South Africa’s failed infrastructure privatisation and deregulation

12 February by Patrick Bond , Greg Ruiters


The South African state is commonly said to be ‘failing’ – not only because yet again at the end of 2023, a recession hit. An alleged fiscal crisis, in the form of a public debt to GDP ratio in excess of 70 percent (mostly due to Covid-19 revenue shrinkage), prevents the kind of institutional rescue and expansion of infrastructure and services typical of prior eras of developmental- or welfare-state construction.

A typical articulation of the terrain of infrastructure financing came from Finance Minister Enoch Godongwana (2023) in his most recent budget speech: “Investment in infrastructure is central to supporting higher economic growth and expansion of access to basic services. We are seeking to facilitate a quantum shift in the quantity and quality of delivery by mobilising private sector financing and technical expertise at scale.”

But Godongwana (2023) also admitted “the lack of a credible pipeline that can attract funding, lack of sustainable financing arrangements to crowd-in private finances, and poor contract and project management to manage cost and schedule overruns.” His plans included new municipal regulations and “an Infrastructure Finance and Implementation Support Agency that will systematically address the need to crowd-in private sector finance and expertise into the public infrastructure programme. Government will also widen the scope for concessional borrowing by creating new mechanisms through which private-sector investors and multilateral institutions can co-invest with government for selected infrastructure projects. This will include the use of build-operate-transfer structures, Public Private Partnerships (PPPs) and concessions, and application of the frontloading mechanism which provincial conditional grants now allows for.”

As always, there were expansive promises: “The outcome will be clearer institutional arrangements for the private sector to invest in public infrastructure, an increased pipeline of credible infrastructure projects, and greater access to various forms of financing underpinned by effective delivery mechanisms. These measures will unlock social infrastructure projects, blended finance and PPPs including the electricity transmission infrastructure and upgrades to railway lines, amongst other projects that will be fast tracked” (Godongwana 2023).

On 21 February 2024, a further speech by Godongwana is expected to detail further outsourcing of state functions to the private sector, to close state and parastatal institutions down entirely, to sell off assets to the highest bidder, or to have corporations manage the state assets and services. When applied to vitally-needed infrastructure – especially electricity, commuter rail, freight rail and port-management, highways, water and sewage treatment, or pipelines for water or petroleum products (considered ‘network’ public works) – the problems associated with state mismanagement are supposedly amenable for resolution through privatisation or some form of PPPs.

This analysis considers, first, the conceptual bases for various forms of infrastructure privatisation and deregulation that have been experienced in post-apartheid South Africa; second, the history of state infrastructure investment and divestment; and third, options for resistance by coalitions of workers, communities and women, environmentalists and others concerned about the public interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. .

Many forms of privatisation

Privatisation is the sale of state assets to private firms. Partial privatisation through PPPs often involves transferring management and operational functions into private hands, while the assets are still state owned. Corporatisation or commercialisation entail running State-Owned Enterprises (SOEs) using principles associated with private profit Profit The positive gain yielded from a company’s activity. Net profit is profit after tax. Distributable profit is the part of the net profit which can be distributed to the shareholders. -making, even if this merely represents a surplus returned to the SOE or to the state.

The varying kinds of PPP arrangements are complex, for the bidding, procurement process, and performance and service delivery contracts, as well as monitoring and evaluation, cost considerable amounts of scarce money and take away from officials’ time and managerial attention. Management-oriented PPP contracts vary from short term to 30 years but in some cases, infrastructure concessions are up to a century in length, given the large-scale investments involved. Yet more complexity is introduced even where total divestiture of assets occurs, because the state may still claim to regulate privatised or commercialised firms in the public interest.

Among African countries, South Africa stands out for the extent of its privatisations, but others in infrastructure occurred between 2000 and 2008 in Nigeria, followed by Kenya and Ghana. Very little privatisation (in the narrow sense) took place in the rest of Africa, and much of that was local capital buying in rather than the foreign direct investment that international neoliberal advocacy suggests is necessary and desirable (Nellis 2005). The slow uptake in privatisation in the 1990s was due to strong opposition from entrenched vested interests (senior bureaucrats in ministries and SOEs themselves, as well as public sector workers concerned about their job security (Bennell 1997).

Over the past 40 years, many governments – among them South Africa during its period of democratic transition – have divested themselves of airlines, railroads, telephone services, electricity companies, water services, health facilities and other functions, thereby unlocking a new phase of capitalist expansion and innovation. Divestiture, as this form of privatisation is formally known, was the model of privatisation adopted in the United Kingdom (UK) under Margaret Thatcher in the late 1980s, with entire systems of public services delivery being sold to private firms (Schofield and Shaoul 1997; Bakker 2003).

Less easy to classify are the many forms of privatisation that involve the downloading of service responsibilities to individuals, communities and non-governmental organisations (NGOs). Represented in the pro-privatisation literature as ‘active citizenship’ and ‘community empowerment’ – as a supposed antidote to welfare dependency – this transfer of decision-making and responsibility also constitutes a move from the public (i.e. the state) to the private (in this case an individual or community), even if the profit motive is not a central objective. Although not necessarily acting with the same institutional or economic incentives and frameworks as a private company, the transfer of decision-making power to individuals and communities nevertheless constitutes an abdication of responsibilities on the part of the state (McDonald and Ruiters 2007, p. 10).

