Truck attacks: it’s all about market share

TRUCKS are burning on South Africa's highways once more, as they did in July 2021 when the apparent spontaneous combustion of the private sector's logistics machinery at Mooi River toll plaza set off nine days of devastating riots and looting.

In an attempt to formulate a premature explanation for arson attacks on 21 trucks since Sunday, Police Minister Bheki Cele claims the phenomenon is “business-related".

Well, for once I think he's right. You could even argue that he should know, because the government and the police very often know by name these warlords of the informal economy who are fuelling the destruction. Many of them do business with the state and have connections with the liberation movement.

The operational doctrine of a significant “business-related" cohort of these “entrepreneurs" was conceived in the ruling party's drive for a power monopoly in the formal economy's value chains.

Warlords target transport economy

What do the violence of the past 40 years in the taxi industry, the destruction of trains and rail transport and the burning of trucks on highways have to do with each other?

Public violence is probably the most conspicuous common feature. But the three battlegrounds also define the logistics system of the economy. In a certain way, criminal systems are competing with each other for market share in the transport economy.

The hijacking of the state and the economy by the ANC is accepted as almost normal, but it is probably no less harmful than the presence of the Guptas in Transnet and Eskom's balance sheets.

The criminalisation of the ANC has led to a new class of warlords in the informal economy with connections in the governing party and a determination to hijack the value chain of the formal economy.

What Cele is referring to is the value chain of South Africa's transport economy, which appears to be in the sights of these warlords in the most morbid way.

If South Africa still had any form of intelligence services, the identities of the arsonists and the entrepreneurs giving the orders would probably be known.

The intelligence services are obviously not totally ignorant about the provocateurs of violence in the informal economy. Those with an interest in stability rooted in intimidation are well known: they live in mansions, provide free perks to important politicians and live in public luxury without any fear of a lifestyle audit.

Their connection with liberation politics is historical, and their dependence on a criminalised state is financial as well as political in nature.

More than politics or crime

But if you want to understand the phenomenon of burning trucks by linking it to the July 2021 riots politically, the truth and reality will escape you.

It is not purely about politics and it is not as simple as crime. It is more likely to be understood as economic competition between empowered cadres trying to divide the highly rewarding value chain of the transport economy among themselves.

The burning trucks are in all probability the manifestation of the way in which an economic power monopoly is established in a value chain.

A proven paramilitary capacity for violence is necessary to protect market share. Those who are arrested create the impression of mere criminality, but as is the case with the taxi industry, the assault on South Africa's transport economy needs armed violence to reach a point of stability.

The same pattern occurs in the way the construction mafia works, the low-intensity “war" in the taxi industry, the destruction of Prasa's passenger transport and Transnet's freight transport. The crime cartels in the value chain and supply chain of Eskom, the mining industry and the logistics sector have exactly the same modus operandi.

In a certain way, the tense and violent nature of these phenomena represents a raw type of capitalism where competition is regulated by intimidation rather than by the statutory regulations of an established, constitutional democracy.

Prasa and Transnet

Due to increasing poverty, the informal economy is limited in terms of the profits and economic benefits it can deliver.

The next target for entrepreneurs in the criminalised informal economy is the value chain of the formal economy.

The supply chain that delivers goods and services to the state is fairly saturated with the presence of empowerment partners and cadres. Enabling legislation and the uncodified connection between the criminals, the state and the informal economy create the space within which opportunistic operators operate without fear of competition from the private sector or prosecution.

Between 2000 and 2010, gun violence on railway platforms caused passengers to use taxis on a large scale.

The reality is that the taxi industry initiated the shooting incidents without any fear of prosecution, precisely to lure millions of commuters away from the trains to the services it provides.

The looting of Transnet and Prasa infrastructure over the past two decades has ensured that these state enterprises will not be able to compete for market share with the warlords of the informal economy any time soon.

Unbridled chaos is not their friend

The misplaced perception sometimes exists that those responsible for the attacks on the value chain of the country's logistics systems have an interest in unbridled chaos, but the opposite is true.

They have an immediate interest in the type of order and stability in which market forces operate in a predictable imbalance to their advantage.

The monopoly a criminal entrepreneur enjoys in the informal economy by placing an essential product in the market in an innovative way is obtained by intimidating market competitors with violence.

In the formal value chain, by contrast, the potential for excessive profits is enormous. The ability of cadres and enabling partners to negotiate contracts with exorbitant profit margins with state enterprises is legendary. In the supply chain, crime, subversive behaviour and corruption are the connective tissue between the formal value chain and the informal economy. Cadres and operators functioning in this space manage their interests with the confidence of indispensable service providers.

In their ability to extract a share from the surpluses of the formal economy's value chain, they rival the effectiveness of a tax collector. Many chain stores and businesses in the immediate vicinity of the taxi industry pay a protection fee to taxi bosses with the same urgency as they pay annual tax to the South African Revenue Service.

Privatisation is often proposed as a solution in the effort to replace the functions of the state, but also to disrupt the corrupt and violent monopolies of informal operators in the formal value chain.

But the reality is that private sector entrepreneurs will have to use paramilitary security companies to protect their market share and infrastructure. Moreover, the criminal informal economy has the necessary political connections to protect them from entrepreneurs in the private sector. The prosecution of these empowerment entrepreneurs or warlords almost never happens.

There are no real examples where the state has succeeded in reclaiming lost territory from opportunistic operators in the informal economy. The so-called regulation of the taxi industry has been a futile theoretical exercise for decades.

Role of taxi bosses and Dudu in 2021

On Twitter, as in those dark days of destruction, the sinister war cry of Jacob Zuma's daughter, Dudu Zuma-Sambudla, echoes against the background of a profile picture with the Russian flag: “We see you!"

She is related to the taxi bosses who called for the restoration of order during the violence of July 2021. The losses caused to their ability to extract taxes from both the formal and informal economy forced them to seek order in the midst of chaos.

Ironically, their profits are based on the principles of an economy of scale and can only exist by monopolising 60% of all rail or road passenger transport. Their market share — in the absence of competition — is limited by the scarce capital of the working class and the recipients of government subsidies.

For four decades, the taxi industry has been successful in monopolising passenger transport by calibrating competition with force. The construction mafia, paramilitary competitors in the mining industry and empowerment cartels in South Africa's logistics sector are the most recent violent entrepreneurs forcing themselves into the formal economy's value chain.

To dismiss these phenomena as crime and/or corruption is a grotesque mistake. A bright light focusing on empowering entrepreneurs is a more logical starting point.

♦ VWB ♦

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