A “Tunisia Moment” Coming?

Niall Reddy

A PROMINENT COMMENTATOR and a brother of the former president, Moeletsi Mbeki caused a major stir last year when he announced that South Africa is headed for a “Tunisia Moment.” The vociferous denial that the comment elicited from local elites was itself evidence of a growing consensus, now encompassing much more than the odd Marxist analyst, that South Africa is headed towards total social crisis.

As the eurozone crisis and signs of fatigue in Asian economies seem likely to arrest the already anemic global recovery, that conclusion seems ever more unavoidable. This situation is the outcome of the African National Congress’s Faustian pact with big business, which left the uneven structures of apartheid capitalism intact and sacrificed substantive distribution for the accumulation of a small elite, embedded with financial capital.

Accumulation and the MEC

Zavareh Rustomjee and Marxist economist Ben Fine coined the term Minerals Energy Complex (MEC) to refer to the “evolving system of accumulation” in South Africa.(1) They identified the emergence, through the early 20th century, of several mining mega-conglomerates that grew on the back of lucrative mineral rents from South Africa’s bountiful reserves of coal and precious metals, gradually merging and absorbing competitors until only a handful of firms remained.

By the middle of the century these firms had expanded to gain a controlling stake in numerous key sectors of the South African economy including beneficiation [processing of ores], engineering and, crucially, finance. At the same time they developed a close synthesis with the South African state, which devoted massive resources to bolstering accumulation in MEC sectors, including the establishment of large public enterprises in electricity and steel. The system of legislated apartheid which emerged in the 1960s can be linked to the demand from the MEC for cheap migrant labor.

The authors intended the concept to denote not only the significant weight of mining and related industries in the domestic economy, but a structural economic complex that imparted a particular dynamic to the overall trajectory of accumulation in South Africa.

Through the 1980s, MEC capital found its interests inhibited by the pariah status of the apartheid state and a labor system incapable of providing an adequately skilled workforce. This and a confluence of other factors made a continuation of apartheid unviable by the early 1990s.

The ANC assumed its part in the transition process with widespread legitimacy but internal discordance amongst its various sections. A party of mixed class and ideological composition, the ANC lacked the organizational traditions and working-class representation needed to deliver major change.

Radical elements that did exist were subsumed by those co-opted in an energetic campaign by local and international capital. The victors quickly consolidated a longstanding process of collaboration with big business through policies of elite formation euphemistically titled “Black Economic Empowerment” (BEE) — implanting the new managers of the state in big business and the MEC, in particular its financial divisions.

Neoliberalism After Apartheid

The neoliberal macroeconomic framework that emerged from the “elite transition” seemed centrally geared to managing the steady flow of capital abroad, legally and illegally, and ensuring a secure environment for financial profit. Liberalization precipitated an orgy of mergers, acquisitions and unbundlings (peaking at 630 M&As in 1998) among corporates eager to capture BEE deals and ameliorate political risk by diversifying abroad.(2)

The traditional MEC, centered on six core conglomerates, dispersed in this process, leaving a much more diffuse and internationalized complex, but seemingly still based on the nexus between minerals activity and finance with the same determining influence. Capital controls were steadily dismantled in an offering to business that culminated in the decision to allow major firms to relist themselves overseas. During the 2000s illegal capital flight averaged at 12% of GDP, peaking at 20% in 2007.(3)

Finance has been the fastest growing sector of the post-apartheid period, appropriating around 20% of Gross Domestic Product (GDP) by 2010. The South African sector resembles the parasitic U.S. model — overwhelmingly disposed to service mortgages and consumer borrowing while contributing little to productive investment, which is funded instead through retained earnings or securities markets.

Acquisition of financial assets exploded in the 2000s with commercial banks and other monetary institutions doubling their holdings to almost R430 billion (roughly $52 billion — ed.) by 2007. Households held almost R200 billion in the same year – a twofold increase from 2005.(4) There was also a marked increase in the financial portfolios of non-financial corporations.