Capital, as Joel Kovel (2002, p. 42) argued, sees “each boundary/barrier as a site for commodity formation,” but this process is not always consciously pursued since some opportunities arise perversely. Examples of this are the business of cleaning up pollution, or making drugs to fight the effects of over-eating and to cure new diseases unleashed by industrial emissions and ecological decay. Bottled water is another good example: a response to the (perceived) contamination and unreliability of (public) water supplies and thus a self-fulfilling prophesy. The various activities that now make up the ‘service sector’ – from bereavement and psychological services to private security firms to child-care to fast food – attest to capital’s reckless addiction to growth and its uncontrollability. Firms compete with each other to get faster and newer services and gadgets to the ever receptive, ideal-type consumer.

Nationalisation occurs when the state assumes ownership of a private company or several companies. The process may be negotiated so that compensation is paid to the private company. In some cases, nationalisation might occur without compensation. When very large firms face bankruptcy, for example, they may ask to be nationalised or bailed out. Nationalisation can be an ‘amicable business’ because in cases where even the World Bank World Bank
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

supported public ownership, they insisted that governing boards be ‘autonomous agencies’ and that “the private sector be well presented on its governing boards,” Bank critic Cheryl Payer (1982, pp. 106, 112) remarked. But most nationalised firms must exist within markets for investments and products, so their ability to cross-subsidise to assist the entire society becomes quite limited. Payer (1982, p. 112) concludes that the World Bank arranges matters in poor countries, such that if nationalisation does occur, the Bank will ensure that “consumers will see that they get no benefit from nationalisation.”

There are cases where third-world governments appear to be ‘revolutionary’ by nationalising all foreign assets, as did Gamal Abdel Nasser Hussein in Egypt in 1957. But nationalisation provided the new military elite with instruments for the local bourgeois class to consolidate, and by the last years of Nasser’s rule, Egypt faced widespread corruption. Nasser’s successor Anwar Sadat reopened the gates to foreign investors to enable the fusion of the new bureaucratic bourgeoisie and foreign capital (Lowy 1981, pp. 179-180). In many other cases the state and private capital share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. ownership. South Africa also witnessed ‘mixed economy’ rhetoric that obfuscated power relations during its democractic transition.

Ultimately, nationalisation without worker control and democracy is yet another capitalist policy. In the context of the drive to privatise, commercialise or deregulate, ‘corruption’ can be seen as a global phenomenon and historical in nature, since it is bound up with both original accumulation and ruling-class formation. It is also a continuous process, leading David Harvey (2003) to coin the term ‘accumulation by dispossession,’ as an ongoing process, distinct from primitive, original and once-off theft by a new capitalist ruling class pushing out the feudal order.

South African state infrastructural expansion

The critical period for nationalisation and SOE expansion began in the late 1920s, with electricity, iron and steel, rail and postal services and other functions vital to capital. During the 1930s the state also built much more public infrastructure, and to support the infant industries, tariff protection was introduced and played an important role in the import substitution industrialisation that followed (Fine and Rustomjee 1996).

As a result, manufacturing capitalists expanded beyond the older forms of deep mining equipment. The rate of growth of black workers’ wages was also dramatic due to the labour demands of industrialisation, as their share in relation to white wages rose by more than 50 percent (from 11 percent to 17 percent), the fastest ever recorded. Overall, gross domestic product GDP
Gross Domestic Product
Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another.
grew 8 percent per year from 1931 to 1946. National debt to GDP had risen to 125 percent by early 1932, the highest level in recorded history. Yet in spite of that unprecedented debt, or indeed because of it, the national state – run by racist whites – solved the ‘poor white problem,’ and birthed what became a generous welfare state for white citizens.

The conditions were ripe for a much greater role for mega-project network infrastructure after World War II ended, with two major spurts of construction works recorded during commodity price upticks above and beyond an average 2.5 percent annual growth (Figure 1). Most were the result of the Minerals Energy Complex’s expansion, and nearly all had major SOE involvement (Fine and Rustomjee 1996). But with apartheid formally adopted in 1948, public enterprises were also bastions of white privilege. SOEs served capital and secured employment for white workers who became the support base of the racist regime. After democracy was won in 1994, the ruling African National Congress (ANC) restructured the SOE sector in part to deploy its leading cadre to top jobs and open up new patronage routes for corrupt syndicates – as the arms deal and Zondo Commission into State Capture (2022) showed – but unlike the apartheid state, it failed to ensure a growing employment pool for black public sector workers, and instead permitted large shares of SOE jobs to be rationalised, as commercialisation proceeded. State infrastructure was, as a result, biased to highly corrupt, elitist projects (Figure 1).

Figure 1: Rhythms of infrastructure investment, 1946-2010

Source: Consulting Engineers of South Africa 2010, 4

As in the case of many South African SOEs, a form of privatisation may also happen when public entities are ‘corporatised’ by becoming stand-alone business units operating at arm’s length from a government, and allowed to take the form of pure profit-making ventures. The ‘public-good’ features of state services are negated because of commodification. Governments retain a stake in the new business. Privatisation means that commercial considerations are primary: profit maximisation, cost recovery, turning a profit in a short time, downsizing the workforce, charging higher prices, disconnecting supplies to those who do not pay. Privatisation may also include downloading duties performed by the state onto households or citizens (redefined as customers).

