South Africa: A faded rainbow

Since the empire-building days of Cecil John Rhodes, politics and mining in South Africa have made for potent chemistry when mixed. Every big government upheaval has been preceded by trouble at the mines. So when wildcat strikes spread across South Africa’s platinum and gold belts last year, some fallout in Luthuli house, the Johannesburg headquarters of the governing African National Congress, was always likely.

In 1922 the “Rand revolt” by armed white miners protesting against pay cuts and an influx of cheap black labour led to the electoral defeat of Jan Smuts, the prime minister. Strikes by black mineworkers 24 years later prompted a backlash by Afrikaner nationalists that augured the imposition of apartheid. Again, in the late 1980s, it was a general strike with the National Union of Mineworkers at its core, which, together with sanctions, helped force a negotiated end to white minority rule.

A prolonged bout of industrial and social unrest has rumbled on into 2013, spreading from mines to farms against a backdrop of creeping disaffection with government, internal dissent within the ANC and faltering confidence among investors.

It is another volatile mix. And, for those with half an eye on history, the most turbulent year since multiracial polls brought Nelson Mandela to power in 1994 has raised troubling questions about what is in store for South Africa. “The political significance has yet to be felt,” says Michael Solomon, a mining policy expert who helped draft new regulations for the sector 20 years ago.

Yet if there is a crisis of confidence in the ANC, Jacob Zuma, the movement’s intelligence chief in the struggle years and for three years the head of state, has neither shown the strain nor conceded turf to rivals. A consummate survivor, he saw off corruption probes, sex scandals and his formidable predecessor, Thabo Mbeki, on his journey to the presidency. In December, Mr Zuma quashed a challenge by Kgalema Motlanthe, his deputy, to retain his post as head of the ANC. Despite the respect the latter enjoys at the ANC’s grass roots, Mr Zuma won 75 per cent of votes at the Manguang conference.

Insiders say the size of that majority does not mean that Mr Zuma commands unwavering loyalty within fractious ANC ranks, whose eclectic make up includes newly rich tycoons, leftists, racial nationalists, trade unions and liberals. Rather, it suggests he had a well-oiled re-election machine. But given the ANC’s continuing dominance of national politics, it is almost inevitable he will contest and win another five-year term as president in the 2014 general election.

“Mangaung drew a line under unpredictability of the political regime for the future. It does not mean it’s good or bad, it means the uncertainty has been removed,” says Martin Kingston, chief executive of Rothschilds South Africa.

As for Mr Zuma, he makes no concessions when it comes to criticism of his style nor of the slow pace with which the government is tackling the quandaries facing Africa’s most developed economy.

“That there’s been a weak leadership, it’s a perception that has been built and people believe in it, but it’s totally out of order,” he told the Financial Times last month. “It was not because government was failing to govern, not at all,” he says of the mining crisis, in which 34 protesters were shot dead by police at a Lonmin mine at Marikana. “The companies were responsible for it.”

If South Africa’s economy has slowed to the point where legions of school leavers have little hope of formal employment, Mr Zuma is adamant that the blame lies elsewhere too, – the other side of the Atlantic. “We lost about 1m jobs as a result of the problem that started in the United States.” The failing education system? “That was Dr Verwoerd,” he said, referring to the architect of apartheid.

For all the defensive bluster, however, South Africa is undeniably in flux. This can only partly be attributed to the fallout from the global recession. Events surrounding the massacre at Marikana brought other harsh realities into relief.

At the root of the unrest was the same racially based system of cheap, migrant labour that Rhodes pioneered at Kimberley in the 19th century. This has stubbornly survived attempts to improve workers’ conditions and left South Africa’s labour-intensive mines exposed as technology improves productivity elsewhere.

“We recognised 20 years ago that you can’t write good policy without understanding history,” says Mr Solomon, lamenting that sound initiatives to improve conditions for miners gathered dust while profits soared. The companies, while they made some concessions, never “entered into the spirit”, he says.

The same concentration of capital in few hands has endured since the time of Rhodes, feeding the perception that businesses have enjoyed the dividends of democracy without doing their bit to tackle inequality. Since the transition to black majority rule there has been an obvious political imperative to change that. But the ANC has been wary of dismantling the whole economy while trying.

The colour of some of the richest South Africans has changed as “black economic empowerment” saw stakes in lucrative mining stock allocated to the politically well-connected. But South Africa remains two nations in one, and the slow pace with which government is bridging the gap has set them on a fresh collision course.