This process has infected the very central nervous system of the South African economy, leading to a prioritization of shareholder value and short-term speculative gain over real investment, and entrenching a thoroughgoing fiscal conservatism and marketized approach to policy formation along with the interests that sustain them.(5) A constrained state has been unable to lead even meager efforts to diversify out of capital-intensive MEC sectors. The little industrial policy that has been implemented has gone largely to white-elephant megaprojects associated with mining, energy and steel.

Outside of finance, communication and a few MEC sectors, the only real growth has been in services, mostly reflecting a consumer-debt fuelled boom in retail along with waves of outsourcing and externalization from other sectors. The MEC has remained at around 23% of GDP and, crucially, just under 60% of exports (2010), while the GDP share of non-MEC manufacturing has shrunk by 7% to around 15% over the last two decades.(6)

Devastating Impact on Workers

The impacts of MEC-based neoliberalism on the South African working class have been devastating. A failure to attract investment in anything but finance and MEC sectors has left structural unemployment untouched and almost 36% of the labour force without work.

Precarious employment, primarily in security, cleaning and retail, forms the lion’s share of new jobs that have been created — a deliberate shift on behalf of capital to maintain apartheid levels of exploitation in the face of new trade union rights.

The data are murky, but unionists and bargaining councils estimate that between one and two million workers are now covered by some form of third party employment contract, designed to confound collective bargaining and impede legal challenges to unfair dismissal and maltreatment. This includes everything from a few professionals managed by highly regulated firms to the notorious “bakkie brigades” — the most superexploited workers trawled from desperately poor communities on the back of open-air vans (“bakkies”) for piecemeal work on farms and in factories, leading the union federation COSATU to coin the phrase of a “modern form of slavery.”

Real wages for all except the top decile have stagnated or shrunk, and labor’s share of GDP is now at a 40-year low of around 45%. The Gini coefficient of inequality, both within and between races (whites are relatively better off since apartheid) has stretched — making South African the most consistently unequal nation on the planet.(7) Workers have had to accept mountainous debt loads in order to sustain living standards, leading to a large profusion of potentially toxic debt. Domestic demand is, of course, languid, entrenching an export orientation that has so far only exacerbated the contradictions of the South African economy.

In the face of this, policymakers have seemed caught in a kind of cognitive dissonance, tweaking details but unwilling to confront root causes even as the crisis gathers.

Export dependency and exposure to international financial markets left South Africa prostrate when the global crisis stuck. GDP growth turned negative from the third quarter of 2008, only returning to positive territory at the end of 2009, with an overall contraction of 3%. Employment fared even worse. Around a million jobs, 6% of the total, were lost during the recession period.

The poorest and most marginalized workers in agriculture, informal and domestic work were the worst affected. Low-wage workers within the formal sector and those in the mining and commodity industries were also disproportionately hard hit.(8) Mining output dropped by 33% in the last quarter of 2008, export value fell by 24% in the first quarter of 2009, and by 2010 manufacturing levels were below 2005 levels.(9)

Infrastructure roll-outs totalling R300 billion in 2010, much of it to support MEC sectors through new power plants and transport networks, were the only other palliatives applied by the central government. Support to individuals and smaller companies was almost entirely lacking.(10) Absolute fidelity to neoliberal policies has ensured that South Africa was one of the worst affected “emerging nations.”

Amidst a flagging recovery, South Africa’s elites sought to quell growing opposition through a vigorous public campaign to market the 2010 Soccer World Cup as a panacea to the nation’s mounting economic woes. Unions were convinced to moderate wage demands and sign on to a social pact promising an equitable distribution of the profits from the tournament.

The outcome is well known and quite in keeping with the history of high-spectacle world events — vicious repression and social exclusion undergirded grotesque profiteering by soccer’s governing body FIFA, international corporations and local “parastatals.” The total bill for the tournament soared past R70 billion (over $8.4 billion), mostly sunk into white elephant stadia and needlessly revamped airports. Temporary construction jobs quickly dried up as former supporters struggled to identify any long term economic gains.

