Shaken by an economic and political crisis, the country is in need of major reforms.
Twenty-six years after the end of apartheid, South Africa is the exception on a continent that is on a continuous upswing. Undermined by violence, corruption and nepotism, South Africa is regressing economically, socially, institutionally and in terms of the rule of law.
Growth in South Africa will peak at 0.8% in 2017, after reaching 0.3% in 2016. Inflation is at 6% per year. The unemployment rate is at 24.5% of the working population and is 54% for young people. The current account balance has worsened to a negative balance of 4.8% of GDP. The public deficit has widened with the drying-up of economic activity and has reached 4.1% of GDP. The public debt is at 52.5% of GDP whist reserves have melted away to 46 billion dollars, corresponding to six months of imports. As a logical consequence, the rand has suffered massive depreciation and South Africa’s sovereign ranking has been downgraded to speculative grade.
The problems of the South African economy are primarily structural. It is becoming less competitive, for its structures and costs are close to those of a developed country without the corresponding advantages in terms of skills, technology, infrastructure, financing and public services. The business environment is worsening with increased political, judicial and fiscal uncertainties that are having a particularly nefarious effect on the mining sector, on industry and on agriculture – the latter having been hard hit by drought. Immense inequalities remain –large numbers of townships still have no running water or electricity. Crime and insecurity are endemic. Xenophobic violence against immigrants is soaring.
In the space of a few years, South Africa has seen its share in the wealth of sub-Saharan Africa fall by 50% to less than 30% and, in 2014, its status as the leading economic power on the continent was lost to Nigeria. At the same time, it has been overtaken on the technological front by East Africa, notably by Kenya, one of the countries experimenting with a digital economy. Together with Russia and Brazil, it is one of the emerging countries that is coming apart, in contrast to the success of China and India, whose growth rates are around 6.6% and 7.5%.
At the heart of impediments to economic and social advance is the political crisis. Jacob Zuma’s rabble-rousing and racketeering has managed to bury Nelson Mandela and his “rainbow nation”. One scandal has followed another, from the 20 million euros of public funds spent on work on his house in KwaZulu-Natal, to the farming out of certain ministries and whole swathes of media, mining and energy operations to the Gupta family – the oligarchs of the new regime.
The crisis within the African National Congress (ANC) is now in the open. An electoral crisis, with the spectacular drop in votes (from 62% to 54%) in the local elections of August 2016, and the loss of the key cities of Johannesburg and Pretoria. A government crisis, with the reshuffle of 30th March which was aimed at getting rid of the Finance Minister, Pravin Gordhan, and which led to an acceleration in the fall of the rand and a downgrading of the country’s financial ranking. A parliamentary crisis, with a vote of no confidence being proposed – a vote that is constantly being put off by the ANC which controls 249 of the 400 seats. A social crisis, with an increase in the number of demonstrations – violently suppressed – demanding the president’s resignation. The crucial event is the ANC congress in December 2017 which will decide on Jacob Zuma’s successor. He plans to impose the nomination of his ex-wife, Nkosazana Dlamini-Zuma, over that of his vice president, Cyril Ramaphosa, who has the support of moderates and leaders of the economy.
South Africa has considerable assets: exceptional natural resources; a diversified economy with high-value-added services; Johannesburg as the main financial center of the continent; businesses in a dominant position in infrastructures, distribution, finance and consumer goods that are the backbone of African capitalism; highly-renowned diplomatic and military skills. But all this potential needs major reforms. On 11th July 2009, on his first trip to Africa, which took him to Ghana, Barack Obama stated in Accra: “Africa doesn’t need strong men, it needs strong institutions.” Today, South Africa is seeing the solidity of its institutions coming under threat from the autocratic and kleptocratic excesses of Jacob Zuma. Just as it freed itself from apartheid, it must now free itself from the ANC.
(Column published in Le Point, 27th April 2017)