THE NEO-LIBERAL INCENTIVE STRUCTURE IN POST-APARTHEID SOUTH AFRICA by SHAUKAT ANSARI A thesis submitted in conformity with the requirements for the degree of Doctor of Philosophy Department of Political Science University of Toronto © Copyright by Shaukat Ansari 2019 The Neoliberal Incentive Structure in Post-Apartheid South Africa Shaukat Ansari Doctor of Philosophy Department of Political Science University of Toronto 2019 Abstract This dissertation argues that the persistence of certain aspects of neoliberal market orthodoxy, such as capital account and trade liberalization, fiscal austerity and the inflation targeting (IT) regime, over a twenty-year period in post-apartheid South Africa can be attributed to series of economic incentives and constraints that accompanied the country’s integration into global capital markets in 1995. Specifically, it is posited that capital account liberalization, as well as a new accumulation regime adopted by the South African conglomerates predicated on financialization and outward expansion, has rendered the business community and the political elite dependent on portfolio capital inflows to fund the fiscal deficit and the balance of payments. This development has enabled global credit rating agencies and international investors to wield a potential veto over potential unorthodox economic policies. Global financial integration has thus compelled the Treasury and Reserve Bank to craft orthodox economic policies in line with interests of global asset managers and domestic corporations. Moreover, the ANC’s cash transfer programs to impoverished South Africans, which have been a crucial factor in the party’s electoral success, are partially funded through the ii international capital markets. Finally, organized labor’s integration into a corporatist governing arrangement has served to dampen the resistance to this neoliberal regime. iii Acknowledgments I always imagined that writing a dissertation would be an arduous task, but only once I started the process did it dawn on me that I had underestimated just how isolating it would be at times. Numerous individuals helped me along in my endeavors, providing encouragement, intellectual stimulation, and inspiration. I would like to thank my entire family, my parents and siblings, for their unwavering support. My mother especially was a source of comfort, and her small (but cozy) apartment outside of the city often served as an escape and destination for my ruminations, and writing, on the topic at hand. My brothers also offered unflinching support throughout this journey, in more ways than one. I would also like to thank my supervisor, Paul Kingston, who provided me with much guidance and numerous thoughtful discussions, gently prodding and directing my thought process on those occasions when it started to wander. Paul’s patience, confidence, and his expertise in international development, all contributed to the completion of this project. I am also grateful to my committee members, Antoinette Handley and Judith Teichman, whose incisive comments and suggestions prevented me from getting lost in the data. Additionally, John Saul and Dickson Eyoh served as excellent external and internal readers. I am also indebted to several close friends who contributed to my resolve and determination over a ten-year period. Since my undergraduate years at the University of Toronto, Atif Nasim has been a close confidante and intellectual sparring partner, and his friendship served as a consistent source of stability throughout my academic years. Francis Dargon has also been a very close friend since I began my academic journey, and I owe him—and his family—deep gratitude. Noshir D’Almeida and Pedro Sanchez always provided me with necessary and lively breaks from the rigours of scholarly research, and our conversations over drinks were inspiring in numerous ways. Sangeetha Navaratnam was an enormous pillar of support during my first round of field work, and I am forever grateful for her friendship. I would also like to extend my gratitude to all those officials who gave their time to be interviewed. Finally, while my research brought me into contact with several wonderful people in South Africa, I would be remiss if I did not mention July Eccles, whose relentless, on the ground activism, embodies the very spirit of my intellectual project. Although all errors are of course my own, this dissertation was truly a collective effort. iv Table of Contents Acknowledgments .................................................................................................................................. iv Table of Contents………………………………………………………………………………………………………………….v List of Tables .................................................................................................................................. vii List of Figures .........................................................................................................................viii Chapter One .......................................................................................................................................... 1 Introduction ........................................................................................................................................... 1 Financialization .................................................................................................................................. 6 Theoretical Frameworks: Understanding the Capitalist State ................................................... 10 South Africa’s Developmental Trajectory .............................................................................. 21 The Shift to Liberalization and the Abandonment of a Comprehensive Industrial Program .......... 30 Indicators of Market Orthodoxy...................................................................................... 31 Chapter Breakdown ..................................................................................................... 40 Methodology ............................................................................................................. 42 Chapter 2 ............................................................................................................................................. 45 South Africa’s Integration into Global Capital Markets: The State and International Finance .. 45 A brief history of capital controls: from Bretton Woods to market orthodoxy ......................... 49 The politics of capital controls in post-apartheid South Africa .............................................. 61 The IT Regime and the ten-year bond yield: portfolio flows and the incentive structure . 80 Chapter 3 ............................................................................................................................................. 93 Accumulation Strategies by the Corporate Sector in Post-Apartheid South Africa: Finance, the Minerals Energy Complex (MEC), and Market Orthodoxy .......................................................... 93 The rise of conglomerate capital and the ascendance of neoliberal financialization ................. 96 The State, Anglo-American and BEE .................................................................................... 130 Chapter 4 ............................................................................................................................................. 138 South Africa and the IFIs ..................................................................................................................... 138 The IFIs and South Africa: The Period of Apartheid to the Democratic Shift ........................ 143 The IMF: Evolution and Involvement in South Africa ......................................................... 147 The IFI’s Influence in Post-Apartheid South Africa: Success or Failure? ....................... 162 Chapter 5 ........................................................................................................................................... 169 Domestic Pressures and the Neoliberal Trajectory: The Tripartite Alliance, ............................. 169 v Opposition Parties, and Zuma ...................................................................................................... 169 The Tripartite Alliance: Origins, Cracks, and Implications for Policymaking ....................... 173 Marikana Massacre .................................................................................................................. 184 New Political Resistance to the Neoliberal Growth Model ............................................... 192 Zuma’s Ascension to Power and the Left-Wing Political Coalition .............................. 198 Conclusions ........................................................................................................................................ 210 The Early Development Paradigms in Post-Apartheid South Africa .......................................... 216 APPENDIX ........................................................................................................................................ 224 A Primer on Bonds and Yields ...................................................................................................... 224 Regression Model Details........................................................................................................... 226 Works Cited ......................................................................................................................................