On this, Evans Ramokga provides a cautionary tale. The 29-year old winch operator at one of Anglo American Platinum’s mines neighbouring Marikana, along with a handful of colleagues, mobilised thousands of miners into downing tools in September in a strike that contributed to an operating loss of R6.3bn ($705m).

This year Amplats has announced plans to shut down two mines in Rustenburg, threatening up to 14,000 jobs. The protests rumble on.

Driving through a desolate landscape of derelict hostels and squalid shanty towns, Mr Ramokga speaks in menacing tones about how last year’s strikes could have been more violent “if we allowed it”. He then turned his ire on Mr Zuma, the traditional unions and the ANC.

“It is not enough to shift Zuma. The ANC as a whole has forgotten about the interests of the poor. They are running the economy for personal interest,” he says. “We will start to split, everybody will go and vote for who is best for him. I personally will not vote for the ANC.”

Asked if he saw himself as a future leader, he expressed profound disillusionment with the willingness of the older generation to nurture Young Turks like him. “It will be like the old days when the king says if the mother gives birth to a male they kill him.”

The malaise is not confined to mining. The story of stagnant productivity, rising costs and growing demands from a poorly educated labour force applies to other labour-intensive sectors, too. This year there have been violent strikes on farms in the wine-producing Western Cape and riots in Sasolburg, an industrial town where two people were killed when protests at the merger of two municipalities turned violent.

“We don’t deal with inequality at our peril,” says Adam Habib, vice-chancellor at the University of Johannesburg, commenting on the violence.

What worries mining companies is that this gathering anger is less and less mediated by traditional unions, who have lost the trust of workers like Mr Ramokga. What troubles ANC officials is that Mr Ramokga is representative of a “born free” generation who did not experience the evils of apartheid directly and who judge the party more on whether it meets their aspirations today than for its liberation credentials. Internal ANC research has found that at the next elections, the party risks losing significant support if it does not deliver improvements in livelihoods and services, in what could be the first step towards dismantling the hegemony it has enjoyed since 1994.

“They [young South Africans] use a simple measurement. Is the ANC capable of going to the moon? And they say, well, if it can’t deliver [school] books, how can it go to space? There’s no sentimentality about it,” Mr Motlanthe told the FT days before he launched his failed leadership bid.

He was in no doubt that South Africa and the ANC were approaching a tipping point. Disillusionment among the youth was highlighted in a recent advertising campaign for First National Bank, in which young South Africans called for a change of government. The ANC accused the bank of “treason”, underscoring the tension between corporate South Africa and the ruling party.

If the president revealed a chink in his armour it was by bringing in Cyril Ramaphosa on his slate as deputy head of the ANC and vice-president in waiting.

Since Mr Mbeki beat him into being anointed Mr Mandela’s successor, Mr Ramaphosa, who led the NUM during the 1987 strikes and was instrumental in drafting the post-apartheid constitution, has been looking like the best president South Africa never had.

He has been focused on building a business empire but has never been far from discussions about future leadership. His election as deputy triggered a spike of optimism about the movement’s willingness to improve relations with the private sector and bring more focus to policy.

Importantly, nationalisation of the mines was removed from the ANC’s options at Mangaung, while the party threw its weight behind a “national development plan” which seeks to reduce the proportion of households with a monthly income below R419 per person from 39 per cent to zero by 2030. Bond rates strengthened, and Moody’s, which downgraded South Africa last year, said that on balance the policy decisions looked “more investor and business-friendly than had generally been anticipated”.

“Cyril’s election must be a net positive because any of us who know of him recognise him to be a highly capable, sophisticated and experienced individual,” says Mr Kingston. “The problem is I don’t think any one person can confront or resolve all the issues facing the country and the party. It would be unrealistic to assume his shoulders are broad enough to carry the load alone.”

Fitch apparently agreed and last month downgraded South Africa, warning that “social and political tensions have increased as subdued growth, coupled with rising corruption and worsening government effectiveness, has constrained the government’s ability to ... redress historical inequalities”. Meanwhile, the rand hit a four-year low against the dollar last month before appreciating slightly.

Mr Zuma may be confident that he has ridden out the latest storm that broke at the mines. The markets, the business community, civil society and others seem far from sure the chapter has closed.

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