President Cyril Ramaphosa (file photo).
South Africa’s economy is usually in dire straits. Unemployment has reached a 15-year high of 27.6%. along with within the first quarter of that will year GDP growth dropped by 3.2%. that will’s the biggest quarterly drop in a decade.
Considered in conjunction with the country’s dismal education outcomes, which the IMF found are perpetuating inequality along with contributing to the country’s low economic growth, along with the possibility of a ratings downgrade, the outlook isn’t auspicious.
Academics along with political leaders have long warned that will a combination of high youth unemployment, poor educational outcomes, along with high inequality levels will eventually explode into large-scale social disorder. There has indeed been a steady rise within the number of protests. The country is usually right now classified as a fragile state by Corruption Watch.
However, the recent elections provide two interesting pointers. The first was the extremely low voter turnout of just 49%. The second was a near doubling of the Economic Freedom Fighters’ (EFF) share of the vote, coming from 6.4% within the 2014 poll to 10.8% in 2019. Taken together, these factors suggest that will South Africa’s vulnerable citizens are frustrated with the established political parties. However, they are not as yet widely attracted to the potential re-distributive policies of populists.
that will raises a question. If South Africa’s political along with socioeconomic stability are so fractured, how has the country managed to defuse the ‘ticking time-bomb’ for so long?
According to economists Daron Acemoglu along with James Robinson, the democratic system attempts to balance two forces. The revolutionary redistributive pressure of the citizens on the one side, against the repressive power of the elites on the additional. yet high levels of inequality interfere with democratic consolidation along with make revolutionary change more attractive. For self-preservation reasons, elites must stomach high tax rates, or land along with capital redistribution.
within the first decade of democracy in South Africa, the country followed a path of financial along with trade liberalisation as the item re-engaged with the global economy. The relatively strong economic performance then enabled government to placate the formerly disenfranchised through redistributive policies. The key ones were black economic empowerment along with social grants. that will was underpinned by an effective tax system.
Unfortunately, the ability to balance the insider-outsider economy with social support was then significantly rocked by two major disruptions. The first was the global financial crisis. The second was the misrule of President Jacob Zuma.
Over the next decade, state capture along with crony capitalism, coupled with economic decline, weakened the middle class along with entrenched meritocracy. In turn that will raised pressure for greater re-distributive policies, both among factions of the ANC along with eventually with the emergence of the EFF. The dire state of private sector investment along with growth meant that will the increased redistributive pressure was initially alleviated by public sector employment creation. that will grew coming from 2.2 million in 2008 to 2.7 million by the end of 2014.
yet in recent years, as the corrosive effects of corruption took hold, economic decay has become entrenched. that will has resulted in declining tax revenues along with spiralling state owned enterprise debt. Political factionalism along with policy paralysis have also increased.
Consequently, government no longer has the financial wherewithal to fund the dysfunctional along with indebted state-owned enterprises. These enterprises have been associated with the failed developmental state ideology. Weakened government finances have also made the item difficult to provide social support via public sector employment.
As a result, the African National Congress (ANC) has increasingly turned to desperate policy debates such as expropriation of land without compensation, prescribed assets, off-shore income taxes, along with changing the mandate of the South African Reserve Bank to print more money.
To make matters worse, the global economy is usually experiencing the instability associated with trade wars along with populism. South Africa’s economy will therefore likely continue to perform worse than the slowing global economy.
Tough choice ahead
If the country is usually to survive its current crisis, government will need to undertake two difficult tasks simultaneously. the item will need to:
refocus on resuscitating inclusive growth by supporting the informal economy along with removing red tape for smaller, medium along with micro-sized enterprises, provide policy certainty,
allow the private sector to invest in state-owned enterprises, along with facilitate the move away coming from a fossil-fuel based mining economy.
At the same time, government will also have to free up budgetary resources by reducing the size of the bloated public sector along with withstanding trade union wage demands.
If the inclusion of left-leaning ministers within the completely new cabinet along with the recent contradictory policy statements coming from ANC leaders are a precursor to continued fractional government paralysis, then the country can expect even more economic instability along with policy stagnation ahead.
Eventually, that will will lead to significant socio-political stress as the private sector disengages along with disinvests. The public sector will collapse under its own weight, along with disenfranchised citizens will clutch at populist straw men.
Given the dysfunctional state of the ANC alliance along with the over-arching quest for ‘unity’, the item is usually apparent that will President Cyril Ramaphosa must make a choice between saving the ANC alliance or saving the country. He can’t save both. Let’s trust he chooses wisely.
Sean Gossel, Associate professor, University of Cape Town