Deregulation and privatisation are related but different processes. The former enables the latter. It is also critical to define privatisation as a broad phenomenon, not merely as the sale of state assets, but also as ‘green field’ privatisation in new areas of commerce such as sale of telecommunications bandwidth, as well as the marketisation of social and public life more generally. Corporatisation and commercialisation of public entities are also within the ambit of privatisation. Nominally public entities are thereby recognised as essentially capitalistic and hence effectively operating as businesses, at arm’s length from the state. Cross-subsidisation and other means of serving the public interest become exceedingly difficult given such pressure.

SOEs have been increasingly understood as commercial entities, and the idea of public ownership itself was delegitimised. Janet Newman and John Clarke (2009, pp. 7-8) argued that “public services are not only public because of their material basis in public funding or being located in a public sector.” They serve a public interest, but the recent era has entailed “erasure of the publicness of public services resulting from the introduction of markets, contracts and a consumerist focus.” Similar observations have been in analyses of mission drift in public banks where the mission of these banks has been eroded as they increasingly function like private banks (Scherrer 2017).

In 1940 when living in Mexico City under the then 11-year old Institutional Revolutionary Party, Leon Trotsky (1940) pointed to left-wing illusions associated with nationalisation, even when accompanied by progressive, anti-imperialist rhetoric: “The nationalisation of railways and oil fields in Mexico has of course nothing in common with socialism. It is a measure of state capitalism in a backward country, which in this way seeks to defend itself on the one hand against foreign imperialism and on the other against its own proletariat. The management of railways, oil fields, etc, through labour organisations has nothing in common with workers’ control over industry, for in the essence of the matter the management is effected through the labour bureaucracy which is independent of the workers, but in return, completely dependent on the bourgeois state. This measure on the part of the ruling class pursues the aim of disciplining the working class, making it more industrious in the service of the common interests of the state, which appear on the surface to merge with the interests of the working class itself.”

South African narratives of nationalisation

In South Africa, the African National Congress (ANC) and its supporters in the 1980s – such as the United Democratic Front and affiliates of the Congress of South African Trade Unions (COSATU) – originally appeared to favour the principle of further nationalisation, of at least the commanding heights of the economy. Their 1955 ‘Freedom Charter’ included the demand that “The mineral wealth beneath the soil, the Banks and monopoly industry shall be transferred to the ownership of the people as a whole.” In 1987, the National Union of Mineworkers (NUM), led by Cyril Ramaphosa as its general secretary, proposed that COSATU adopt the Freedom Charter but the National Union of Metalworkers of South Africa (NUMSA) opposed this in favour of a more explicitly anti-capitalist Workers’ Charter. The NUM won. One reflection of the durability of the Freedom Charter’s promise to share the wealth is the way Nelson Mandela (1990) himself, still in jail, wrote to his supporters in early 1990: “The nationalisation of the mines, banks and monopoly industries is the policy of the ANC, and a change or modification of our views in this regard is inconceivable.”

But after a meeting at the Davos World Economic Forum in early 1992, he moved the ANC away from state ownership. By May 1994, Mandela even wrongly claimed that the ANC’s ‘Reconstruction and Development Programme’ campaign document contained “not a word about nationalisation” – which suggested that neither Mandela nor his Sunday Times interviewer had read as far as page 80, where the RDP cited the need for “increasing the public sector in strategic areas through, for example, nationalisation” (Bond Bond A bond is a stake in a debt issued by a company or governmental body. The holder of the bond, the creditor, is entitled to interest and reimbursement of the principal. If the company is listed, the holder can also sell the bond on a stock-exchange. 2014).

In the anti-imperialist and national liberation struggles, economic narratives have often been reduced to building an amorphous ‘pro-poor economy’ in which the state would limit foreign capital’s prerogatives and play a redistributive role. Third Worldist ‘Marxists’ and Moscow-aligned parties subordinated themselves to the ‘radical’ nationalists, especially after a 1928 Comintern order to forge alliance with the latter. In the case of the SA Communist Party, for example, a two-stage theory of revolution was declared in which non-racial democracy was the overarching objective and (much much) later, a socialist economy would emerge. Many Third-Worldist Marxists refused to recognise the reality that behind slogans such as “unity of the oppressed!” and “power to the “people!,” the radical nationalists had their own class project that would do the opposite.

In South Africa, this class project took an aggressive form after 1994 when ANC and its allies adopted a ‘Black Economic Empowerment’ assimilation strategy for corporations, using SOE’s and privatisation to create almost instant black millionaires. Leading comrades quickly became capitalists, as they were ‘deployed’ into SOE’s and private corporations, but typically in a financialised manner (loaded with debt that could only be repaid with rising stock market values), and sometimes in a manner that also entailed subtle forms of corruption via the influence over the state (and particular politicians) that the business elite enjoyed. They were, however, often accused of a ‘fronting’ process, in which a genuine bourgeoisie was impossible to create. This instant wealth acquired through political manœuvres and tacit support of older-order capital has even overshadowed the privatisation-nationalisation debate. Without working-class control, both are simply floating-signifier strategies because they are not linked to changing the character of power relations.

Radicals both within and outside the ANC were disoriented by these processes. Even Harold Wolpe (1988, p. 104), the leading ANC intellectual (though often an independent neo-Marxist) had firmly believed as late as 1988 that a negotiated settlement between the apartheid regime and the ANC “seems not possible”. But by the early 1990s, Wolpe – along with Eddie Webster, Karl von Holdt (1987), Jay Naidoo, Alec Erwin, Stephen Gelb and others mainly in the white left intelligentsia – defended their efforts ‘structural reform,’ arguing the Left was too weak (and then attacking independent socialists as ‘ultra-left’) (Callinicos 1992).

