After its unbanning, the ANC faced the dilemma of how to move from opposing apartheid to presenting social policy alternatives that would change a radically unequal, racialised system of health and welfare. The legacy of pre-democratic South Africa established structures of class and race inequality that aimed to uphold the ‘good society’ for a white minority at the consequent expense of the black majority, creating for the latter what could, drawing on Richard Titmuss (1974: 75), be aptly described as a racialised ‘diswelfare’ state. In health care, the key mechanisms through which this racialised ‘diswelfare’ state was achieved in the apartheid era were: (i) differential allocation of funding to public health on the basis of race; (ii) a racialised labour market and the consequent unequal access to private and public health on the basis of race and class (income, employment status); (iii) the fragmentation of service delivery among 14 administrations, all of which were constituted on a racial basis; (iv) an inappropriate balance between the primary preventive and tertiary curative level components of health care, tipped in favour of the latter, in the context of the impoverished social conditions of the majority of South Africa's black inhabitants.

The structuring of health policy to provide for the health needs of the inhabitants in South Africa was fundamentally conditioned by the relationship between the public and private sector. The racial and income dualism of the labour market and the manner in which it influences access to social provision in South Africa is most tellingly revealed in the case of private health care. Historically, the private health care sector in South Africa has been a more significant sector in human resource and budget terms than the public sector. It was estimated that private finance accounted for 61 per cent of all health care expenditure by 1992/1993 – a year before the democratic transition (FFC 1998: 35). Private health care in South Africa (referred to as medical aid schemes) are a form of private occupational health care. These private medical schemes offer variable ‘packages’ of health care services, provided by private general practitioners and hospitals contracted into the medical aid schemes, and provide health care services on a strict fee-for-service basis.

THE ORIGIN OF SOCIAL DEMOCRATIC IDEAS IN THE STRUGGLE AGAINST FASCISM IN THE 1940S

The period between 1939 and 1945 was a significant one for the development of inclusive social policies that created the possibility of a social democratic option for a post-war, post-segregation South Africa. The war against fascism led to many white workers enlisting in the army. This meant that the United Party government under Jan Smuts was forced to depend on black economic and political support for the Allied war effort, of which South Africa was a part. The need to maintain ‘industrial peace’ in Smuts’ phrase (Hansard, vol. 43, 1942, col. 5) and fearing Japanese invasion after the collapse of Singapore in February 1942, the United Party established a series of commissions on a post-war ‘people's charter’. This included examination of the social needs of urban Africans, who were the bedrock of industrial growth and thus the war effort. These social policy reviews in health, education and welfare represented the most extensive examination of the effects of poverty and lack of social service provision in South African history, only surpassed by the democratic government of Nelson Mandela in 1994. The reviews identified the need for direct government intervention to overcome the failure of the policy of segregation to stem the tide of black urbanisation in the 1940s, and to ameliorate the health and welfare conditions of Africans in the urban areas. They also showed that the system of capitalism neglected to remunerate African workers at a level adequate to sustain their livelihood in urban areas.

A number of detailed social development proposals consistent with a broadly social democratic impetus emerged between 1940 and 1944. They recommended a national health service under state control; the extension of state housing and welfare provision for Africans; the eradication of the pass laws, which forcibly controlled the movement of Africans; the extension of social security into a national system incorporating urban Africans; central government control of African education; and specific measures around the extension of milk provision and feeding schemes for Africans. The political circumstances of the war against fascism induced this search on the part of the Smuts government for more inclusive social policies that could relieve the poverty of urban Africans, and was led by liberal reformers in the government.

In the pall of a destructive preceding political era under Jacob Zuma, characterised by corruption of the body politic and the institutions of our democracy and by poor economic performance, the president of the African National Congress, Cyril Ramaphosa, has promised a ‘new dawn’ for South Africa. He advocates that ‘… we put behind us the era of diminishing trust in public institutions and weakened confidence in leaders. We should put all the negativity that has dogged our country behind us, because a new dawn, inspired by our collective memory of Nelson Mandela and the changes that are unfolding, is upon us’ (Vuk’unzenzele 2018). We must ask what lessons have been learnt though from the political circumstances and policy choices made since democracy in 1994 in South Africa that require the arising of such a new dawn.