The hypocrisy and failed promises quickly dispelled worker passivity. A million-strong public sector strike, the biggest since democracy, ensued in the immediate aftermath of the World Cup and secured wage increases 3% above inflation. Incidents of “crowd control” recorded by the police, a proxy term for protests often centered around service delivery, soared to record highs of over 12,000 for 2010/11.(11)

A (not so) New Growth Path

In early 2011, amidst growing social resistance to neoliberalism, the government adopted its New Growth Path (NGP), which is to inform the macroeconomic future of the country. The document is characterized by rhetorical genuflections designed to paper over fundamental continuity with the past. It represents an eclectic admixture of Scandinavian corporatism and East Asian developmental statism, both elements ultimately limited by a renewed commitment to inflation targeting and an independent reserve bank.

Acknowledgment of the need for industrial diversification, fostering domestic demand and commitment to decent jobs, are welcome. But a contractionary fiscal policy, reaffirmation of monetarism and misguided faith in the agency of “class-compromise,” ultimately scuttle the transformative perspective of the document.

While employment creation symbolically replaces growth in key areas of policy focus, with five million new jobs ambitiously slated for 2020, the reality is that the NGP lacks any serious vision of a solution to the unemployment crisis.

Notwithstanding limited commitments to direct job creation through public works programs, once the rhetoric is uncovered it is clear that the responsibility to roll back stratospheric levels of unemployment is surreptitiously vested in the private sector — never mind the irredeemable failure of similar policies in the past.

Indeed, the NGP’s record in practice, a year and a half after its inception, is laughable. GDP growth peaked at the end of 2010 and the first quarter of 2011 at 4.8%, but declined quickly through the succeeding periods to an annual figure of 2.8%.(12) That is far below other “emerging” economies and less than half what would be required to meet the NGP’s ambitious employment targets at current rates of capital intensity.(13) In fact, with growth concentrated in the familiar finance, communications and MEC-linked manufacturing and mining sectors, narrow unemployment in the first quarter of 2012 was 0.2% higher than the previous year.(14)

Growth continued to slow in 2012, with every major economic indicator reeling in the face of the crisis in the eurozone, which receives almost a third of South African exports. A collapse of the euro and persisting fatigue in Asian markets is almost certain to trigger a renewed downturn.

These uncertainties have compounded ongoing capital strike: Far from investing, corporate deposits exceeded R530 billion in June and the small level of remaining fixed capital formation is now almost entirely accounted for by government spending.(15)

Despite this, and symptomatic of the intransigence of financial capital, Finance Minister Gordhan has refused to implement any measures to arrest persisting capital flight.(16) The only mild analgesic offered to South African workers by Treasury officials has been proposals to ramp up infrastructure programs, which formed the centerpiece of Gordhan’s budget speech in early 2012. Case studies of existing programs indicate that they could be an invaluable resource in tackling unemployment, but would need to be drastically expanded and redirected from MEC spheres of influence to provide desperately needed services.

That same budget speech drew shrill protests from conservative commentators who execrated modest increases in capital gains and dividends taxes, intended to finance public works, as an attack on the rich. In reality any loss to South Africa’s 1%ers, the top 100 of whom increased their wealth by 62% between 2010-11 to a combined value of R153 billion, was almost entirely offset by regressive decreases on personal income tax and the abolition of an alternative company level tax on dividends.(17)

Ultimately, any redistributive measures are completely undermined by the government’s continuing tacit commitment to a little-remarked stipulation limiting tax revenue to 25% of GDP, which appears to have its provenance in the 1994 negotiated settlement.(18) That rule means that even as the revenue service makes mild gains in clamping down on South Africa’s profligate tax evaders (the richest fraction of whom managed to keep R48 billion out of government hands last year), further breaks will inevitably be offered to the narrow base of corporate and individual taxpayers.

With government debt climbing to nearly 40% of GDP, $100 billion of which is owed to foreign lenders, notorious credit agencies Moody’s and Standard & Poors downgraded SA’s rating to negative. This, along with government’s unwillingness to wrest greater tax revenues from rich citizens and corporations, or contemplate a change in the mandate of the reserve bank, forecloses on any state-led program of the scale needed to resolve the unemployment crisis.

In fact, with the risk of another recession, the regime’s policy even jeopardizes existing social spending that has been vital to reproducing ANC hegemony.