The rapid dilution of ANC liberatory promises and its alliance with big capital coincided with the USSR’s collapse, which was especially traumatic for leadership from the Stalinist traditions of South African Communism. They refused to break from the ANC, because according to Jeremy Cronin (1992, pp. 88-89), “the Communist Party mustn’t become an oppositional force: that would weaken the thrust of the national democratic transformation that’s occurring and indeed the socialist project in the longer run.” PG Eidelberg (1997) noted how “Webster’s own renewed espousal of radical reform – which was now increasingly in the sense of an alliance with the ANC – was in turn, to be paradigmatic of much of COSATU’s thinking as the 1994 elections approached.”

The neo-marxists advocated social compacts between labour and capital, but expected far more SOE interventions. Yet the existing SOEs, municipalities and other infrastructure providers have been exceptionally inefficient, corrupt and unjust, which in the spirit of hegemonic ideology associated with the ascendence of neoliberalism (Scherrer 2017), allowed government to promote privatisation at all levels of the state.

What state investments there were after 1994 fused durable privileges of white-owned capital with a new black bourgeoisie whose ‘Black Economic Empowerment’ shares contributed to amplification of wealth for a tiny fraction of society, leading to what became the world’s most unequal country (World Bank 2022). Debates continue to rage over how to address SOE shortcomings, in both short-term capitalist terms – a more efficient service delivery of existing state services of importance to the economy – as well as in the public interest, so as to serve the needs of sixty million residents including long-term ecological stewardship.

Indeed, investment in built-environment infrastructure remains exceptionally important for climate adaptation and resilience in the context of worsening extreme-weather events. But from October 2020, austerity was declared by the Treasury, because the state budget deficit soared due to Covid, leaving the aggregate debt to rise from 28 percent of GDP in 2006 to more than 70 percent in 2021.

Notwithstanding a vast surplus in South Africa’s public-asset Asset Something belonging to an individual or a business that has value or the power to earn money (FT). The opposite of assets are liabilities, that is the part of the balance sheet reflecting a company’s resources (the capital contributed by the partners, provisions for contingencies and charges, as well as the outstanding debts). balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. sheet thanks mainly to mineral wealth – making the state far richer in relative terms than Western Europe (IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
2018) – Treasury and Reserve Bank officials refuse to tap into national resources or engage in Quantitative Easing strategies (aside from a brief period in March 2020 when local financial markets were temporarily shut to further state borrowing). The state is under constant pressure from credit rating agencies Rating agency
Rating agencies
Rating agencies, or credit-rating agencies, evaluate creditworthiness. This includes the creditworthiness of corporations, nonprofit organizations and governments, as well as ‘securitized assets’ – which are assets that are bundled together and sold, to investors, as security. Rating agencies assign a letter grade to each bond, which represents an opinion as to the likelihood that the organization will be able to repay both the principal and interest as they become due. Ratings are made on a descending scale: AAA is the highest, then AA, A, BBB, BB, B, etc. A rating of BB or below is considered a ‘junk bond’ because it is likely to default. Many factors go into the assignment of ratings, including the profitability of the organization and its total indebtedness. The three largest credit rating agencies are Moody’s, Standard & Poor’s and Fitch Ratings (FT).

Moody’s :
which, from 2017, began judging South African bonds as ‘junk’ quality (Ngwane and Bond 2021)

Corruption and neo-patrimonialism

Corruption should also be forthrightly addressed, for the term is a vague moral signifier which associates breaking or circumventing rules as the work of a few rotten apples in an otherwise rule-governed system whose basic structure is fair. But since extra-economic force was inherent to capitalism since its origins – marked as they were by extremities of wars, violence, slavery and other coercive powers – the state form depended upon violent destruction, rebuilding and expansion as a necessary part of capital’s dynamism. 

David Harvey (1982) poses this process as exhibiting tendencies towards both overaccumulation crisis and – as the main mode of crisis resolution – towards the devaluation Devaluation A lowering of the exchange rate of one currency as regards others. of capital. In this, the state operates in both defensive and offensive mode to defend its constituencies’ interests, with its success or failure reflecting the correlation of class and territorial forces. The world’s victorious capitalist classes typically have powerful, violent states capable of managing, and benefiting from, such destruction. This violence extends to all sentient life and the earth itself. In other words, the basic system’s rules are not set up for the sake of fairness and justice but instead to meet the needs of capital accumulation and the reproduction of class power, as the amplification of so many ongoing global-scale socio-economic and environmental crises illustrate.

Taking this perspective, Western liberal rhetoric regarding the need to combat ‘neo-patrimonialism’ is profoundly hypocritical, since a great deal of the Global South’s ‘Big Man’ post-colonial phenomenon and of the associated degeneration of the neo-colonial state reflects their Western origins and the broader international context in which their ruling classes operate, as Frantz Fanon (1963) had pointed out in The Wretched of the Earth. Moreover, a related problem emerges from Western analysis of the African state: cultural explanations for macroeconomic dysfunctionality.

In South Africa, for instance, the Oppenheimer mining tycoon family’s Brenthurst Foundation in Johannesburg (e.g. Mills et al. 2017) promotes cultural analysis without a hint of political-economic awareness: “The system that many African leaders have preferred thrives on corruption and nepotism… a primordial lust for wealth and power along crude racial, tribal, party, and familial lines,” according to Brenthurst CEO Greg Mills (2011, p. 4).

