How to solve the Economic-Social crisis in South Africa by Professor Herbert Vilakazi

I was present at the Daily Dispatch indaba where Professor Vilakazi presented his model and introduced his book and I must admit that what he said made a lot of sense. Reading the note below he outlines his ideas but goes deeper in terms of the reasons for the economic disparities in South Africa. This is definitely worth the read and would recommend it. At the indaba agriculture was not the only sector he said we need to focus on, the manufacturing sector was another sector he highlighted. In his speech he emphasised the fact that South Africans need to move away from office based ventures that are part of the tertiary economic sector and only provide employment to the middle to upper class. We should focus on primary and secondary economic sector ventures so as to create employment that is needed by labour workers. To get a better understanding of the what Prof Vilakazi refers to I have included some notes on the economic sectors. And a lot of our industries like mining industry have only the primary and tertiary sector meaning that we have to outsource secondary sector skills.

I do believe though that there is a huge potential for Africa as a whole here because some of the primary and secondary sectors we lack are prominent in some African countries which is why it's so important for Africa to look within Africa for solutions to African problems.

The classical breakdown of economic sectors is:

• Primary: Involves the retrieval and production of raw materials, such as corn, coal, wood and iron. (A coal miner and a fisherman would be workers in the primary sector.)
• Secondary: Involves the transformation of raw or intermediate materials into goods e.g. manufacturing steel into cars, or textiles into clothing. (A builder and a dressmaker would be workers in the secondary sector.)
• Tertiary: Involves the supplying of services to consumers and businesses, such as baby-sitting, cinema and banking. (A shopkeeper and an accountant would be workers in the tertiary sector.)

In the 20th century, it began to be argued that traditional tertiary services could be further distinguished from "quaternary" and quinary service sectors. An economy may include several sectors (also called industries), that evolved in successive phases.

• The ancient economy was mainly based on subsistence farming.
• The industrial revolution lessened the role of subsistence farming, converting it to more extensive and monocultural forms of agriculture in the last three centuries. Economic growth took place mostly in mining, construction and manufacturing industries.
• In the economies of modern consumer societies, services, finance, and technology – the knowledge economy – play an increasingly significant role.

Even in modern times, developing countries tend to rely more on the first two sectors, compared to developed countries.

By ownership

An economy can also be divided along different lines:

• Public sector or state sector
• Private sector or privately run businesses
• Social sector or Voluntary sector

HOW TO SOLVE THE ECONOMIC-SOCIAL CRISIS IN SOUTH AFRICA BY PROFESSOR HERBERT VILAKAZI

(August -September, 2012)

The deep, widespread crisis of poverty, unemployment, and inequality has caused a serious disturbance in the mind and soul of everyone in the country. Severe poverty, unemployment, and inequality are the roots of all sorts of dehumanization and brutalities which show themselves at all levels of society.

Our leadership and intellectual elite inside and outside government and political parties have presented in the media their opinions on the causes of the crisis, as well as proposals on how the crisis can be ended. A major document has been presented to Parliament by the National Planning Commission, detailing what should be done. The proposals put on the table, so far, from inside and outside government, still leave a lot to be desired. The Planning Commission urges that the entire citizenry of the country should participate in the vast project to solve the crisis before us; but then warns against populist pressures in the process. The poor, unemployed, and ordinary workers in urban and rural areas, who are the vast majority, have every right to put their imprint on public policy and to demand the allegiance to them of government and political leaders. 

We must, however, guard against a false notion of democracy: when the masses of society members want major changes, particularly changes in the life of the poor, working, and unemployed in urban and rural areas, science and specialized knowledge come into prominent play. We cannot rely on mass meetings of political parties, or hundreds of people in consultation in public halls, to propose how the problem of poverty, unemployment and inequality should be solved just as we cannot call a mass meeting to get a plan on how we can send a rocket to the Moon. That is useless populism that shall not get us anywhere. From the `people’s assemblies’ we shall only get demands for jobs, for the end of poverty, for equality, for health, etc., just as the people may say we should send a manned space-craft to the moon. `How’ all this is to be done does not come from the assemblies, but from individuals who have specialized knowledge; at the end, the `how’ must be taken back to the assemblies for serious study, questioning, amendments, and approval. The understanding of modern social and national problems requires comprehensive knowledge resting upon a serious knowledge of economics and economic history.

