Stagnation at home and fence-sitting abroad are costing the country dearly, and the costs are only rising.
South Africa is facing two fundamental challenges, one internal, the other external. Its response to both – or failure to respond to either – will define its future prosperity and position in the world. A policy of indecisive drift will not resolve either.
Internally, the government must tackle the incompetence and graft that have undermined the delivery of vital services – above all, energy and transport – and that are doing serious damage to the prospects for economic growth.
Externally, South Africa’s efforts to sit on the fence between East and West – as it sees them – is being made increasingly uncomfortable by the war in Ukraine. Economically, its fortunes lie overwhelmingly with the liberal world economy. Politically, the old alliances with Russia and China still carry weight. The recent row with the US, threatening trade, and the invitation to President Vladimir Putin for the BRICS Summit suggest a crunch is coming.
It is the internal challenges that preoccupy most South Africans most of the time. “Load-shedding”, the euphemism for power cuts, is getting heavier, more costly, and more disruptive. As South Africa heads into winter, there is even talk of a potentially catastrophic grid loss. The government has resorted to hiring Karpower generator ships (at great expense), and the private sector is increasingly taking its own steps to reinforce generation capacity, including through growing investment in renewable power generation. Sales of solar panels are reportedly going through the roof. But they would rather have a grid that worked.
Former CEO André de Ruyter’s exposé of the incompetence and corruption at state energy supplier ESKOM has made it harder for the government to shuffle off responsibility for the woeful collapse in generation. State capture may have been exposed and contained, but it is still far from being rolled back. So hopeless has the government been that Afrobarometer reports nearly 60% of South Africans would prefer ESKOM to be privatised as the only way to get a reliable power supply.
This crisis illustrates that the ruling African National Congress (ANC) has become less a coalition of constituencies and more a patchwork of self-interested cliques who are reaping benefits from the state and passing them on exclusively to their loyal clients. Rent-seeking rather than service delivery has become the order of the day, and a reason to hang on to power. Buying off those cliques to keep himself in the presidency seems to be all Cyril Ramaphosa can manage. The ANC has rusted in power: the façade of the state remains, but behind it is decay that will bring the façade down if left unaddressed.
The last serious plan to reform the economy was Trevor Manuel’s National Development Plan, launched in 2012. More than half-way to its 2030 target, little has been achieved. Of course, Covid and the Ukraine war interrupted all plans; but they have equally underlined the urgency of reform. South Africa ought to be bouncing back, with mineral prices high, surplus labour and – at least once upon a time – the best infrastructure in Africa. Instead, it is bumping along the bottom.
There is plenty of entrepreneurial and economic potential in the country. In the recent Financial Times survey of the Fastest Growing Companies in Africa, one third of the top 100 companies were based in South Africa, in sectors as diverse as fintech, IT, healthcare, energy, education, and agriculture as well as mining. But many of these companies lack access to the right kind of funding and feel that government is more an obstacle than a support to their efforts. Yet it is still the private sector that is going to create the jobs needed to employ the 50-70% of young people currently unemployed.
The lack of international investment and governmental reform will cost the economy dear in a few years’ time. Sweating assets will keep production up for a while, but a future decline in output is unavoidable unless investment increases now.
And that is where the second challenge becomes relevant domestically as well as globally.
Since 1994, the ANC has tried to balance South Africa’s economic engagement with Western markets – in 2022, 36% of its exports went to the EU, US and UK, against 25% to Africa and 10% to China – with a political commitment to non-alignment and close party contacts with Russia, China, and liberation movements across the world. The Ukraine war and now the BRICS Summit in August are testing that balance.
Though initially quick to condemn the invasion, the South African government subsequently rowed back. And, in March this year, President Ramaphosa blamed NATO expansion for the outbreak of hostilities, echoing Russia’s own justification for the war. That, together with the alleged loading of weapons onto a Russian vessel in South Africa last December, provoked a rare public criticism from US Ambassador Reuben Brigety. Though the row has been defused, the implication that South Africa’s privileged access to US markets under the AGOA trade deal (worth $2.7 billion in 2021) might not survive Congressional scrutiny when renewed in 2024, has been firmly registered. No Russian, Chinese, or African markets could compensate for that.
Putin’s indictment by the International Criminal Court (ICC) for child abduction poses a particular challenge for South Africa as host of the 2023 BRICS Summit. ICC indictments of incumbent heads of state are particularly problematic. In the case of both Presidents Uhuru Kenyatta of Kenya and Omar al-Bashir of Sudan, the indictments drew attention to their crimes but also inhibited diplomatic efforts to address the underlying problems. This made it difficult for others to discuss with and pressure them.
South Africa, which still belongs to the ICC, has been here before. When al-Bashir attended the African Union Summit in Durban in 2015, civil society groups took the government to court to arrest him while he was in the country, as required for ICC members. The courts supported the case and the government had to swiftly and surreptitiously smuggle al-Bashir out of the country, embarrassing everyone. If Putin shows up in August, this will happen again. Some in the ANC have urged the government to withdraw from the ICC as an interfering “Western” institution (though most African states are members), but this cannot be done before August.
Sitting on the global fence is becoming increasingly uncomfortable for South Africa. It will not dismount, but the pain is now economic as well as political, and the cost is rising.
Overall, the ANC appears to have become so introspective that it is losing touch with both its own citizens and the outside world. With a fragmented opposition, its chances of retaining power in next year’s elections, even if forced into a coalition, are strong. But as one observer told me, the only political party that was growing fast was the Apathy Party – and that itself poses problems for the country as a whole. To save its skin, the ANC needs to reform itself and the country, and fast.