Yet the history of official white-settler thievery, corruption has undergirded the accumulation of capital since the days of slavery and colonial wars of dispossession. Most important was the period in which forced proletarianisation became vital to the consolidation of a white-settler supremacist society. The formation of white class society is based on 370 years of corruption in which European settlers – first Dutch, then the English and Dutch-descendant Afrikaners – formed a ruling class, full-fledged capitalists, middle-classes, a proletariat and at one stage even a Boer white small-farmer quasi-peasantry.

When the ANC took power in 1994, it engineered its own share of this system: in 1997, the country’s future (2005-08) deputy president (then Deputy Minister of Trade and Industry Phumzile Mlambo-Ngcuka) declared that “blacks should not be ashamed to be filthy rich” (News24 2005), while in 1999, the new president (Thabo Mbeki) explained, “As part of the realisation of the aim to eradicate racism in our country, we must strive to create and strengthen a black capitalist class” (Mbeki 1999). In 2004, the party’s official spokesperson, Smuts Ngonyama, declared that he “did not join the struggle to be poor” (cited in Breytonbach 2013). One problem was never acknowledged, however: joining the white bourgeoisie meant assimilating into a network that the biannual PwC ‘Economic Crime Survey’ of 2018 reports has “the highest instances of economic crime in the world with economic crime reaching its highest level over the past decade. At 77 percent South Africa’s rate of reported economic crime remains significantly higher than the global average rate of 49 percent.”

After 1994, the small black middle class also took a great leap forward, through high-paying civil service jobs and direct forms of accumulation via patronage politics and privatisation. Family businesses were set up to benefit from the outsourcing process that soon hollowed out the state, including tender fraud, nepotistic appointments and other forms of influence peddling. To join white counterparts who enjoyed deep pockets – hence residential real estate wealth that also affected school locational decisions – the new black middle class took on excessive amounts of debt which by late 2008 led to a ‘credit impairment’ problem for 40 percent of the country’s borrowers, once interest rates Interest rates When A lends money to B, B repays the amount lent by A (the capital) as well as a supplementary sum known as interest, so that A has an interest in agreeing to this financial operation. The interest is determined by the interest rate, which may be high or low. To take a very simple example: if A borrows 100 million dollars for 10 years at a fixed interest rate of 5%, the first year he will repay a tenth of the capital initially borrowed (10 million dollars) plus 5% of the capital owed, i.e. 5 million dollars, that is a total of 15 million dollars. In the second year, he will again repay 10% of the capital borrowed, but the 5% now only applies to the remaining 90 million dollars still due, i.e. 4.5 million dollars, or a total of 14.5 million dollars. And so on, until the tenth year when he will repay the last 10 million dollars, plus 5% of that remaining 10 million dollars, i.e. 0.5 million dollars, giving a total of 10.5 million dollars. Over 10 years, the total amount repaid will come to 127.5 million dollars. The repayment of the capital is not usually made in equal instalments. In the initial years, the repayment concerns mainly the interest, and the proportion of capital repaid increases over the years. In this case, if repayments are stopped, the capital still due is higher…

The nominal interest rate is the rate at which the loan is contracted. The real interest rate is the nominal rate reduced by the rate of inflation.
rose rapidly as a result of the way the first stage of the global financial meltdown occurred, prior to global Quantitative Easing (International Monetary Fund 2014, 56).

For the black majority, the flip side of the ‘negotiated settlement’ between the nascent black bourgeoisie and their former white enemies has been the descent into greater poverty (reaching two-thirds of the population under an ‘Upper Bound Poverty Line’ of $3.25/day), soaring inequality, worsened spatial apartheid (since new low-income housing estates are further away due to cheaper land in a private developer-led model) and social barbarism. The day-to-day experience of the average township dweller in SA is one of violent crime, insecurity, poor services, dysfunctional schools, decaying townships, taxi wars, rapid spread of shack settlements, xenophobia and mass unemployment. These symptoms of the problem of broader societal corruption are never named as such, however, and indeed the only genuine immediate antidote – much more expansive state social policy – is typically precluded in part because of state failure

How deep is this sort of problem? The most widely-cited data on state corruption ‘perceptions’ – from Transparency International – suggest that just as sharp a decline could be observed during the Mandela and Mbeki presidencies. This era of blatantly corrupt profiteering – including from network infrastructure – coincided with the renewed fiscal crisis and resurgent ideology of privatisation, from 2008. But the seeds had been sown well before, in an ideological shift towards state outsourcing and outright privatisation.

Ideologies, sites and tempos of privatisation

In contrast to the New Public Management (NPM) standpoint – explored below – based on seeking greater efficiency of state services as the primary objective for restructuring, we adopt an approach drawing on political economy traditions. This approach is not to adopt a general theory of the form of the capitalist state, which is a product of uneven and combined development and is a strategic relationship that unveils class forces at various levels. It is incorrect to claim ‘laws of motion’ in state formation as one would expect from an underlying theory, or to see state strategies as linear and transhistorical, ignoring the different modalities and forms that the state could take depending on the context and class forces. In the same vein, liberal democracy or a welfare state might be the best shell for capital during certain conjunctures, but at other times, capital has also periodically turned to fascism as a form of rule in response to intense class contradictions.

