The Strange Case of the 24 Cuban Engineers

or: Why our bad developmental policy is good developmental policy for Cuba.

What I want to do for this post (my first) is to introduce a few of the concepts I’ll be referring to in subsequent posts, without getting too deep into the nitty-gritty! We’ll get to the theory, but without the practical application, things tend to get a little boring or end up being vague generalities, too abstract to be useful. I’d like to avoid that.

Of course, this is assuming I make it to post #2. I think my thoughts on the ‘issue of Cuba’ are fairly uncontroversial, but I’ve already seen some teeth bared since I expressed my opinions on that great swirling vortex of hatred, otherwise known as Twitter. And when it comes to Twitter discourse, South Africans can be nasty.

So, what’s with Cuba?

On Monday (the 19th), The Department of Water and Sanitation announced its plans to bring in 24 Cuban engineers to assist with South Africa’s infrastructure issues and share their expertise. The price? R64 million.

Minister Lindiwe Sisulu believes the deployment of these engineers will benefit rural settlements, where water conditions are poor and infrastructure lacking. These engineers are a short-term solution to a problem, she says, that local engineers are either not equipped or not willing to deal with. What’s more, the Cuban engineers will be able to impart their knowledge and technical skills to our own water engineers in provinces like Mpumalanga, Northern Cape, Free State, and North West.

The condemnation of this announcement has been pretty much unanimous, with, to my knowledge, only the Economic Freedom Fighters coming out in support of the government’s decision. In a statement released by the EFF, they welcomed the decision and said:

The fact that Cuba’s role will primarily be the transfer of skills, reveals that their purpose is not that of milking South Africa dry, but that of developing our nation to be a credible global competitor that is able to provide critical services to the people.

These are, of course, noble goals. Skills and technology development are crucial to any developing economy, and the more we can learn, borrow and steal from countries further up the ladder than us, the better.

The problem is… Well, this isn’t the first time Cuban water specialists and engineers have been deployed to South Africa to help with water infrastructure. Nor is it the second time. It’s not even the third time.

In 2001, Cuban specialists were spread around the country to assist in sanitation, water services, and geo-hydrology. Then again, from 2004–2007, Cuban engineers and geo-hydrology experts were deployed across South Africa. They were tasked not only with aiding in the building of crucial infrastructure but to “plug the gaps in the skills arena for South Africa.”

Then again, in 2015, Cuban engineers, technicians, and water scientists arrived in South Africa to assist the Department of Water and Sanitation. Of the thirty-five engineers, twenty of them returned to Cuba three years later, while the last fifteen only left in 2019. According to Minister Molewa, these engineers were to earn “less than half a million rand per person per annum.”

In a statement defending the decision to import the necessary labour, Minister Molewa said it is:

[...] important to note that the Cuba co-operation makes proviso for the pairing of Cubans with young South Africa engineers that will be sourced directly from University as part of skills transfer.

Sound familiar? That’s because Lindiwe Sisulu has defended her own decision to utilise Cuban engineers in much the same way. According to the Minister, Cuban engineers have been imported to transfer skills and knowledge around water and sanitation because South African engineers do not have the necessary specialities in particular areas.

Not so much a short-term solution, then, is it? And if we’re being charitable—which becomes increasingly difficult when you start considering the sheer amount of money spent on outsourced labour (spoiler: it’s well over a billion to Cuba alone)—it’s not a very efficient solution either.

Where are the skilled engineers, water specialists, and technicians that were set to learn from these “co-operative” ventures? If these initiatives were successful, we wouldn’t still be relying on outsourced expertise. Either, first, because the underlying issue itself would have been resolved, or because the skills impartment would have succeeded and our own engineers would be able to solve the problem themselves.

Well, according to Consulting Engineers SA CEO Chris Campbell, there is an abundance of highly skilled and experienced local engineers that would provide a more sustainable solution. Solidariteit has provided a list of over 100 engineers with the skills and expertise to deal with the water crises and, according to Action SA, they’ve had over 3,000 submissions as a result of their Hire our Engineers campaign. What’s more, the CEO of the South African Institute of Civil Engineering, Vishaal Lutchman, said that:

I may not fully agree that the skills are not available. We have many engineers that leave for the reason of not being non-patriotic, they leave because there is no work.

But these concerns have fallen upon deaf ears and have for some time. And, unfortunately, the story doesn’t end there either.

