When Nelson Mandela was elected president of South Africa in 1994, marking the end of the brutally racist Apartheid system, there was great optimism over the country’s future. The transition into a multiracial, multiparty democracy set in motion a nearly 15-year-long spell of economic growth that saw living standards rise and GDP per capita rise by 25%. Despite the 2008 global financial crisis, which also affected the southernmost African nation, optimism was not lost and the economy stabilized by 2010.
Then, the country became the first African nation to host the FIFA World Cup and was granted inclusion into the BRICS group, an acronym for Brazil, Russia, China, and now South Africa. This international group represented the major emerging national economies of the world who later joined efforts at reforming global economic governance. The latter development was a more significant one. It represented the possibility that South Africa could emerge as the most important economy in Africa and as a global economic force in its own right — when it joined the ranks with China and India.
However, the economic downturn first felt in 2008 was not just a blip on South Africa’s upward growth trajectory. Since 2008, growth and GDP have stagnated, and the number of people living below the upper-middle-income line fell by 10% between 2005 and 2010. Despite these worrying statistics, the country has yet to significantly rebound. Moreover, inequality in the country remains among the worst in the world, and since 2000 has increased slightly. Speaking to its dark past, inequality is often felt along racial lines, with the Black population having the lowest household income by far.
The Problems Keep Mounting
There are many reasons for this disappointing economic stagnation; it stems from events inside and outside the country. Externally, the global downturn in commodity prices in 2008 and 2014 was felt acutely in South Africa, a major exporter of minerals and alloys with trade representing around 60% of its GDP. The country’s internal struggles and controversies have also contributed to an increase in pessimism about democracy and the nation’s future. To blame for this pessimism is the years-long controversy regarding former President Jacob Zuma’s forced resignation and later his trial over corruption charges that shook the nation in 2018 and international confidence in the nation.
On top of all of this, the COVID-19 pandemic brought severe economic hardship and forced the government to borrow heavily to provide relief packages. Now, the path forward for South Africa is uncertain and filled with further economic struggles. The seemingly never-ending political drama will add additional stress to a nation hit hard by the pandemic. Plus, South Africa still has to address basic development needs such as clean water.
This is not to say that South Africa’s national situation is overly dire and its democracy is in jeopardy, as it is still among the most industrialized and educated countries on the continent. Yet, there is little doubt that political mismanagement has seriously hindered its once impressive economic growth. To return to this once impressive record, it will be necessary for South Africa to implement major structural changes in both the political and economic spheres.
Trouble Within the African National Congress
Former President Jacob Zuma was embroiled in controversy for much of the past 15 years. In 2005, then-President Thabo Mbeki first fired Zuma, who was serving as deputy to the president, over corruption allegations. Later, after being elected president in 2009, allegations of corruption soon resurfaced, which followed Zuma until his party forced him to resign in 2018. Charges against Zuma ranged from fraud to money laundering and racketeering, including those closely connected to two Indian businessmen—the Gupta brothers—accused of draining as much as $7 billion from the national treasury through state-owned enterprises (SOE). Eventually, the accusations became overpowering within Zuma’s own party. As a result, there was a struggle to replace Zuma as leader of the African National Congress (ANC), the party that Mandela founded and that has been in power since the end of Apartheid.
After being forced out of the ANC leadership, Zuma was pressured to step down as president in 2018 and has since gone on trial over his corruption charges. Replacing Zuma was Cyril Ramaphosa, a party veteran like Zuma but someone who was not generally viewed as corrupt. Zuma’s resignation did not come without consequences, however. Riots and violence have broken out periodically since his arrest, with factions loyal to him perpetrating much of the violence. They view Zuma’s arrest as an internal plot to get rid of the former president and have since destroyed businesses and infrastructure, resulting in huge amounts of economic damage and the loss of roughly 300 lives.
While this drama unfolded at the highest level of government, accusations, and investigations into corruption run much lower into the state apparatus. However, Ramaphosa warned that this corruption, both real and perceived, is a serious hindrance to South Africa’s continued growth and development, and has prioritized rooting it out internally within the government.
Economic Hindrances and Challenges
South Africa faces serious economic hurdles if it is to return to the steady growth last seen in the 2000s. Moreover, the corruption currently causing turmoil to the political scene also extends to its economic woes. The country’s large SOE sector, which includes companies such as energy utility Eskom, has been badly managed in the past decade and is generally seen as a source of corruption. This mismanagement and the sheer size of SOEs mean that South Africa’s economy has become vulnerable to their failure, and has added debt pressures at a time where debt is at historic highs.
Allegations at the highest level of government and an uncertain political climate may have also contributed to the decrease in foreign investment in recent years, which makes spurring growth more difficult, especially in innovative sectors. Poor business confidence and falling commodity prices have led to the Rand, the national currency, to fall significantly in value and left the government with a fiscal deficit. Additionally, current stimulus packages could push national debt to dangerous levels, which has resulted in many commentators recommending South Africa begin a period of fiscal conservatism spending, which would mean cutting back on various government spending.
As South Africa emerges from the pandemic, the government will need to address many developmental challenges. Lowering the country’s persistently high unemployment rate of almost 30% should be one priority, as this would boost the economy and partially quell recent social unrest. Improving a host of other development challenges like electricity outages and poor infrastructure will also improve the overall business climate. South Africa cannot wait for commodity prices to rebound—if at all. Given the country’s strong links with other major economies, there is an opportunity to expand growing sectors like technology, where it is already home to a large number of startups.
Looking Ahead
Despite experiencing continuous economic and political turbulence, South Africa’s democratic institutions have largely maintained their independence, and the country has not suffered any serious democratic setbacks. Against the efforts of former President Zuma and his allies, the courts and other pivotal institutions have upheld their mandate and did not buckle under political pressure. Moreover, unlike Zuma, who wanted to continue the expansion of the public sector despite its poor-performing productivity and ever-increasing wage bill, Ramaphosa is seeking external investments and rooting out corruption present in SOEs.
Removing deeply entrenched corruption anywhere isn’t easy and won’t happen overnight. It might be especially difficult to manage when going after certain populations and SOEs. Politicians and public servants at the receiving end could play the populist card and accuse the Ramaphosa government of being against South Africa or the South African people. These accusations would certainly not be beyond the pale of Zuma and his allies. Their mismanagement and corruption plundered a once hopeful South Africa into a decade of stagnation. The challenges that South Africa faced in the past decade will be difficult to overcome. Still, just as the nation inspired the rest of the world in 1994 with the end of Apartheid, South Africa may be able to regain its place as one of the major emerging nations of the world.