As Bob Jessop (2022, p. 94) argues, “I rejected a general theory of the state because this would have been transhistorical, ignoring the ways in which the emergence of the territorialisation of political power, which defines the general characteristic of state power, varies with social formations and their dominant relations of production. There is a limit to what one can say about states in general in these terms even if the importance of territorial sovereignty is recognised. It is more important to examine state power than to examine the territorial form of the state apparatus as such and this was emphasised in the form-analytical work of Marx and Engels, the ideas of Lenin and Trotsky, the writings of Gramsci on the state in its inclusive sense (political society + civil society, or hegemony protected by the ‘armour of coercion’), as well as the arguments of Poulantzas and other relational theorists.”

In this respect, we need to be precise about the state’s role in the phasing of capitalism’s development. The movement towards privatisation and the campaigns for PPPs of various kinds began with first wave deregulation and privatisation during the 1980s, promoted by Western governments and institutions associated with business (e.g. London’s Adam Smith Institute). Neoliberalism was imposed on the Third World via IMF and World Bank ‘Structural Adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

Programmes,’ and the process was rapidly advanced by the transition from centrally planned to market economies in Eastern Europe and the former Soviet Union. With the global financial crisis 2007–2008 the push for privatisation and PPPs to lower global public debt loads gained new momentum, particularly shaped by corporate think tanks and international financial institutions.

The public sector is seen to be too weak to meet the challenges of the 2030 Agenda and most governments face huge debt. Yet over the last few decades, corporate income tax rates have plummeted by more than 20 percentage points (see the section “Taxation” in this volume). In South Africa, the peak was 52 percent in 1992, but it dropped to 27 percent in 2021. In spite of lower taxes, corporations’ ‘illicit financial flows’ amounted to 3-7 percent of GDP (i.e. $25 billion) according to Treasury officials (Planting 2019).

Neoliberalism is conceptualised not only as a policy paradigm and a hegemonic ideology but also as a distinctive form of governmentality (Scherrer 2017). Hence NPM advocates specific changes such as restructuring of civil service departments into arms-length agencies or corporate entities mainly through contracts and competitive mechanisms such as contracting-out and internal markets and performance-based accountability.

In general, NPM has meant new governance arrangements with different roles for the ‘hollowed out’ state as an ‘enabler’ rather than as implementer and bigger roles for consultants and external agents. NPM typically depicts organised labour as inflexible and resistant to change (Mpofana and Ruiters 2019). It argues for an ever-expanding consultant industry. Leading bureaucrats receive bonuses and subsequent appointments in the private sector in what is termed ‘a revolving door’ (Beetham 2013). From the private sector’s standpoint, policy churn in the form of changes of policies and PPPs is ‘rational’ since this allows for enormous profits (see also Dutta et al. in this volume).

But even the World Bank recognises that if not adequately regulated, privatisation frequently leads to corruption and fails to deliver improvements, greater competition or increased foreign direct investment (Rose-Ackerman 1996). The Bank and other privatisation advocates acknowledge that a strong, autonomous state with independent policy makers and a robust regulatory apparatus are ‘preconditions’ for successful privatisation – an irony given that ‘state failure’ is one of the premises of marketisation (Estrin and Pelletier 2018).

Perpetual neoliberal reform

One of the key reasons for institutional instability and policy churn, according to Peck (2001, p. 452), is a neoliberal dynamic of almost “perpetual reform… there is always another solution over the hill.” Additionally, David Beetham (2013, p. 45) notes, instead of governments controlling the excesses of the corporate sector in the public interest, they have become increasingly its “chief promotional agent”.

Diane Stone (2004, p. 561) argues that NPM, “spread around the globe because of the existence of a global ‘fashion-setting’ network of management consulting firms and growth in the use of external consulting services by governments (and) large consulting firms such as PriceWaterhouseCoopers, KPMG or Andersen Consulting established ‘government consulting divisions’ advocating the adoption of a more managerial approach in government.”

But all states are ‘captured’ to one degree or another and in various forms or by coalitions of capitalists, highly-paid consultancies which form a shadow state, with collaborationist trade unionists and NGOs. This leaves the ideal ‘autonomous’ state as a largely mythical construct. The state, as Marx argued, is a moving contradiction.

How might we reframe the debate? For Marx the commodity form (money) become the ‘battering ram,’ destroying old norms. Capital became the measure of all things. Privatisation and deregulation are rather much like extended primitive accumulation and commodification. Commodification entails the transformation of community relationships, formerly untouched by commerce, into commercial relationships. Under capitalism, many goods and services which previously had no market value or were self-provided within households and communities have been brought into the market fold and mass production. New commodities Commodities The goods exchanged on the commodities market, traditionally raw materials such as metals and fuels, and cereals. are created with expanding markets to new geographic areas and new sectors that may not yet have been marketised, while a deepening of commodification is accomplished through the deregulating exchange mechanisms, allowing further penetration of market principles into under-marketised spheres.

The extent and pace of commodification and decommodification over the longue durée can be seen as part of a larger, dynamic process of change, one that is unique to capitalism and central to an understanding of uneven development and capital accumulation and class struggles (Bond and Ruiters 2017). We also need to situate de-commodification within class struggles (Polanyi 1956; Esping-Andersen 1990; Fraser 2017). Capital is repeatedly bailed out by the state (public money serving private ends in the name a false universal called the ‘economy’), especially under circumstances considered ‘too big to fail.’