Since 2015, the South African National Defense Force has spent nearly one billion rand on Cuban experts who have been deployed in order to assist their program to refurbish old military vehicles. Military vehicles that were mostly made in South Africa by state-owned manufacturer Denel—which is currently on the brink of collapse. Then there was the two-hundred million rand oops made by the SANDF over the unapproved Cuban COVID-19 drug, the hundreds of millions spent on the Cuban medical brigade (a decision I think one can fairly describe as controversial) and,  of course, the most recent deployment of yet more engineers.

If by now you don’t think this is a problem, then you should at least be able to accept that we’re spending a lot of money on expertise that doesn’t come from within South Africa.

This is endemic of a greater problem. Whenever the South African government is faced with a policy decision, particularly one relating to developmental policy, it seems determined to make precisely the wrong decision.

For a developing economy, importing skilled labour is only a good idea if a) you’re going to gain a tech advantage out of it or b) you engage in skills-learning so that you can solve the issue yourself going forward. That’s pretty much it. Otherwise, you end up with parasitic relationships in which the surplus of skilled labour in developed nations can simply be exported to developing nations, reducing the impetus to produce equivalent skillsets themselves. Not only that, the amount of money we’re spending on overseas experts is astronomical.

The question you’ve always got to ask is this: Is this Good Developmental Policy? To put this into perspective. Solidariteit built their three-hundred million rand Afrikaans technical college under budget and ahead of schedule, while the SANDF spent nearly a billion rand on outsourced labour. Construction of Sol-Tech began in September of 2019 and ended just over a year later. For less than one-third of the amount spent on Cuban technicians, South Africa could have built a Technikon to meet the need for qualified experts and already had its first generation of technicians working on refitting the old military vehicles. Better yet, the money saved could have been spent on keeping Denel from caving in on itself and getting into the export game! Maybe we could start increasing the export of our own skilled technicians and help Cuba and other allies with their infrastructure in the form of mutual co-operation. 

So, that's a resounding no to the question of whether or not our outsourcing was good developmental policy, then. By all accounts, we already had skilled personnel available to assist the SANDF in their endeavours anyway.

Now, perhaps, there may be a cost-to-benefit ratio for some of the above that may justify the expenses: humanitarian necessity, trade agreements, or administrative burdens that limit deployment of our own experts in these fields, but that should raise concerns of their own.

Even if outsourcing this labour appeared cheaper than utilising local experts, this is money that is taken out of circulation and given to the Cuban government—this is, in part, how Cuba manages to keep its own universal healthcare thriving. The experts themselves are given a stipend to live off, and there is some controversy over how Cuba’s exported labour market is paid, as well as a bunch of other ethical concerns. But that aside, the point is that the money is, for the most part, removed from circulation within South Africa’s economy. The money does not get spent downstream of the earners on local products and local services. This means less money being spent on local businesses, which means less profit, and a smaller GDP. The actual cost of outsourcing is far higher than the initial outlay makes it appear (if one is to compare the impact of hiring local vs outsourcing on our economy). So, the only argument I can see that would justify outsourcing is that we simply don’t have the available skills in South Africa.

To be absolutely clear: the outsourcing of labour to fix critical infrastructure is absolutely justifiable if domestic solutions are not available. However, repeating this process over and over again, without developing the skills ourselves through previous engagement with these experts when they have been brought in means that there is something fundamentally wrong with the way we’re operating.

As a result, what South Africa is doing, and has been inadvertently doing for years, is bankrolling the developmental policies of other countries other than our own.

What’s more, countries like Cuba and Russia—and even China—are not countries we want to look to for our agricultural and industrial policy. While high levels of education are, no doubt, good for democracy, Cuba is an example of how this does not necessarily correlate with prosperity (having lots of graduates doesn't mean you'll see sustained growth). Without a strong foundation of agriculture and industry, the rest won't follow. Cuba, which imports most of its food and has a surplus of professionals it needs to export in order to provide them with employment, is on a path that it will struggle to maintain. In a sense, perhaps this is Cuba's "developmental" policy. While South Korea and Japan embraced steel and the automotive industry; Malaysia, its electronics; and others fell into textiles; Cuba created a form of export discipline out of its professional class. As it turns out, a humanitarian product of Cuba’s policymakers is also good business. Cuba’s biggest export? Its doctors.

