such as anticolonialstruggles, did spark some intellectual movements in Africatoo, albeit on a much more modest scale because of the muchsmaller size of the intellectual class in Africa. Thepreoccupation of African [including the diaspora]intellectual movements tended to be parochial problems suchas racial domination. Examples are the ‘Negritude’ ofSenghor and ‘Black Consciousness’.

Black intellectuals had a lot to say about what to do tocombat colonialism but once the struggle was won theirvoices became muted except for a few brave souls who had togo into exile in order to be able to publish their Jeremiadswhich were usually thiny disguised as novels. Within the‘independent’ African countries few people were left whowere competent to lead cultural innovation. In any event theruling elites would not have seen such projects as being intheir interest.

Before the defeat of colonialism, intellectuals (includingartists) tended to be allied to the liberation movements.They saw their intellectual work as a contribution tonational service. While this made sense in terms of thepriorities of the time it had unfortunate consequences afterliberation. Intellectuals remained comfortable with beingassociated with the former liberation movements even thoughthe latter were now in power and needed an independentrestraining voice.

There are habits of thought which were inculcated duringstruggle days and which were necessary then but which arethoroughly obnoxious in twenty first century South Africa.Top of the list is the feeling that one has an obligation tobe loyal to a movement or a party. This feeling is a

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poisonous seed which has the potential to eventually destroythe constitutional order in this country. A proud SouthAfrican only has an obligation to be loyal to theconstitution.

What is needed in twenty first century South Africa is anintellectual and activist movement which has the followingpriorities:

To free people from the herd mentality and to spreadknowledge about

How a democracy is supposed to work How to force public representatives, in a

constitutional way, to be accountable How to punish corrupt public representatives in a

constitutional way. How to get rid of useless public representatives in a

constitutional way

In the past twenty years we have seen ample evidence that,as a matter of certainly, frustrated citizens will dothese things violently. So it is in the interests of thelong term survival of democracy and a functioning state,including the ruling party, that the people be taught how todo these things constitutionally. One would have though thatis the reason why we have that expensive constitution in thefirst place.

4. Conclusion4.1Phases of human development

The evolution of mankind can be divided into three phaseseach of which is characterizes by the nature of the motiveforces which drove it:

The gene phase: During this phase the genes played acentral role as a particular lineage of the animalkingdom developed into apes and proto-humans.

The technology/culture phase: This phase was madepossible by the collapse of communication barrierswhich was made possible by the development of speechand language. During this phase spontaneous development

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of technology and culture played the dominant role inthe development of humans from primitive cave dwellinghunter gatherers to modern farming men.

The entrepreneurship phase: During this phase man didnot wait for technology and culture to developspontaneously. Technological and cultural innovationwere driven by entrepreneurship. It is this phase ofhuman development which enabled man to be trulymasters of their own fate. Africans, in general, andpeasants, in particular, never reached this stage ofhuman development.

Prior to the entrepreneurship phase, both technological andcultural innovation took place gradually with each smallstep of incremental change being a spontaneous response tocurrent local conditions. Traumatic or otherwise unusualconditions were more likely to spark changes. Unusualconditions include the collapse of critical technologicalbarriers a prime example of which was the invention of theprinting press which dramatically increased theaccessibility of knowledge opening the way to themassification of education.

It is usually difficult if not impossible to assign a datewhich marks the beginning of a historical process becausesuch processes are gradual and are usually only recognizedin retrospect. The entrepreneurship phase of humandevelopment began with the division of labour and, inEurope, it reached its maturity with the inception of theguilds. However, the potential of this phase would have beenseverely limited if it had not been accompanied by themassification of education which sparked the enlightenmentand the flowering of science all of which led to theindustrial revolution.

It is clear that Africa, in general, and South Africa, inparticular, cannot be competitive in a globalized worldwithout taking cultural entrepreneurship seriously. We needour own enlightenment and the flowering of science in order

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to be masters of our destiny. I conclude by summarizingpriority areas in which South Africa can do with someintegrated cultural innovation.

4.2Languages and tribal matters

During the 90s it may have been a necessary politicalexpediency to declare that South Africa had eleven officiallanguages but the effect of that was to retain the apartheidera official languages: English and Afrikaans. This wasaggravated by the parlous state of black run schools whichleft white run schools as the only remaining centers ofeducation.A practical solution is to reduce the number of officiallanguages and to simultaneously adopt a policy of unifyinglanguages. It is not necessary to recognize individual Ngunior individual Sotho dialects as languages. We can thusdeclare that the official languages are Nguni and Sotho.This contributes to nation building while avoiding themarginalization of any language. Language specialists can be commissioned to devisestrategies to accelerate the convergence of Nguni dialectson the one hand and Sotho dialects on the other with a viewto the long term unification of them all. Convergencetowards fewer standard languages is only possible if wecultivate a reading public. Rapid urbanization and theelectronic media also make the task easier. It was much moredifficult to create standard Afrikaans.We need one integrated cultural agency to look at the taskof cultural innovation in order to adapt and preservevarious aspects of African culture including languages. Alanguage has to be dynamic and serve a large market in orderto have a chance to survive. Innovation in the form ofregrouping is therefore of critical importance or else, inthe long term, tiny languages are doomed under thecreative destruction of the dominant European languages inour list of ‘official languages’. Very soon they may becomeno more than dusty museum pieces.