The most extensive state bailouts of capital yet recorded are in fossil fuel subsidies given to companies guilty of high greenhouse gas emissions. Using a conservative measure of the damage done by such emissions ($60/tonne of CO2), the IMF (2021) records $5.9 trillion in current annual subsidies, mostly implicit insofar as climate damage goes untaxed. In South Africa, which has the world’s lowest carbon tax ($0.42/ton for most polluters from 2019-25), the annual subsidies are $50.6 billion. Other estimates are $3000/tonne, putting these mainly implicit subsidies at five times the country’s GDP (Kikstra et al. 2021).

But aside from the sphere Marx called ‘free gifts of nature,’ at the heart of the capitalist mode of production is the commodity labour power. Its transformation within the system of wage labour is the source of profit, hence “Our investigation must therefore begin with the analysis of a commodity” (Marx 1978, pp. 302–303). Primitive accumulation, while seen as an ‘original phase,’ continually prepares the ground for the commodification of human bodies and nature, and has been shown – starting with Rosa Luxemburg’s Accumulation of Capital in 1913 – to be a more or less permanent process, especially via imperialism and re-colonisation, for which privatisation remains a vital tool (Harvey 2003).

This requires that we re-imagine what public and the state means as a form of civilisation and solidarity. Public service bodies act as channels through which public culture is sustained, reproduced and reframed, and environmental values are conserved. In Africa, such notions of community, solidarity, ‘Ubuntu’ (i.e., “we are who we are through each other”), and African socialism – as well as Pan Africanist sensibilities – have long animated progressive political culture and justified the need for SOEs.

Post-apartheid infrastructure commercialisation and mega-project crises

Before reviewing the crises associated with these projects, especially those currently supplying network infrastructural services, it is important to remember how many of the post-apartheid investments were aimed at finding Public Private Partnerships in financing, operations and ultimately ownership, with many featuring commercialisation. These were especially evident in telecommunications, transport, electricity and water.

In 1997, when a 30 percent share in the state-owned Telkom telephone system was sold to a Houston/Kuala Lumpur alliance, problems soon arose. For fixed-line telecommunications, the cost of local calls skyrocketed as cross-subsidisation from long-distance (especially international) calls was phased out. As a result, out of 2.6 million new lines installed, at least 2.1 million disconnections occurred, due to unaffordability. Immediately, 20,000 Telkom workers were fired, leading to ongoing labour strife. A second fixed-line operator was first discouraged then encouraged under pressure from competing commercial interests, and a regulator (with integrity) was ultimately dropped from the selection process. Attempts to cap fixed-line monopoly pricing by the regulator were rejected by the Texan/Malaysian equity Equity The capital put into an enterprise by the shareholders. Not to be confused with ’hard capital’ or ’unsecured debt’. partners via both a court challenge and a serious threat to sell their Telkom shares in 2002. Telkom’s 2003 Initial Public Offering on the New York Stock Exchange raised only $500 million, with an estimated $5 billion of Pretoria’s own funding of Telkom’s late 1990s capital expansion lost in the process. A collusion pact on pricing and services gave windfall profits to the two main private cellular operators. And persistent allegations of corruption stymied the introduction of a third cellular operator.

Similar problems arose in the transport sector, also characterised by private operators and partial-privatisations. The commercialised toll roads across the country were often unaffordable to the poor, especially those living in the immediate vicinity. Private kombi minivan taxis remain extremely dangerous, unregulated and ungovernable, due to profitability pressures. Air transport privatisation included the collapse of the first regional state-owned airline following privatisation, South African Airways’ disastrous corporatisation mismanagement by a chief executive imported from the US and subsequent renationalisation of the 30 percent share owned by (bankrupted) SwissAir, and major security glitches and labour unrest at the Airports Company of South Africa. There was constant strife with the ANC-aligned trade union which threw ports privatisation into question. The increasingly corporatised passenger rail service shut down many feeder routes (originally based on migrant labour routes prior to kombis); although unprofitable, they had been crucial to rural economies.

The electricity sector commercialised more slowly, but Eskom fired 30,000 workers as it transitioned to a public corporation with a profit motive. Much higher tariffs were imposed on residential customers, the rural electricity grid’s expansion was slowed. Then came widespread disconnections – affecting millions annually – of households who fell into arrears on inflated bills, leading to resistance transcending marches and protests, and extending into illegal reconnections that in Soweto alone reached 86 percent of all households the utility was supplying.

Water and sanitation outsourcing began with fanfare but ultimately affected only 5 percent of municipalities. In the spirit of privatisation, however, local governments adopted a 100 percent cost recovery policy during the late 1990s at the urging of central government and the World Bank. Where there had been commercialisation, it was a failure, e.g. in the small town of Nkonkobe and nearby Queenstown and Stutterheim (Ruiters 2002). In the city of Mbombelo (Nelspruit), London-based Biwater departed in disgrace after not extending services to most poor people and disconnecting many other low-income residents. In Johannesburg’s black townships (not white suburbs), Paris-based Suez was attacked by communities for imposing pre-paid water meters, substandard sanitation and refusal to disclose basic information about the utility (Ruiters 2007). Sufficient counter-pressure – including mass protests and vandalism of water meters disrupted cost-recovery systems by 2006. But across South Africa, cost-recovery dogma led to mass disconnections of water, and in 2000-01, to the continent’s worst-ever cholera outbreak.