Nevertheless, as the developing world sees its own growth in the professional class, demand for that sort of labour will diminish. And, as it has not managed to embrace strong agricultural and industrial policy early on (thanks in no small part to harsh US sanctions) it'll have a host of new issues to overcome.

So, what is good developmental policy, and where have we been going wrong? (Aside from outsourcing).

The South African steel industry is a great example of where our government has stood at a fork in the road and, time and time again, made the wrong decision.

Steel is a pretty good indicator of where a country stands in terms of industrial development (and industrial development is a pretty good indicator of growth). First, if you're making your own steel, it means you're creating jobs, which in turn feed the economy. Second, it means you don't need to import in order to manufacture goods that are part and parcel of an industrialised nation. Any stimulus that goes into the steel industry is likely to have a chain effect, benefiting related industries and making them more competitive on the international market. Third, it means you can export the steel to other steel-consuming countries. But what's more, if you've efficiently industrialised, it means you've succeeded in creating a strong agricultural base too. As they say:

If you want industrialisation, you better prepare for agriculture!

Steelmaking is a key South African industry, making up 1.5% of our GDP and providing 190,000 jobs. But it is also a value multiplier. Charles Dednam, the secretary-general of the South African Iron and Steel Institute, claims that the steel industry value chain multiplies the value of South African iron ore by a factor of four and is at the heart of South Africa’s energy and water-supply infrastructures—sectors that have been on the decline for many years.

A big part of RSA’s exports: Ore & Metals

In 2020, iron and steel made up around 6% of South Africa’s exports, while ores, slag, and ash made up over 14%. Vehicles (another industry connected to the steel industry value-chain) made up over 12% of our exports. According to Dednam, every 1,000 tons of steel produced locally adds R9.2 million to our GDP, provides three jobs directly and three indirectly, and enables all of the necessary developments for successful industrialisation.

Nexlog Export Data 2019

Unsurprisingly, steel being a good indicator of where you are in terms of industrial development also signals the pace at which a country is moving down the de-industrialisation path. Steel manufacturing’s contribution to South Africa’s GDP dropped by 44%, from 24% in 1990 to 13% in 2018. China’s immense production (making up over 50% of the world’s production) means that South African steel must compete with incredibly low-priced goods in a globally depressed market.

With poor transport and energy infrastructure, as well as low domestic demand (made lower by competing, cheap final products, the result is that a country with bad industrial policy must compete on its home turf against countries with good industrial policy. Our own steel imports have steadily increased, while our manufacturing has diminished. ArcelorMittal South Africa, our primary steel manufacturer, cannot compete with international production facilities. The government’s import tariffs (20%) protect ArcelorMittal from international competition in the local market, but the downstream steel industries suffer, as their own products must compete with global finished products (even in the local market) sourced from cheaper materials. As these downstream industries are not afforded the same protection, the result is a decrease in demand for their (more expensive) finished products, which translates to a decrease in demand for ArcelorMittal steel. Not only that, it means both ArcelorMittal and downstream steel industries will struggle to compete in the global market, which means fewer exports.

Trading Economics RSA Imports

Any protectionist policies that do not encourage and enable competitive pricing will create monopolies that can and will gorge themselves on the protected domestic market and engage in rent-seeking behaviour (until the domestic market no longer has the capacity to provide any demand). NEASA’s Gerhard Papenfus put it simply when he said, “there is no alternative” but for AMSA to invest in modern production facilities if it wants to compete internationally. That means pumping money into infrastructure and engaging in proactive policymaking that will meet the needs of our local and regional actors.

ArcelorMittal’s current monopoly is counter-productive. One might look at free-market critiques of the current government policy and its attempt to “pick the winner” without creating a competitive environment for other entrants. This is partly true. Mathew Cuthbert is quite right when he says that government ought to open up the market to other entrants, but I don’t think simply lowering input costs for companies in the steel industry would allow for RSA companies to compete with international steel industries that have benefited from hardcore industrial policy. Sure, it’ll work in a protected domestic market, but that’s not good enough! Downstream local industries need to be able to utilise local steel at a rate competitive enough for them to compete with other finished steel products imported, and then again on the export market. What we need is export discipline.

As a manufacturer, actually becoming competitive internationally will have the chain-effect of assisting local downstream steel manufacturers to become more competitive domestically against the import market and in the export market (no longer having to suffer the cost of bloated local steel pricing).

