South Africa’s Falling Fortunes

Posted by on Nov 6, 2013

South Africa’s Falling Fortunes

For the first time since the birth of democratic South Africa in 1994, the country’s economic fortunes have taken a sharp and substantial negative turn. In part due to the prevailing global economic conditions and in part, and more critically, as a result of domestic political economy issues the country’s growth has fallen consistently from an expected 3.4% a year ago, to the current projected growth of less than 2.5%.


However,  the two consecutive downgrades of the country’s  international credit rating, by rating agencies Moody’s and Standard & Poor, had much less to do with the falling economic growth per se as opposed to the structural political and socio-economic issues facing a government that appears unable to deal with the root causes of the complex issues at hand. Today, South Africa’s global rating is only two notches away from “the junk bond status”. This is a serious indictment on government’s ability at a time when Africa’s growth is on the rise, its development taking roots and many African countries enjoy rising international creditworthiness.


Over the past three months, a series of wildcat strikes have brought the country’s mining sector to its knees, and has spread to other sectors such as transport and manufacturing activities. The complexities of the socio-economic and political issues facing South Africa cannot be underestimated. As the most unequal society as regards income distribution, the country is further burdened by widespread poverty and deepening youth unemployment problem. More accurately, the country’s youths face a pervasive “unemployability problem”, thanks primarily to a dysfunctional and mediocre public education system.


Yet despite nearly two decades of evidence, the government refuses to account for its failures in the education field. Successive ministers of education, and governments in general, have offered a blend of dismissive political postures and defensive reactions to justify the failure of the education system. Yet South Africa boasts one of the most effective private schooling system.  Despite considerable public funding, a systemic poor public education generates graduates who are unemployable.


More broadly, the machinery of the state is incapable of dealing with the requirements of a fairly modern and complex economy, and even much less able to provide public services to the majority of the population that relies on the effectiveness of the bureaucracy to have education, health, and basic municipal services. Persistent denial on the part of the political leadership to acknowledge the deep rooted structural fault-lines within the public sector, and the ineptitude to take effective action have further compounded the frustrations and dissatisfaction of the masses.


The working classes in general, and the mine workers in particular, have been left in a precarious space. Whilst a number of highly connected political leaders of the ANC have amassed unprecedented fortunes via their connectivity to the government authorities, the working conditions of the mine workers have been left in the limbo. Neither the state bureaucracy is able to use its fiscal revenues to provide basic amenities for the workers, nor do the mining houses take seriously their commitments to their social and labour plans as required by their mining licence conditions. The dysfunctionality of the local government sphere complicates the situation even further. Moreover, the alliance between the union leaders and the ANC political leadership disarms the unions from consistent and effective focus on the workers’ interest.


In this milieu the political power relationships have exacted a heavy toll on the economy. After nearly two decades of democratic rule, South Africa today is more an unequal society than before, has serious and systemic  human skills problems, and its public service infrastructure riddled with mediocrity and incompetence, primarily caused by the ANC’s insistence on political patronage and deployment of its cadres at all spheres of local, provincial and national government.


Possibly more damaging for the economy than any other fault-line has been the rapid spread of corruption and abuse of public resources over the past few years. Corruption is the most pernicious tax, and highly detrimental to the poor in particular. Within the ANC leadership the issue is well-known and frequently acknowledged. However, there has been an evident lack of effective action against such corrupt and abusive practices, in part because many of the ANC’s high profile leaders have been implicated in, or suspected to have been involved in, such practices.  Moreover, increasingly the line between ‘black economic empowerment’ and corruption has become blurred.


Doing business in such a milieu has become more difficult and the risk to investment has risen sharply. The absence of a visionary and value-based political leadership to recognize the damage that such trends exact on the fortunes of the society is the real deficit in today’s South Africa.