Gordhan’s budget enshrined real decreases in SA’s network of social grants that provides the primary income to one-third of the population and is widely regarded as the thin bulwark against wide-scale social rebellion.(19) This was justified in terms of the need to absolutely prioritize employment in the allocation of state resources. But given the government’s unremitting failure to create jobs it could serve simply to fast-track the impending crisis.(20)

Despite the supposed commitment to “decent work,” the state took no action against labor brokers (contractors —ed.), who continued to expand voraciously through the crisis.

COSATU Under Pressure

COSATU, trapped in old modes of organizing under an ossified bureaucracy, has been largely unsuccessful in unionizing South Africa’s growing precariat. Eventually waking to the scale of the threat, the union called a general strike in early March to demand an unconditional ban on broking. The strike was generally viewed as a massive show of force for the unions with upwards of 1.5 million workers estimated to have downed tools.

The ANC, which appears increasingly dependent on COSATU for mass support given the erosion of its own political cadre and popular legitimacy under years of cronyism and poor delivery, was visibly threatened. A modest compromise was quickly proposed, involving legislation stipulating that workers be given the same rights as permanent employees after six months at a particular workplace. But labor activists argue this will only increase the turnover of brokered workers. Despite this, COSATU seems ready to acquiesce.

“Labor flexibility” has been a centerpiece of the ANC’s market-friendly economic policy and is deeply tied to BEE interests linked to the state. They are likely to relinquish it only under the most determined opposition, which the incumbent COSATU leadership, beyond the initial strike action, seems unlikely to provide. But even a highly implausible outright ban on brokers would not be a silver bullet for the problems facing workers. The broking lobby would hold the process up in the courts for years and may even succeed in winning a constitutional injunction based on the right to enterprise, as happened in Namibia. Failing that, brokers will simply reinvent themselves as service contractors or decamp to the black market.

COSATU’s stand against broking has provoked an intensification of what often appears to be a powerfully coordinated campaign by big business and the center-right Democratic Alliance (DA) to generate public anger at unions and turn unemployed against organized workers. Not a day goes by without a series of specious arguments splattered across the mainstream media by “experts” for hire, claiming that labor-aristocrats are keeping jobs from South Africa’s youth with greedy wage demands.(21) This despite the fact that honest research shows that half of the employed in the country earn less than R3000 (about $360) and one third earn less than R1000 per month (an amount which is divided, on average, amongst 10 dependents).(22)

The campaign took quite an unexpected twist in May when the DA bussed in unemployed youths from Johannesburg’s townships to march on the COSATU headquarters, demanding the union retract its opposition to a “youth wage subsidy” (a thinly disguised vehicle for business tax exemptions) only to be repulsed by thousands of angry, rock wielding unionists.

Of course the DA’s endeavors are impotent, premised as they are on the notion that there exist two discrete groups: “unemployed” and “organized workers,” rather than labor and its “reserve army,” who live in the same houses and share the same wage packages. Effective opposition to precarity requires broad working-class unity. But rising popular anger against brokers, particularly among politically important layers of underemployed youth — almost all of whom have had some encounter with “agents” operating out of poor communities — could provide the impetus for greater coordination between unions and social movements fighting for jobs and access to services.

Land Reform

A recent Human Rights Watch report drew attention to what peasant activists and farmworker unions had been saying for ages: that superexploitation in the countryside resembles a colonial atavism and a humanitarian crisis.(23)

As part of its rite of passage to a “sensible,” business friendly international community, the transition government agreed to a program for land reform effectively authored by the World Bank, turning on the principle of “willing buyer, willing seller.” Unsurprisingly there were few sellers “willing” to part with their land for the price any dispossessed buyers or a very unwilling state was able to offer. As such over 87% of agricultural farm land remains in the hands of white farmers, and fewer than 8% of targeted areas have been redistributed.

Living conditions of farmworkers and communities have stagnated or declined. In parts of the Western Cape the notorious “dop system,” where workers on vineyards are paid in alcohol, remains in place. Effective organization has been lacking, leading to individual acts of desperation and increasing levels of violence, often directed against farmers.