Capitalism produced not only the advanced industrial societies of the West and Japan, but also colonialism and underdeveloped countries. South Africa is a by-product of this twin process. To know how poverty, unemployment, and inequality can be eliminated in South Africa requires a correct knowledge of how the problem arose, but also a correct knowledge of economics, and of the economic history of the modern world. 

Regarding the historical roots of our problem, it is not enough to refer to Apartheid. Apartheid is simply an Afrikaner term for a policy and process which existed before 1948, which Afrikaners wanted to pursue in their own way; this is a process that goes back to Smuts, to the 1920s and 30s, to 1913, 1910, 1906, and to the conquest of African people in the 19th century.

The roots of our problem lie in colonial conquest. Colonialism gave rise not only to a colonial State, but also to a colonial economy and a colonial ideology. Here is a peculiar phenomenon: the death of a colonial State is survived for decades, even centuries, by the colonial economy and the colonial ideology. The colonial State died in South Africa, but is survived by the colonial economy. Our economy still bears the very serious scars and shape of a colonial economy. The representatives of the Mother-country, England, settled here, together with a population from other parts of Europe: hence the designation “settler-colonial society. The European population in this colony became the largest in Africa, giving rise to very strong emotional bonds between this settler community and the West, and imbuing Western rulers with the feeling that the bond between this settler-community and the West is untouchable (This is the emotional bond which exploded in anger against Mugabe). This gave rise to two grossly unequal parts of South African society: the African part, the vast majority of society, a large part of which is in pre-industrial rural areas; the African became the primary labourers; this vast sector is poor, with the worst facilities and infrastructure; the other part is the White community, a very small minority; this part is by and large wealthy, compared to Africans; it has the best facilities and industrial infrastructure; it is intimately linked with the industrial Western market economy.

Colonialism and the African Slave Trade created the racial problem. Sobukwe was correct: there is only one race –the human race, distinguishing human beings from other animals. The lines of division between human beings, based on skin colour, hair texture, or culture, making one community superior, another inferior, are creations of social and historical events, particularly of the ruling classes. The colonial rulers, having brought people from India to the colony to meet labour needs, created a special status position for these workers: thus the South African `Indian’ emerged. Another status position was created for the children of sexual union between Europeans and Africans: thus South African `Coloureds’ emerged. The identity and status of Indians and Coloureds flowed from the struggle and tension between Europeans and Africans. The identities and lines separating Europeans, Africans, Indians and Coloureds are products of social, political, and economic factors. Over and above the economic and political roles of these groups, rulers created separate statuses for them. The intention was to make these communities closer to Whites than to Africans, for the security of Whites. A recent creation has been the “Black middle class and a “Black capitalist class, as protection for the capitalist social order: this is a very tiny slice of society, which is merging with the middle and upper-classes of White, Indian, and Coloured sections, making up so-called “non-racial South Africa. The “Black middle class and “Black individual capitalists have become detached from the Colonial economy in which the overwhelming majority of Africans are trapped. 

The problem of inequality, poverty, and unemployment remains. The World Bank, not for the first time, has warned about the growing problem of inequality in South Africa: “The policy challenge is to find a way to break this vicious, self-perpetuating cycle of inequality… The crucial question is: how can we eliminate this inequality, poverty, and unemployment –and the racial problem in South Africa? 

Thinkers who have proposed solutions to this crisis have failed to accept the fact that the current South African economy still bears the scars and shape of a colonial economy. The majority of Africans are trapped within deep underdevelopment in preindustrial rural areas; through the migrant labour system, some millions were forcibly brought to work in mines and urban areas; a large bulk of the African rural population has migrated together with their poverty and misery to urban areas, forming shanty-towns attached to the original townships. These millions of Africans constitute the Colony inside South African society: Africans constitute the colonial economic component inside the South African economy. Figures indicate that most of working-age urban Africans are not workers in modern industry and commerce, but are in what is called the “informal economy - in our terms, are in the colonial economy. This is the fundamental problem of South Africa. 