But what’s all this got to do with Cuba? Well, nothing, and everything! We can’t get a seat at the table if we don’t focus on our own developmental policy. By relying on outside expertise without gaining a technological or skills advantage, we undermine the potential for our own industrial development. That is not to say that we should not co-operate with other countries in order to learn from them or engage in humanitarian ventures, but rather that we should use such ventures as a step toward a policy of non-reliance. If these engineers that arrived in 2001, 2004, and 2015 did succeed in teaching our own experts the skills necessary, then where are they? And if it’s simply the case that our engineers, who did learn the skills on one of these co-operative endeavours, are unwilling to work in the rural areas, then the stated goal of “skills development” needs to be revisited, as it is clearly not fulfilling its purpose.

Importing technicians from overseas to help fix our military vehicles is obviously bad policy. The same is true for bringing in farming experts, German engineers, etc.

Some have said that we are gaining learning from our relationship with Cuba and point out that South African students are studying medicine abroad. While that is certainly true, it comes at a cost. And it turns out, it’s quite a big cost (over double what it would cost to train these doctors locally). I get the impression, perhaps naïvely, that people think Cuba is training our medical professionals for free. This would be along the lines of a mutually beneficial agreement: we pay Cuba millions in order to assist us with infrastructure problems, and, in return, they assist in the training of our own experts as part of the cost of those millions spent.

But that’s not what’s happening. The price of educating South Africans in Cuba has been just over two million rand per student. It cost the government around one hundred and thirty million in 2019. This program had been growing larger since its inception in 1996 (with mixed results) but appears to be in the midst of being rolled back.

And we’re not even a major trading partner of Cuba’s anyway. In fact, less than 0.001% of Cuba’s imports come from South Africa. In turn, South Africa imported just over four million dollars worth of Cuban goods in 2020. That’s less than half what we import from Kazakhstan and just a little more than our imports from Tokelau (an island I’d never heard of before looking through the numbers). Given that Cuba imports most of its food (due to its own particular type of developmental policy), and South Africa’s agricultural sector plays an important role in our export efforts (around 10% of our exports), this strikes me as strange for supposed allies. China and Spain are slowly reducing their trade with Cuba, so there is room for the South African export market here.

Trading Economics Cuba Imports

Again, another area where skills development could be exchanged for trade agreements, and in a way that would benefit our own developmental policies! I suppose, in a roundabout way, increasing trade with Cuba would go some way to reducing the issue I mentioned above: that the money is being taken out of South Africa’s economy and not being spent on domestic goods and services. Stronger trade agreements would remedy that or at least reduce the actual economic cost.

To put it simply: Our approach to development cannot be reduced to the exercise of paying back old debts or signalling solidarity with a country that has often found itself isolated in its battle against imperialism. Yes, foster mutually beneficial relations, but not at the expense of our own development. Even if there is a skills gap in South Africa, or our own engineers are too expensive or refuse to assist, did we look to the international community and ask if someone could do it better, quicker, and cheaper? Who knows, but Sputnick Ratau, the Director of Media liaison at the Department of Water and Sanitation, when asked what makes Cuban engineers better than other international engineers, admitted that this choice was not about competition with other countries but about agreements formed with Cuba. Again, is this good developmental policy?

I say no.

If you’ve made it to the end, well done! I had not intended for this to be so long, but the more I wrote, the more I felt I needed to write. Going forward, I’ll try to keep them to a shorter essay format! Anyway, at the end of each of these posts, I plan on mentioning whichever book it is I’m currently reading. Perhaps I’ll do some (short) reviews in future too!

At the moment, I’m reading John Laband’s The Land Wars. I picked up a copy at a Bargain Books sale for only R75 after spotting it at Exclusives (where it was not R75). Anyway, I’m about halfway through it, and it’s proving to be a great read. As the title suggests, the book digs through the various conflicts in the Cape’s history as successive waves of settlers steadily pushed its frontiers forward.

There is a lot of detail within these pages, tracing the roots of the unfolding conflicts between the settlers and the indigenous peoples, and the consequences they had upon both the colonists and the San, Khoikhoin, Xhosa, Mfengu and Thembu people. There is, of course, a lot of War in this book, but each conflict is contextualised within the greater politics of the time. It helps that it’s well-written and enjoyable to read!

Until next time. Maybe.