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The slow burn continues in South Africa

Posted By on June 3, 2019 @ 12:52

Elizabeth II may have had her annus horribilis in the early 1990s, but she would—in the minds of many South Africans, at least—be thought to have escaped lightly. The ‘rainbow nation’ went to the polls in early May after its decennium horribilis, a lost decade in which GDP growth stagnated, unemployment skyrocketed and corruption ran amok. Among other things.

For the romantics, the worm began to turn in late 2017 when the ruling African National Congress (ANC) belatedly axed Jacob Zuma, a president who had achieved little besides synonymity with systemic sleaze over the course of two terms.

His successor, Cyril Ramaphosa, has since proclaimed a ‘new era of renewal [1]’, but the election shows that it’s been a hard sell. Reading electoral macro figures may be a flaky exercise at the best of times, yet there’s one conclusion that appears safe in this instance: there are pessimists aplenty to match those who cling to the notion that the glass is half full.

The ANC took 57% of the vote, a drop of 5% since the 2014 vote, and its lowest number since apartheid ended in 1994. There were also records to be found in those who didn’t bother voting. Of the 75% registered, only 65% turned up to vote, meaning that the ANC’s ‘mandate’ is drawn from 28% [2] of the electorate. Figures among the youth are more stark again. A mere 50% [3] of those under the age of 29 registered, down from 64% in 2014. And a meagre 16% of 18- and 19-year-olds registered.

It’s difficult to gainsay the sense of cynicism that pervades the majority. There’s no sign of the country escaping the vortex of high unemployment and low economic growth anytime soon. According to one recent study [4], South Africa’s performance across a range of economic, social and governance measures deteriorated more over the past 12 years than any other nation not at war. Describing the outlook as ‘dismal [5]’, former senior South African National Treasury official Michael Sachs has said that the ‘realisation is slowly dawning that this is permanent—an endemic and chronic condition. There is no magic bullet to take us out of this situation.’

At the political level—from where the real problem emanates—the ANC is riddled with factionalism, and Ramaphosa’s support base within the party is thin and unstable [6]. Zuma’s allies are clearly circling [7], hoping to wrest back control. There’s also the uncomfortable truth that representations of Ramaphosa as a political messiah are less the reality than a (largely white) fantasy. One of South Africa’s richest men, he symbolises not the poor, but an oligarchic elite [8] that trades in political access and patronage—and that has shown little to no genuine interest in the great unwashed. Even if he wanted to take a wide broom to his own soiled house, he couldn’t do it, because that would remove the ANC’s remaining purpose. Conspicuous consumption is, effectively, all that’s left—the grimy residue of a party that once strutted the world stage as the answer to moral decay.

The political room for broader economic reform is equally constrained. Looking over the fence at the opulent black political class and the still-wealthy whites, the mood among the underclass is more instant redistributive gratification than it is painful, long-term growth.

And so it follows that the solutions offered by the ANC are becoming increasingly perverse. In a situation where reform would be political suicide—with knives being drawn by those inside and outside—the temptation to reach for populist answers (aka national economic suicide) is overwhelming. Here, there are no ‘good’ or ‘bad’ factions of the ANC. Insanity becomes a matter of degree. Ramaphosa’s party enemies, throwing all caution to the wind, charge headlong down the path of radical populism. The party’s secretary general, Ace Magashule, deeply mired in the corruption of the Zuma era and facing investigation, has fulminated [9] against those who eat at the ‘well laden table of white monopoly capital’ and declared that ‘for as long as the poor are poor, the rich cannot sleep at night … [W]e are surely coming for what is ours.’ As he’s a man who appears to lack a scintilla of imagination, it has to be assumed that the layers of irony were unintended.

His prescription for revival was equally unimaginative, a simple parroting of the pseudo-far-left Economic Freedom Fighters, who took an unprecedented 10.8% in the elections: expropriation of white farmland, nationalisation of the reserve bank, a raising of the minimum wage, free national health insurance and free universal education, just for starters.

