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Politics

South Africa pursues wealth distribution

Martina Schwikowski im
May 16, 2017

The South African government has introduced radical new economic measures to address the problem of wealth distribution. But analysts say it is largely a response to political pressure in the lead up to the 2019 election

https://p.dw.com/p/2d3JY
Frau im Township Soweto
Image: AFP/Getty Images/O. Andersen

In South Africa the business sector is struggling due to poor economic growth and ongoing political infighting. In response, the government has recently changed its stance on the economy, as President Jacob Zuma takes a tougher stance against financial institutions.

This includes instructing policy makers in the African National Congress (ANC) to introduce new laws which will require big banks to sell more stakes to black South African investors. A speedy redistribution of land will also mean black South Africans will also be encouraged to take ownership of major domestic sectors, including construction.

Wealth redistribution a major issue

Zuma's stance is in line with the rhetoric of many of his supporters who claim there is a conspiracy driven by "Western forces" to have the president removed from power because he is fighting "white monopoly capital". The new Finance Minister Malusi Gigaba who was appointed after Jacob Zuma sacked Pravin Gordhan, has promised wealth redistribution.

New Finance Minister Malusi Gigaba promises  economic shift to the left Getty Images/AFP/G. Guercia)
New Finance Minister Malusi Gigaba promises economic shift to the leftImage: Getty Images/AFP/G. Guercia

"For too long, there has been a narrative or perception around treasury, that it belongs primarily and exclusively to orthodox economists, big business, powerful interests and international investors. The ownership of wealth and assets remains concentrated in the hands of a small part of the population. That must change", said Gigaba when he took over his new position in April.

Cynicism remains

Zuma's new approach is a departure from the position he held in 2010 when he opposed an attempt by the former ANC Youth League President, Julius Malema, to adopt stricter economic policies.  

Azar Jammine is the head of independent economic consulting firm Econometrix in Johannesburg. He told DW that people remain skeptical of Zuma's ideas.

"President Zuma already had eight years to pursue this radical transformation. Nothing has been done. What people are concerned about is, what do we mean by radical economic transformation? If it is the expenditure of uplifting poor people and providing them with more services then it is a very positive move. If it is a way of introducing nationalization and land expropriation without compensation then it could have negative implications."

Jammine says Zuma is also still under attack for alleged corruption.

"He is now trying to defend himself by adopting this so-called radial economic transformation. But one remains cynical because this whole concept is more of a political ploy than practically addressing a real issue.

Zuma also hopes to discourage the poorest sections of the communities from voting for left-leaning political parties, especially the Economic Freedom Fighters (EFF). Led by Julius Malema, the party is pushing for the nationalization of land and mines. Only one year after its founding in 2013, it became the third strongest party in the last South African general election. 

ANC responding to political pressure

The ANC is currently trying to win back support following a poor result in the 2016 local elections, in which it lost a number of key cities to a coalition of opposition parties like the EFF.

Aubrey Matshiqi is a political commentator and researcher at the Helen Suzman Foundation. He told DW that recent move to reform the economic sector is driven in large part by this poor result and a need to perform well in the 2019 general election.

"The ANC is now responding to the pressure from the EFF. The EFF has taken a radical stance when it comes to economic transformation and they have linked this to race and the fact that 'blackness' is still an indicator for social and economic disadvantage in South Africa."

Members of opposition parties ask President Zuma to resign
Members of South African opposition parties ask President Zuma to resignImage: picture alliance/AP Photo/T. Hadebe

More than 90 percent of the country's wealth remains under the control of the – mostly white – 10% of its 55 million inhabitants. It is becoming increasingly evident that South Africa is in need of a transformation which will support not only education and job creation but the creation of small businesses and entrepreneurship.

Empty promises

Ultimately, the ANC's promise of a radical economic transformation is an empty one for many analysts who are watching the situation.

Gigaba had previously indicated that he did not intend to change the country's fiscal policies and planned to stick to the current budget as a means of keeping the investors' confidence avoiding further economic slumps.

"One wonders why there is a new minister of finance if there is no change in policy," says Jammine, "That increases the suspicion that Gigaba is only there to carry out the deals that the president would like him to."

So far there has been little evidence of the so-called radical economic transformation. Matshiqi agrees that the ANC is most likely trying to win back voters' confidence.

"There is no swing to the left – that means there will be no economic consequences."