The underdevelopment of African rural communities, and of their off-springs in urban areas, are now the heavy drag that is pulling down the entire South African economy. The national economy cannot develop any further as long as it contains this colony. In accounting terms, when conducting an audit of the national economy, the colony, comprising the vast majority of society, is simply entered in the loss column. The cost of the colony to the national economy is many times the value of the Gross National Product of the country. The colony is now sapping and negating the vitality and growth potential of the national economy and society in the same way that US militarism and wars are sapping and negating the vitality and growth potential of the US economy and society. The cost of Iraq and Afghanistan already runs to trillions of US dollars. South African economists and statisticians often calculate and bewail the cost of a holiday to the national economy. The cost of the colony to the South African economy, the cost of unused capacity of tens of millions of African people should also run into trillions of Rand: that is how big the South African economy can be if the colony were eliminated. That is the “potential economic surplus, in Baran’s terms.

We cannot eliminate the colonial economy in our midst guided by the principles of modern economics. Modern economics is a reflection of the workings of advanced capitalist economies. In the history of capitalism, the colony was simply an object and site of economic vandalism and plunder. This was during the stage of plunder wages and complete denial of democratic and human rights to the colonized. Except for the relation of vandalism and plunder, the colony was separated from the metropole. African rural areas were as separated from the industrialization and modernization process taking place in the White community as the Belgian Congo was separated from Belgium, as Northern Rhodesia was separated from Britain. The metropole accordingly waxed fat with extra-ordinary wealth drawn from this relationship. The ending of the plunder wage structure, and the relative triumph of democracy and human rights, changes the dynamics of the capitalist economy. The profit rate goes down. The urgent need now is for true unity and integration of the national economy –for the elimination of the colony. The future development of the country must now depend on the skills and educated intelligence and health of these millions of people currently cut-off from modern industry, commerce, and agriculture. 

The World Bank stated some decades ago that the Achilles Heel of the South African economy is the smallness of its domestic market. The buying power of the overwhelming majority of the population, trapped in the Colonial economy, is very small. That is the Killer to the national economy. 

We must put in place a policy which effectively eliminates the existence of this colony within the national economy. 

Modern economics misguides us. The main reference points in modern economics shall always be industrial capitalist economies. For example, World Bank economists begin their account of stagnation and decline in the South African economy by referring to problems in the world economy: “A weakened global economy and dampening of consumer and business confidence are triggering a slowdown in South Africa’s growth momentum…South Africa is highly integrated with the global economy, and is therefore susceptible to the ongoing slowdown in the eurozone countries and China… Economists in the South African Reserve Bank think likewise. 

In formulating the strategy for eliminating poverty, unemployment, and inequality in South Africa, we cannot be guided by the list of needs provided by thousands of people in public meetings around the country. Those formulating the strategy cannot take the `super-market route’, i. e., they cannot take a trolley and fill it with tens and tens of needed goods and services mentioned by the masses of people during consultations. 

Serious economics and economic history advise us differently. There has always been one sphere of economic action which has jump-started the engine of economic growth and development, which then spreads the growth dynamic to the rest of the economy. The 17th century European Agricultural Revolution was the prelude to the Industrial Revolution of the 18th century; the African Slave Trade and African slavery in the 18th-19th centuries jump-started the engine of the European-centered World economy; cotton and the Textile industry were the economic basis of the Industrial Revolution; the construction of Railroads jump-started the engine of US economic growth in mid-19th century; Oil, California Gold and the Automobile industry jump-started gigantic US economic growth in the second-half of the 19th century and early decades of the 20th century; Mining jump-started the engine of industrialization and gigantic economic growth in late 19th and early 20th century South Africa. For some decades now, construction, sale, and purchase of Housing has been a crucially important basis of the growth of the US economy, and massive collapse of Housing has been a fore-runner of the collapse of the economy. 