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The integrated cultural agency would also review variouscultural rites such as the rites of passage to manhood.These rites need to be updated to make them relevant to theentrepreneurial stage of human development.In South Africa we like to think that traditional leadersare custodians of cultural traditions. However nothing isdone to prepare them for that role and there is ampleevidence that they are in fact definitely not playing thatrole. Otherwise young men would not be regularly maimed,mutilated and killed in such large numbers in so calledcircumcision schools. There is no evidence that the so called traditional leadersare concerned about this. Thus our rites of passage to‘manhood’ involve violent criminal behavior and the mostserious possible example of lack of accountability! The‘cultural genes’ we are nonchalantly passing on to futuregenerations are absolutely rotten!The institution of traditional leadership is worse than avery expensive white elephant. They are an anachronism intwenty first century South Africa. If they are custodians ofanything they are custodians of peasant values and culture.4.3Education and science

The idea of having government employees as ‘alliancepartners’ of the governing party is an aspect of that partof our political culture which requires urgent revision. Itis amazing that this practice is compatible with ourconstitution because it clearly amounts to a conflict ofinterest. Government has a responsibility to exercisediscipline impartially over all its employees. A political alliance with some of its employees clearly tiesthe hands of government with regard to exercising authorityover them. This has been amply demonstrated by the lack ofgovernment resolve with regard to the absence of disciplinein the teaching profession. The alliance is one of theanachronistic practices which only made sense during thestruggle era.

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We have long reached a stage where incoming teachers arethemselves products of dysfunctional schools and cantherefore not be reasonably expected to know what a goodschool is. It is therefore absolutely essential to providesuch teachers with a clear definition of what is meant by agood school. This means that we need to formulate whatconstitute the minimal culture for a school to be regardedas ‘good’.For the benefit of the so called Historically DisadvantagedUniversities [HDUs] it might also be necessary to formulatea culture which defines what can be called a reasonably gooduniversity. To illustrate the chaotic state of theseinstitutions: I was once a member of council in an HBU inthe Limpopo province which constantly complained about beinginadequately funded yet they spent millions to hire a CapeTown firm to organize students registration for them.Council members were more concerned about tenderpreneuralopportunities at the tender committee than monitoringgovernance.Elsewhere I have pointed out that a nation reproduces itselfthrough its educational institutions. Can anyone expect astudent to become a competent technocrat when heinternalized incompetence in his university?4.4Urban and rural land planning

Land ownership makes a symbolic statement about who owns thecountry. This is why this is an emotive question which hasthe potential to be exploited by political demagogues. Yetthe direct descendants of those who were dispossessed of theland have lost the skills to work the land. Even if they hadretained those skills, they still would not be able to raisethe capital required to do modern farming which is now bigbusiness.

There is enough land lying fallow in former Bantustans whichcan be used for experiments in subsistence farming. It onlymakes sense to preserve productive land by handing it topeople with skills to work it either as

Small to medium sized commercial farms

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Large commercial farms Tourism related businesses such as game lodges.

To convert productive farmland to subsistence farms is aprime example of peasant culture. It would be silly even ifour people were willing to do subsistence farming. But it sohappens that our people are generally not interested inthat. Therefore farms set aside for this purpose areguaranteed to go out of production after being vandalizedand stripped of everything of value.

We have excellent agricultural faculties especially in theformer Afrikaans universities. We ought to be training blackagricultural professionals, managers who can run largecommercial farms. Such professionals would then provide apool from which we can obtain black farm land owners. Suchpeople can then provide employment for the peasants. Whengood farmland is given to peasants it is the peasants whosuffer because they lose jobs.

Land is a scarce resource. In the rural areas we needformalized land use planning as much as we need it in theurban areas where we are haphazardly building land wastinglow density housing. We can no longer return to the‘controlled urbanization’ of the ‘influx control’ days butwe can improve the situation by controlling immigration. Wesimply do not have the resources to cope with the currentfree for all situation. Besides, it makes planningmeaningless.

4.5Business and finance

Unlike land ownership, which only makes a symbolicstatement, business ownership makes a substantive statementabout who owns the country. The sector which evokes the mostintense emotions is the mining sector because the ultimatesource of its wealth is the land. Yet I cannot recall thegovernment making any special effort to develop appropriateblack skills in this sector. Personally I have never met ablack mining engineer.

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The preoccupation of the powers that be seems to be to setup well connected black people as junior partners to whitebusinessmen. Occasionally mines are handed to unqualifiedblacks as going concerns. These spoilt brats can always berelied upon to immediately strip the mines of all theirmarketable assets and promptly destroy the capital byspending it on all sorts of expensive trinkets such as halfa million rand watches. The issue is not that black people have no capital. Theproblem is that we specialize in destroying capital fornarcissistic instant gratification. If we will ever haveanother Messiah after Mandela that person will find a wayto eradicate this culture which is destroying our people. Itguarantees our continued subjugation as surely as apartheiddid. Finally our control of state resources ought to empower usto establish new big black busineses which are capitalintensive. Public transport is a good example. We arealready well established in the taxi industry. We ought tohave made a break with apartheid planning soon after 1994and planned an extensive public transport system. But ofcourse it was impossible to do this because we do notbelieve in town planning. All planning is not compatible with instant gratificationand instant gratification is a luxury which only juniorpartners can afford. The big brother is always there to bailthem out. That is why creative destruction is not seen as athreat. The junior position is in fact the comfort zone. Ithas always been.

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95 Antoinette Handley, “Business and the State in Africa: Economic Policy Making in the Neo-Liberal Era, Cambridge, [2008]96 Richard Dowden, Africa: Altered States, Ordinary Miracles, Portobello, [2008]

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