In contributing an answer, we feel an honest and forthright reflection is required of our recent economic and social policy-making history, in particular in the era of the democratic political transition between 1990 and 1996. Our book is therefore centred on the primary question that, given its historical state-led anti-inequality stance, how did the ANC in the 1990s come to do such a dramatic volte-face on economic and social policy and advocate for an essentially market-driven or neo-liberal approach. How did this U-turn happen? What were the forces that led the market-friendly charge? Indeed, as many have asked, did the ANC willingly go that way or was it pushed into such compromises?

We show here that the economic policy choices of the ANC leadership were based on a judgement that there was no alternative to the neo-liberalism that had dominated global policy debate since the early 1980s. Ironically, this approach, also referred to as the Washington Consensus, was slowly losing credibility following the publication of the Japanese-sponsored World Bank's The East Asian Miracle report (1993c). That report was highly critical of the core economic and social policy positions that emerged out of the Washington Consensus. This rethinking globally on failed macroeconomic policy in the early to mid-1990s was happening at precisely the time when the ANC was entering negotiations with the apartheid regime over a democratic constitution and the accompanying institutions of a post-apartheid state.

Talks about the transition to democracy in South Africa began fitfully and largely in secret in the mid-1980s. But President FW de Klerk's announcement on 2 February 1990 that the apartheid regime was unbanning the African National Congress (ANC) and other liberation movements, and the release of Nelson Mandela nine days later, took the transition onto a much higher plane and at a rapid rate. That South Africa remained the only fully capitalist economy on the continent at that time is not in doubt. While we do not subscribe to the notion of ‘South African exceptionalism’, we maintain that its capitalism was an extreme, stunted and distorted one. All of these characteristics, in different ways, had a bearing on the very nature of the transition, including on economic and social policy options and choices. Two such features are worth noting here. Firstly, South African capital represented by white-owned conglomerates such as Anglo American Corporation and Sanlam, both established around the end of the Second World War, remained powerful, globally connected and influential as the twentieth century wound to a close. Secondly, the apartheid regime's economic institutions remained well-resourced and internationally connected, despite decades of sanctions and the crisis of the apartheid state. These state institutions included the Ministry of Finance, the South African Reserve Bank, the Central Economic Advisory Services, a number of regional, national and provincial development finance institutions, and the national statistics agency (Central Statistical Services).

The real power among the constituencies engaged in negotiations lay in the hands of white business and in the institutions of the late apartheid state, as journalist and author Martin Plaut argues: ‘The men who had run South Africa for decades also embarked on a process designed to incorporate senior members of the ANC. Radical economic policies were dropped in favour of more conventional macro-economic prescriptions’ (2012: 31). As Plaut suggests, this was no accident; it had been thought through by the old regime and it was to prove decisive in many economic policy battles, including, as we show, the crucial issue of the independence of the South African Reserve Bank (see chapter 6).

This chapter and the next lie at the heart of our project in so far as they relate to the key economic debates during the transition to democracy. Drawing on the long history of policy debates that we have traced in previous chapters, we try to make sense of what transpired in the economic policy debate in the crucial first half of the 1990s. For something did unfold, but what exactly, and why? Was the policy shift away from the ANC's traditional values the result of some grand conspiracy by a small elite in the ANC bent on selling out the legacy of African Claims and the Freedom Charter? Or was it the outcome of a rather chaotic, messy and haphazard unfolding of events under conditions of pressure, where an underprepared ANC leadership was outmanoeuvred by the still well-resourced economic institutions of the apartheid state and by the local big business sector? Were the international financial institutions and Western governments the key influence? Or was it something else?

It would be naive to try to advance some kind of ‘mathematical weighting’ to all the factors that may explain what unfolded in the economic policy debate within the democratic movement in the 1990s. This book is not a ‘who done it’ mystery. Rather, our aim is to rely on our training as academics, our political instincts and our judgement to lay it all out before our readership, as we understand it and based on the available evidence we were able to secure. We use evidence from various public and private archives, from the growing number of recently published memoirs of leading ANC politicians, from other secondary sources and documents, and most importantly from dozens of in-depth interviews with key actors from across the political spectrum that have not been aired before in any coherent and systematic way.