Economics and economic history teach us that the strategy for eliminating massive, national underdevelopment should take a mono-causal path, not a multi-facetted, super-market trolley path in which up to 15 or more different actions are to be done at the same time. The latter path boggles the mind, and none of the 15 or more different actions on the shopping list can be satisfactorily realized. A serious strategy for eliminating massive nationwide underdevelopment focuses initially on one or two economic areas, and triggers growth there which then starts the engine of growth and development in the entire economy. 

The measures that must kick-start the economic process leading to the elimination of the colony within the South African economy must occur within the colony itself, not outside the colony. The initial, main measures must be in the home-base of the colony, African rural areas, and from there move to the off-springs of rural areas, the shanty-towns and townships, leading to the growth and rejuvenation of the national economy.

The present massive underdevelopment of the majority of society, Africans, is rooted in the fact that the Agricultural Revolution, which was the basis of the Industrial Revolution, did not occur within the African community –the Agricultural Revolution did not occur within the Colony. It occurred only in the White community. It is a major error among economists guiding our government to assume that the Agricultural Revolution which occurred in the White rural community renders the Agricultural Revolution in the African community unnecessary. This error follows from the wrong assumption that the White-dominated industrial economy of the nation is the major actor, the Big Brother, of the other twin, the Colonial economy; that the White economy shapes the national economy. That was the case in the Colonial era; in the post-Colonial era of our time, it is the Colonial economy, the Colonial population, which, in the deficit sense, shapes the national economy. 

The National Development Plan tells us that 60 percent of the people are now in urban areas. That has led some industry-centered economists to think that African rural areas are of minor significance in the national economy, which they identify with the modern White economic sector. It is one thing for the majority of rural people to disappear because they have been absorbed by national industrialization, as happened in England; it is something else for the majority of rural people in the Colony to disappear because underdevelopment and misery in the Colony’s rural areas have forced them to flood the cities, when there is no prospect of their being absorbed by developing industry in the White economy. The millions of Africans who have been forced by underdevelopment and misery to migrate to urban areas, who actually constitute the larger bulk of the unemployment problem, have moved to urban areas because of the big default in the nation’s economic history: the fact that South Africa’s Agricultural Revolution took place only in White rural areas. African rural areas, the site of the overwhelming majority of society, remained pre-industrial.

The first act needed to eliminate poverty, unemployment, and inequality in South Africa is to initiate an Agricultural Revolution in African rural areas. This is to cut the roots of massive poverty, unemployment, diseases, and abnormally high death rate in South Africa. The aim of this policy should be to increase and improve the capacity of every rural household in the Colony to produce needed food for sustenance. Rural Africans should also be encouraged to grow, again, traditional African crops, which kept Africans with few of modern diseases for thousands of years. The error in the Agricultural development policies of most Provincial governments, and of the National Government, is that the aim is to produce successful individual Commercial farmers, as part of the strategy to create a Black capitalist class. The focus is not to develop the capacity of an entire rural community to produce sufficient food, to meet household needs, first and foremost, and then, following that, to develop marketing channels and agro-industry. 

Rural development strategies, so far, are heavily weighted in favour of assisting small `Black’ farmers intent on becoming successful Commercial farmers. The considerable moneys and attention being given to African farmers do not reach the millions of people in Communal Lands: these millions of people are so poor that they do not qualify to be considered as small commercial farmers! They live a hand-to-mouth existence, i. e., they are in self-subsistence agriculture. Here is an example from KwaZulu/Natal: More than half of all arable land in the Province, 5.4 million hectors, is in Communal Land areas, under the sovereignty of Traditional Leaders. This is the source of the heavy statistics on poverty, diseases and high death-rates in KwaZulu/Natal. What is amazing is that the “Siyavuna Strategic Plan (2004-2009) for African rural areas in the Province does not apply in Communal Lands! The problem, here, is that in a community of, say, 100 households, Government can sponsor one or 5 individuals to become successful, small Commercial farmers, and still leave the majority households in that community ravaged by poverty and unnecessary deaths. The World Bank, until a few years ago, advised Third World governments to take action against Communal property in rural areas, and put in place policies which would install private property in land, a desired framework for capitalist society. This thinking also influenced our government policy towards Communal Lands. Rather than deal with Communal Lands and Traditional Authority structures, it was thought better to devise a new policy of granting `title deeds’ to individual households, or to deal with “Cooperatives.