Instead of addressing the defunct framework for redistribution and providing greater resources for post-settlement support, the government has been pushing a re-feudalization of the countryside, notably through a Traditional Courts Bill that threatens to curtail the constitutional rights of rural dwellers in favor of greater power for tribal leaders. There is evidence that this is linked to cronyism and parasitism within the state.(24)

Land reform is understandably an emotive issue and an important axis of the potentially explosive situation in South Africa. Agitation for a Zimbabwe-style expropriation of white farmers has become a refrain for demagogues in the ANC Youth League.25 Whether they get their way depends on how the party and the ANC Alliance navigate through a crisis from which they cannot remain isolated.

Political Prospects

In 2007 grassroots frustration with the lack of delivery led to the ouster of President Thabo Mbeki — first from the top spot of the ANC and then from government — by his deputy, Jacob Zuma, who somehow succeeded in posturing as the candidate of the Left despite an unimpeachable record of support for Mbeki’s neoliberalism.

Five years on and four years into the crisis, major social unrest is once again fermenting tensions and conflicts within the ANC and the Alliance. The notorious demagogue Julius Malema, former head of the ANC Youth League and once one of Zuma’s most vocal supporters, became the symbol of a populist-nationalist-left opposition to his rule, carried by sloganeering around mining nationalization.

Malema has since overplayed his hand and been expelled from the party, but the powerful factions for whom he was a proxy (now appearing to coalesce around Zuma’s deputy, Kgalema Mothlante), and the social mood that compelled him, remain.

The year 2012 is a major one on the South African political calendar. The National Congress of the South African Communist Party will have concluded by the time this goes to print, and COSATU has its turn in September, before the main event, the 53rd National Conference of the ANC in December.

An ANC policy conference held in June was billed as pre-match for the end of year showdown. The position papers going in and the declarations coming out of that conference carried extra lashings of populist verbiage, centered around the notion of a “second transition to economic freedom,” but were thin on concrete measures or political lucidity. A few promising nuggets were to be found, such as end to the “willing buyer, willing seller” framework for land redistribution and greater commitment to Palestine solidarity. But then the gulf between rhetoric and action in the ANC’s recent past is world-historic, and any fulfilment of those commitments is contingent on changes within the ANC that seem hard to contemplate.

There were widespread reports of major, even physical, clashes at the conference, underscoring the extent of rot within the Alliance. But a clear reading of the political and social composition of the factions involved, as well the balance of forces within the party, is hard to gauge. Zuma, far more charismatic and attuned to the popular temperament than his predecessor, has so far succeeded in preventing the fissions within the party from forming neatly along the political spectrum.

The absolute most one can hope for in the near future is that the crisis engulfing the ANC will engender something akin to Lula’s Left Turn, where a changing balance of class forces impelled the Brazilian leader to fill the state with developmentalists and genuine reformists, allowing some gains for workers even while important aspects of neoliberalism remained.

But even that modest hope seems most unlikely. So far the South African ruling class has seemed incapable of even articulating, let alone unifying around, a program to resolve the crisis. The prevailing influence of purblind financial capital, deeply intertwined with the ANC elite, further blocks such an outcome.

For South Africa’s inevitable “Tunisia Moment” to have truly far-reaching potential, new revolutionary forces need to emerge — forces that will be strengthened, we can be sure, by the self-destructive path of the incumbent regime.