Firstly, discussion of the evolution of ANC economic policy thinking in the 1990s and the perceived radical shift from the Reconstruction and Development Programme (RDP) to Growth, Employment and Redistribution (GEAR) cannot really be understood without some recognition of the economic policy changes that the National Party government had been instituting since the late 1970s. Secondly, we need to understand economic policy developments within the ANC Alliance as a whole, including in the Congress of South African Trade Unions (Cosatu) and the Economic Trends Research Group set up by Cosatu in the mid-1980s.

Since its establishment in 1921, the South African Reserve Bank (SARB) was both legally and practically subordinate to the Ministry of Finance and to the government of the day, despite the fact that it was wholly owned by private shareholders. It had neither the mandate to set independent goals to achieve nor full operational independence to realise them. Its mandate was eclectic and at various times included price stability, exchange rate stability and economic growth.

It is important at the outset to gain some understanding of government–SARB interactions in the late apartheid era to better understand the significance of what followed in the ‘negotiations’ over central bank independence in the 1990s. We learn from former President FW de Klerk that Gerhard de Kock regularly appeared at Cabinet meetings during his tenure as governor to make presentations on the economy, a practice that De Klerk apparently stopped soon after he became president in 1989. Yet, we also know that Governor de Kock met De Klerk in Hermanus (where both had holiday homes) from time to time to discuss economic issues in general terms. De Klerk's views on central bank independence may have arisen out of these meetings, but also from his general belief that the state should not interfere in economic matters, including the work of the Reserve Bank. De Kock was clearly an important influence on De Klerk on such matters (De Klerk interview, 28 January 2019).

De Klerk's decision to end the practice of the governor attending some Cabinet meetings appears to be in stark contrast to developments in the 1980s. There is a view that during PW Botha's term as prime minister, then president, he intervened directly in monetary policy matters (see Rossouw and Padayachee 2011: S60–61; Rossouw and Padayachee 2019). This is illustrated by the ‘infamous’ Primrose by-election on 29 November 1984, when President Botha allegedly instructed Governor de Kock to reduce the interest rate in order to win the support of heavily indebted farmers in that constituency, in what appeared to be a close contest between the governing National Party and the opposition Conservative Party. Despite official denials, the governor complied with this directive from the president and dropped rates.

OPPOSING INTERPRETATIONS

A number of analysts have attempted to explain how all the developments in policy-making discussed in chapter 4 happened, in particular why the ANC made the choices it did regarding social and economic policy from the late 1980s to the mid-1990s.

To date, two broad approaches to the explanation of these events can be discerned: one best articulated by Patrick Bond (2000) in Elite Transition: From Apartheid to Neo-Liberalism in South Africa; the other advanced by Alan Hirsch (2005) in Season of Hope: Economic Reform under Mandela and Mbeki. Our analysis departs from both, though we do share some elements of Bond's argument.

Bond is correct when he notes that there is yet ‘no conclusive statement about what is happening and how we should confront it until more arguments are tested against time and opposing view points’ (2000: 2–3). We began our project 15 years after Bond made this statement and 26 years since the unbanning of the ANC. We believe that this distance from those heady and hotly contested events does offer some advantages, especially as we have interviewed many of the actors in that unfolding drama, from opposing sides, hopefully satisfying the point made by Bond of the need to seek and understand opposing viewpoints. But we do not expect that everyone will agree with our interpretation. We are especially sensitive to the fact that our own colleagues and comrades in the Alliance1 may find our interpretation difficult to accept, but this is how we see it based on our analysis of the evidence secured and our understanding. We fully expect future commentators to cover similar terrain, and who knows if they will come to similar conclusions to us or to very different views.

Bond's view is neatly summed up as follows: ‘A large part of the drought experienced in the realm of macroeconomic policy – which would, by 1996, decisively rule out the implementation of RDP [Reconstruction and Development Programme] social promises – stemmed from intellectual retreat by select ANC leaders’ (2000: 54). Such a retreat, it would appear, arose out of the nature of South Africa's capitalism and its integration into global circuits of ‘uneven and combined’ development, which locked in the policy options open to the ANC leadership during the transition to democracy.