Even the policy to encourage the formation of Cooperatives in rural areas is still driven, and hampered, by the aim of creating successful capitalist farmers and to encourage the passion for individual wealth, which has brought about degradation to our social life. This logic leads to the emergence of a tiny minority in the community which is successful financially, while the majority of the community is left in poverty. The aim of policy in Communal lands should be to develop the entire community, assisted by the existing communal heritage and sentiments: the current favored policy of helping to develop individual `Black’ farmers should be part of the development of the food-producing capacity of the entire Commune, or should exist side-by-side with the development of all households within the community. 

In our economic history, the necessary step of initiating the Agricultural Revolution in African rural areas was skipped. The Agricultural Revolution only took place in the White community, involving only a very tiny section of the nation. This does not mean that we can just move forward from where we are: we need to go back to repair the massive damage that was inflicted to the African countryside and African people; this, in turn, shall begin to repair the enormous damage inflicted by this default to our towns and cities and to the national economy as a whole. The entire process is a single chain with interconnected links of food production, health, mortality rates, community life, morality, rural industry, mutually-supportive interchange between rural and urban, employment, buying power, size of the domestic market, scale of social pathology, investment opportunities, more power to industry, commerce and to the national economy, etc. The first link of the chain we must focus upon and grasp with our full strength and determination as a nation is Initiating the Agricultural Revolution in African rural areas, in the Colony. This is a revolutionary change that shall reverberate throughout the length and breadth of our society. The chain-reaction from that shall lead to reverse migration, to masses of people in towns and cities moving back to revitalized and modernized rural areas where substantial job-creation shall be occurring. This is not an unheard-of phenomenon: there is a new trend in New York City and other US northern cities of middle-class African-Americans moving back to the South. 

I repeat: the first link in the chain have to be massive changes in the African countryside. The making of modern society begins with massive changes in the countryside. The first act in the rise of capitalism was a massive transformation of the English countryside; the French Revolution began in the countryside; what made cotton `king’ in US economic history, making it the foundation of the rise of the mighty US economy during the first 2 or 3 decades of the 19th century, was the rise of African slavery in the rural South; the greatest drama of the 1917 Russian Revolution occurred in the countryside; Stalin’s path towards the industrialization of the Soviet Union began in 1929 with massive violence in changing the Russian countryside. The Chinese and Cuban Revolutions were massive movements of peasants led by urban intellectuals.

Our slogan towards the creation of a new South Africa should be: To the Countryside! 

The rise of the modern Chinese economy is another striking confirmation of the fact that the countryside is the springboard for the creation of modern society. We really have to begin with the maligned Cultural Revolution, led by Mao Tse-Tung, from 1966, which saw hundreds of thousands of urban Chinese compelled to go to the countryside, “to learn from peasants, to bring about a synthesis between urban knowledge and science, on one hand, and peasant knowledge and science, on the other hand. Modern analysts, however, date the birth of modern China in 1978, when the Deng Reforms began. What is striking is that this new stage in the building of modern China began in the countryside. In an official publication of Chinese scholars, we read: “Reform was first implemented in the rural areas, and then gradually carried out in cities; even when the focus of reform had shifted to cities, it was first tried in the special economic zones, then in coastal areas, and then in the interior (Gao Shangquan, Liu Guoguang, Ma Junru, The Market Economy and China, p. 5). The important point for us is that this has been a single chain with interconnected links, and that the first link that was grasped with the full strength and determination of the Chinese government was transformation in the countryside. In the early 1990s, economists calculated that almost half of the acceleration in China’s economic growth rate during the first phase of Reform (1978-1983) came from improved agriculture and rural development (China:The Next Decade, edited by Denis Dwyer, 1994, p. 13). 

Our greatest challenge as Government and nation is the elimination of the Colonial economy within the national economy. The Colonial economy in our midst is the seedbed of our crushing poverty, unemployment, and inequality. Our first act should be in the countryside of the Colony, through initiating the Agricultural Revolution in African communities. It is through this strategy that we can effectively work to become one mighty nation, instead of the present weak `two nations’.