Notes

1. Ben Fine and Zaverah Rustomjee, The Political Economy of South Africa: From Minerals-Energy Complex to Industrialization, Boulder: Westview Press, 1996.
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2. Seeraj Mohammed, “The State of the South African Economy,” in John Daniel, Roger Southall, Prishani Naidoo Devan Pillay eds., New South African Review, Johannesburg: Wits University Press, 2010.
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3. Sam Ashman, Ben Fine and Susan Newman. “Amnesty International? The Nature, Scale and Impact of Capital Flight from South Africa,” Journal of Southern African Studies. 37(1): 7-25.
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4. Seeraj Mohammed, “The State of the South African Economy.”
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5. Sam Ashman, Ben Fine and Susan Newman, “The Crisis in South Africa: Neoliberalism, Financialization and Uneven and Combined Development,” in Leo Panitch, Greg Albo and Vivek Chibber eds., Socialist Register 2011: The Crisis This Time, Wales: Merlin Press, 2011.
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6. Sam Ashman, Ben Fine and Susan Newman, “Systems of Accumulation and the Evolving Minerals-Energy Complex,” in B. Fine, J. Saraswati and D. Tavasci eds., Beyond the Developmental State: Industrial Policy into the 21st Century, London: Pluto, in preparation, 2012.
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7. Haroon Bhorat and Carlene van der Westhuizen, Income and non-Income Inequality in South Africa: What are the Drivers and Possible Policy Prescriptions?, University of Cape Town, Development Policy and Research Unit: Working Paper 09/138, 2009
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8. Neva Makgetla, “The International Economic Crisis and Employment in South Africa,” in John Daniel, Roger Southall, Prishani Naidoo Devan Pillay eds., New South African Review, Johannesburg: Wits University Press, 2010.
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9. Sam Ashman, Ben Fine and Susan Newman, “The Crisis in South Africa: Neoliberalism, Financialization and Uneven and Combined Development.”
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10. Seeraj Mohammed, “The State of the South African Economy.”
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11. Peter Alexander, “Protests and Police Statistics, some commentary,” Amandla! Online http://www.amandlapublishers.co.za/home-page/1121-protests-and-police-statistics-some-commentary-by-prof-peter-alexander.
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12. South African Reserve Bank Annual Report, http://www.resbank.co.za/Lists/Speeches/Attachments/349/Quarterly%20Bulletin%20Summary%2021%20June%202012.pdf.
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13. “Government on Wrong Track for New Growth Path,” Mail and Guardian Online, 02/10/11 http://mg.co.za/article/2011-10-02-govt-on-wrong-track-for-new-growth-path-say-researchers.
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14. South African Reserve Bank Annual Report, http://www.resbank.co.za/Lists/Speeches/Attachments/349/Quarterly%20Bulletin%20Summary%2021%20June%202012.pdf
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15. “Cash Hoard Tops 530bn,” Business Day Online, 06/18, http://www.businessday.co.za/articles/Content.aspx?id=174326.
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16. The Finance Ministry is even endorsing more globalization and aggravating  its partner COSATU by pledging R2 million to an IMF “firewall.” “South Africa’s Dangerously Unsafe Financial Intercourse,” Counterpunch Online, 04/24/12, http://www.counterpunch.org/2012/04/24/south-africas-dangerously-unsafe-financial-intercourse/.
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17. “Motsepe Tops Sunday Times Rich List,” Business Live Online, 03/09/11, http://www.businesslive.co.za/southafrica/2011/09/03/motsepe-tops-sunday-times-rich-list.
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18. “Tightening the Belt,” Amandla! Online, 04/12, http://www.amandlapublishers.co.za/amandla-magazine/current-issue/1100-tightening-the-belt-by-amandla-editorial-staff.
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19. “At this rate the poor will be with us always,” New Age, 01/03/12 http://thenewage.co.za/Detail.aspx?blog_id=2060&blog_cat_id=1085.
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20. In fact some argue that because of casualization and precarity even successfully job creation cannot be counted on to secure “social cohesion.” Employment has lost its association with citizenship and hence its “integrative,” “disciplining” role in social reproduction. Franco Barachesi, Precarious Liberation: Workers, the State, and Contested Social Citizenship in Postapartheid South Africa. Albany, NY: State University of New York Press, 2011.
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21. “The Wage and Productivity Debate,” Amandla! Online, http://www.amandlapublishers.co.za/special-features/the-wage-and-productivity-debate.
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22. “Schussler Report is Pay in the Sky,” Mail and Guardian Online, 01/06/11, http://mg.co.za/article/2012-06-01-schussler-report-is-pay-in-the-sky.
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23. See “Ripe With Abuse,” Human Rights Watch Report, 2011 http://www.hrw.org/sites/default/files/reports/safarm0811webwcover.pdf.
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24. William Gumede, “Rising Tribalism in South Africa,” Pambazuka Online, 09/05/2012 http://www.pambazuka.org/en/category/features/82016.
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25. See “ANCYL’s Lamola in Hot Water of Land Reform Remarks,” SABC Online, 06/22/2012 http://www.sabc.co.za/news/a/60a08e004bb5bb539ca59f4e20b1a252/ANCYLs-Lamola-in-hot-water-over-land-reform-remarks-20122206.
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September/October 2012, ATC 160