In 1961, the ANC was declared a banned organisation. Many of its leaders were arrested; others had to go underground or flee the country for Lusaka, London and other parts of the world sympathetic to their cause. The years that followed required a whosesale reorganistion of the movement in a difficult global context dominated by Cold War considerations. The West provided little support for the ANC, while offering considerable financial and political support to the apartheid regime. The role of the American Central Intelligence Agency (CIA) in tipping off the South African authorites about Nelson Mandela's whereabouts, which led to his arrest near Howick, Natal, in August 1962, has been well documented. The US Consul in Durban, Donald Rickard, was the CIA operative who provided the information. The arrest had the effect of seriously setting back the struggle against the apartheid regime (Garcia 2016: n.d.). In London, Oliver Tambo secured a base for the ANC, from which it could begin the massive task of raising funds, developing new political strategies and growing international support under Cold War conditions. And in Lusaka, the ANC began, with limited resources, to establish a rudimentary living and working base, as well as the elaborate machinery and structures, to wage the military and propaganda campaign against the apartheid state (Macmillan 2013). In all this, the role of its (acting) president, Tambo, loomed large. But we begin this chapter on an island within view of Cape Town’s Table Mountain, which used to be a leper colony and is today one of the wonders of the new world.

ROBBEN ISLAND

While robust, organised discussions occurred on matters of political economy and strategies of political liberation, very little of what we could describe as economic and social policy debates occurred within ANC or other circles on Robben Island.

Our interpretation

Evidence from three years of research on this project leads us to argue that the narrative and the subsequent explanations for the compromises of the 1990s are far more complex than most monocausal explanations suggest. Some nascent ideas about economic and social policy can be traced back to African Claims (1943) and the Freedom Charter (1955), and to the Morogoro Conference (1969). But the intensity and contestation over such policy escalated considerably as democracy neared. As we have shown, economic and social policy debates in the transition era occurred at formal constitutional negotiations as well as through a variety of research think tanks, such as the Macroeconomic Research Group (MERG), within institutions of the state, in and through the progressive union movement and in business through various scenario-planning exercises.

So as to avoid any misunderstandings, we stress that our conclusions are based only on the areas of the research we have chosen to investigate – that is, on aspects of economic and social policy debates from 1943 to 1996. As far as formal constitutional negotiations are concerned, from Mac Maharaj, Ronnie Kasrils, Pallo Jordan and Jeremy Cronin, among others, we came to hear that other policy debates, especially over constitutional principles, security and defence, were very different and we have no reason to doubt their versions. In these (mainly political) areas, the ANC negotiating teams were better prepared and clearly emerged as ‘winners’.

READY TO GOVERN

Surprisingly little is known about an important and official ANC document that addressed economic policy. This was the Ready to Govern (RTG) document approved at the ANC's May 1992 policy conference. In order to make more sense of the path to the ANC-led government's Growth, Employment and Redistribution (GEAR) programme in 1996, we need to backtrack a little in time to the 1992 policy document. Tito Mboweni makes no reference to RTG in his paper on formulating policy for a democratic South Africa, though he does observe that ‘formulating economic policy has been one of the most difficult and challenging tasks confronting the democratic forces’ (Mboweni 1994: 69). This echoes a comment he made in a letter to the Macroeconomic Research Group (MERG) director, Vella Pillay, in November 1993 (Letter in Vishnu Padayachee private archive).

In late May 1992, the document that came to be titled Ready to Govern was debated and adopted by the ANC. A section of the document was labelled ‘Economic Policy’. An economics commission attended by about 100 delegates (including Mboweni, Alec Erwin and Ben Turok) gave careful attention to a draft document entitled ‘The Growth Path for the New South Africa’, prepared by Mboweni. A vigorous debate ensued about matters centred around the absence of the word ‘development’ in the title of the paper (Turok 2003: 261) and about nationalisation and privatisation. Nelson Mandela himself entered the debate, warning the conference that nationalisation would meet much opposition in the West. Turok claims he opposed any attempts to rule out the option of public ownership, and the matter was only resolved after the conference ended with a watered-down commitment to the public sector’s role within a mixed economy (Turok 2003: 262). Neverthless, it would appear as if RTG was the first official policy document adopted at a full conference by the ANC since the adoption of the Freedom Charter in 1956. For this reason, its significance cannot be underestimated, though its contents were rather vague and its line some-what populist. RTG was essentially an ANC document, driven by the Department of Economic Planning (DEP), and in which the Congress of South African Trade Unions (Cosatu), the South African Communist Party (SACP) and South African National Civic Organisation (Sanco) were more minor players.