Most other policy positions seem sane by comparison, and so it is that Ramaphosa’s schizophrenia comes as a relief to some. But drifting in and out of the twilight zone isn’t going to rebuild the nation either. He has announced [1] that South Africa is on a concerted drive to restore business confidence, attract new investment, enhance the country’s global competitiveness, and deal with the rot at bloated state-owned enterprises.

Meanwhile, much is done to ensure the opposite. Another government bailout of the state-owned power utility—already in debt to the tune of around $50 billion—is in the pipeline [10], despite the fact that the government is itself massively overextended. For the debt-ridden public, a domestic debt-forgiveness bill [11] has been passed, which will force the banks to write off hundreds of millions in loans. That’s hardly a move that will encourage prospective investors to bring their money to South Africa—and it will inevitably result in the tightening of credit terms for the poor.

In the mining sector, where policy uncertainty, strikes and rising costs have deterred investment, the government is doubling down [12] on commandist rhetoric, telling two major companies with unprofitable businesses that they must reverse decisions to cut jobs, thereby balancing ‘shareholder expectations and societal expectations’. Of course, the takeaway for investors is, again, that funds sent to South Africa aren’t safe from political tampering. Better to go elsewhere.

Sometimes the attempt to have it both ways can be seen in a single sentence. The miners were told to reverse job cuts in order to boost investor confidence and grow the economy. Elsewhere, Ramaphosa told a conference of investors [13] that his administration would push ahead with land expropriations ‘but we must make sure that it doesn’t have a negative effect on the economy’. That’s an exquisite non sequitur if ever there was one. In other words, investors can be assured that the dismantling of private property rights will be done with the greatest of delicacy.

Even with the most disciplined government and populace in the world, South Africa would be facing a gargantuan task to turn around its waning fortunes. But with its politics firmly centred on the quick fix and the blameworthy Other, the gap between the key indicators and where they need to be will widen further. At best, the slow burn will continue. Considering the alternatives, that’s where the optimists might wish to pin their hopes.



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URL to article: https://www.aspistrategist.org.au/the-slow-burn-continues-in-south-africa/

URLs in this post:

[1] new era of renewal: https://www.weforum.org/agenda/2019/01/south-africa-continues-on-a-path-of-economic-renewal/

[2] 28%: https://www.biznews.com/thought-leaders/2019/05/13/myth-reality-sa-low-voter-turnout

[3] 50%: https://www.news24.com/Analysis/why-south-africas-youth-would-rather-protest-than-go-to-the-polls-20190414

[4] one recent study: https://www.dailymaverick.co.za/article/2019-04-18-sa-decline-worst-of-nations-not-at-war-model-shows/

[5] dismal: https://mg.co.za/article/2019-04-26-00-sa-economy-is-stuck-in-the-political-mud

[6] thin and unstable: https://www.dailymaverick.co.za/article/2019-05-20-cyril-ramaphosas-choices-constraints-and-the-question-of-trust/

[7] circling: https://www.news24.com/Columnists/AdriaanBasson/aces-anc-vs-cyrils-anc-20190519

[8] but an oligarchic elite: https://www.ft.com/content/42ef27d2-6c13-11e9-a9a5-351eeaef6d84

[9] fulminated: https://www.iol.co.za/news/politics/we-are-coming-for-what-is-ours-says-ancs-ace-magashule-23469684

[10] is in the pipeline: https://www.fin24.com/Economy/Eskom/eskom-keeps-investors-in-the-dark-as-debt-speculation-mounts-20190522

[11] domestic debt-forgiveness bill: https://businesstech.co.za/news/banking/314370/new-laws-threaten-south-african-banks-and-the-economy-nedbank-ceo/

[12] doubling down: https://www.bloomberg.com/news/articles/2019-05-21/south-africa-s-gordhan-says-mining-firms-must-reverse-job-cuts

[13] told a conference of investors: https://city-press.news24.com/Business/ramaphosa-to-investors-we-will-expropriate-land-but-fear-not-we-have-a-plan-20190516

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