Treasury’s role in South Africa’s political economy: a study of an institution at the center of class project in the era of transition

Abstract

Treasuries all over the world are central to the hegemony of capitalism, including a central role in managing capital flows across space, both within and beyond national boundaries. These institutions are an outcome of social struggles reflecting racial, economic, ideological, class, and political conflict. This study explores the Treasury’s role in South Africa’s political economy during the 1980s and 19’90s, when neoliberal policies were adopted before and during democratisation. During the transitional period, the Treasury’s centrality and institutional reconfiguration were class projects, reflecting conflicts surrounding strategies adopted by both state and capital to address the falling rate of profit and overall over-accumulation of capital, and later to address resistance to neoliberal policies. South Africa’s success in adopting and implementing neoliberal policies before and during democratisation depended on the Treasury, especially its role in implementing fiscal austerity. The Treasury changed how it worked with local and international capitalists, the Bretton Woods Institutions, other government agencies, and society.

The reconfiguration of the Treasury resulted in a powerful institution that dictates economic reforms without political accountability in post-apartheid South Africa, giving the institution political powers that it did not possess in the past. The reconfiguration of the Treasury was set in motion by restructuring the inner workings of the state apparatuses, in particular economic policy reform. However, there was resistance to neoliberal policies. Or, put differently, there was an alternative to neoliberalism within the Left in political groups outside of the state that challenged neoliberalism. The study argues that with the help of Bretton Woods Institutions, the Treasury adopted and adjusted neoliberal policies, in part through a Reconstruction and Development Programme (RDP) that was originally adopted to do the opposite. Swyngedouw calls this “post-politicisation.” The Treasury argued that it was merely augmenting the RDP when it imposed the Growth, Employment, and Redistribution (GEAR) macroeconomic strategy, which again made the Treasury the authority on economic policy without contest, aside from trade unions and the Communist Party which were then brought back into line by the Presidency of Nelson Mandela. So, to keep neoliberal policies in place, the Treasury officials adopted economic policy formulation strategies in a way that didn’t involve consultation with those adversely affected, no matter who was the finance minister or what their political views were.

During the 2000s, much of the disciplining role that treasuries played could be understood as a function of top-down instructions—or at least guidance—from the Bretton Wood Institutions, reflecting a geographical hierarchy of power that ran from Washington to Wall Street, London, Frankfurt, Paris and later other international sites where investors purchase treasury bills. In South Africa’s case, there was much more evidence of “homegrown” ideological coherence with Washington’s agenda, even though international flows of capital were also a decisive factor once exchange controls were relaxed from 1995. In future, to achieve redistribution, create jobs, and reduce poverty will require an inclusive, consultative, and democratic process to formulate economic policies away from the Treasury. For this to happen, the study concludes that South Africa needs to reverse neoliberal policies and activists from political and social movements must challenge the Treasury’s power through more radical modes of contestation within the broader political economy.