A parallel albeit quite different set of problems emerged in the electricity sector, for by the early 1990s, the new Eskom generators suddenly were producing at more than a third capacity than needed. That saw Eskom finally roll out electricity to low-income households, but simultaneously provide massive subsidies to the aluminium smelters so as to mop up the surpluses. This proved a headache for decades to come. Columbus steel was privatised, but when ownership was taken by Vladimir Putin’s oligarch ally Roman Abramovich (Evraz Highveld Steel), it was milked and by 2005 run into bankruptcy.

In the more recent period, all the mega-privatisation projects are considered failures. The Gauteng electronic tolling system was charged by the SOE Sanral at far too high a rate which immediately led to mass payment boycotts (reaching 73 percent of users thus destroying the tolling system). The fast Gautrain from Johannesburg to Pretoria ended up needing major unanticipated operating subsidies.

The government’s National Planning Commission (2020) took a hard look at the cost (and time) overruns on the main 2010s mega-projects, and declared nearly all far in excess of originally estimated costs: for instance, an Eskom Pumped Storage Scheme was four years late and cost 290 percent of the original budget. The new airport at Durban cost 242 percent of the original budget, although it opened on time for the 2010 World Cup. The main oil pipeline was six years behind schedule and cost 250 percent more than originally budgeted. The most expensive mega-projects – Eskom’s Medupi and Kusile coal fired power plants – were 293 percent more expensive than expected and were eight years behind schedule, costing the economy much more in lost output due to electricity blackouts.

There are two directions out of the broader quagmires of state network-infrastructure failures described above. The first is to continue blaming the state as an intrinsically inefficient, corrupt site for goods and services vitally needed in South Africa’s economy, especially export-oriented minerals. The second was to recognise that South Africa’s failed privatisation, commercialisation and deregulation of especially network infrastructure was not a function of the state, per se, but of its management, its leadership’s ideological orientation and the milieu of widespread private sector corruption, neoliberal public policy, the business sector’s gross fixed capital formation strike, and austerity. By adopting the first line of argument, ANC leadership confirmed in mid-2022 that the ruling party was rapidly moving to an even more explicit endorsement of private-sector operations, as large parts of network infrastructure continued to fail (Omarjee 2022). Activists in the left-wing labour federation and its social movement allies – the “Cry of the Xcluded” movement – adopted the second argument, but the balance of forces was unfavourable to their interests.


The South African case of privatised, commercialised and deregulated network infrastructure confirms the most serious concerns expressed over the past few decades about contemporary state managerial, ideological and service-delivery weaknesses. The concerns discussed above are readily articulated in class terms, but broader principles are at stake. In any socially-, economically- and environmentally-sound infrastructure project, there are important public benefits (whether under the label ‘pro-poor’ or having characteristics of ‘public goods’ or ‘merit goods’ or ‘positive externalities’ or ‘multipliers’).

But over time in South Africa (and many other sites), especially after the 1990s-era introduction of neoliberal state logics, the public interest has been largely downplayed. Aspects of state services recognised as universally-desired or -required by society, and especially those considered to offer a potential ‘commons’ of mutual interests in decommodifying ever more features of life, were replaced by individualised consumption norms.

Providing network infrastructure is now dominated – especially within states suffering NPM ideology – by the profit-centred strategy of commercialisation and, once full-fledged privatisation then kicked in, by the profit motive. Instead of positive multipliers, many more negative externalities were generated, just as in the private sector. When it came to emissions of greenhouse gases (or transport of coal), for example, South Africa’s SOEs Eskom and Transnet (and former state oil firm Sasol) were exceptionally irresponsible. Moreover, while socio-environmental externality costs were increasingly socialised, deregulation allowed these tendencies to generate a rise in privatised monopolistic profits, from what should have been ‘natural monopolies’ provided by the state.

When it came to social demands for network infrastructure such as household water and energy, there were occasionally breakthroughs won mainly by social movements whose resistance strategies and tactics rose to fierce levels, e.g. illegal reconnection of disconnected electricity in townships such as Soweto (where by the early 2020s fewer than 15 percent paid their bills in contrast to the vast majority whose connections were illegal). Labour’s resistance to privatised state services was often expressed – and was occasionally successful – when trade unions declared strikes (e.g. NUMSA against Eskom).

Environmentalists also forced energy supply to be renewable in the face of state strategies still favouring coal generation as recently as February 2022 (at the country’s northernmost Special Economic Zone). In that case and many others, however, South Africa’s rulers pushed forward with the most notable form of state failure: the mega-project. No matter how unsuccessful, mega-projects continued to motivate an allegedly developmental approach to state building, though the harsh project-based realities revealed systemic corruption as a driver of class formation.

These are the contradictions and socio-economic-ecological struggles that can be found in a South Africa where simply removing white settler-colonial rule in 1994 was only a fraction of the struggle for a genuinely democratic, developmental state. The period of state degeneration was most acute during the Zuma era but in many respects even more blatant forms of neoliberal corruption – a more rapid rush to privatisation, commercialisation and deregulation of network infrastructure – have been recorded since he was replaced by Ramaphosa in 2018.

No version of a mass Workers Party or a genuinely left-wing political organisation appeared on the horizon. So it would be up to critical forces in civil society to stiffen their own resistance to these processes in localistic ways, while envisaging a future state they could control and not just pester from the sidelines, one committed to supplying far-reaching network infrastructure, but of an eco-feminist-socialist character.


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Patrick Bond

is professor at the University of Johannesburg Department of Sociology, and co-editor of BRICS and Resistance in Africa (published by Zed Books, 2019).

Greg Ruiters

is at the University of the Western Cape School of Government



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