Daily Maverick
Dailymaverick logo

Business Maverick

Business Maverick, South Africa

After the Bell: Is SA’s situation hopeless but not serious, or serious but not hopeless?

After the Bell: Is SA’s situation hopeless but not serious, or serious but not hopeless?
Tim Cohen
By Tim Cohen
27 Apr 2023
Facebook
2
South Africa celebrated Freedom Day on Thursday, one of the most remarkable days in global history, but it did so this time with a collective heavy heart.

Colin Coleman sent me a copy of a report he oversaw when he was head of the SA branch of Goldman Sachs after 20 years of democracy. The 20-year report card makes such fond reading now compared with the 29-year report. In a sense, it illustrates how wildly SA went astray.

After the first two decades of democracy, there were some warning signs, but generally, the mood was cautiously optimistic. Now, after almost 30 years, the outlook is outright gloomy, with all of that reflected in the figures. Here is the absolute key number: In 1994, about 5.2 million people were looking for jobs but couldn’t find one. In 2013, that number had decreased to 4.8 million unemployed. It’s now sitting at 7.8 million. Seriously.

There are other indices too, and they are uniformly depressing. SA entered the democratic era with a debt rating by S&P of BB. Just after the election that was improved to BB+, then to BBB in 2003, and BBB+, well into investment grade, in 2005. By 2012, things were headed downwards, and it was back to BBB. Now it sits at BB-, lower than it was during the dying years of apartheid. How is that even conceivably possible?

A host of these indices points to the same trend: a gradual improvement until around the time of the Global Financial Crisis of 2008/09, but the country just never bounced back the same way the rest of the world did. 

What went wrong?


How did SA go so wrong so quickly? There was no change in government; politically the ANC continued to bestride the country.

For a crisis this big, you need several factors to combine. Internationally, the position of emerging market countries, with the notable exception of China, generally weakened. The financial crisis hit investment flows, which were extremely volatile anyway. The extended period of commodity weakness also hit commodity exporters hard, and they have only really bounced back recently. I suspect the collapse of Zimbabwe was also a factor, combined with a huge influx of immigrants which put a strain on SA’s social services and job markets. 

But the biggest change is that although the ANC continued to rule, huge shifts were taking place within the party. The party’s centre of gravity was pulled leftwards; with the sudden advent of the EFF, the left wing of the ANC predominated during the Zuma years.

Of course, corruption within the party, which existed but was comparatively trivial during the Mbeki years, just exploded during the Zuma years and began eating the party out from the inside, as all cancers do.

More than corruption


But there is more to it than just corruption. Two other factors are important. First, there is policy rigidity within the government, combined with poor governance. Policies that were developed in the 1990s and have transparently not worked, such as the mining policy, remain in place without even the slightest hint that they will change for the better.

And these policies, such as they are, are poorly implemented. It’s occasionally so bad it’s close to being funny. Just one example: the Department of Public Enterprises has been struggling for the past year to sell the national airline for R51. You know, I think I have R100 lying around somewhere. If it’s a money issue, then by all means, I’ll pay double. Let’s just get it done.

Intellectual poverty


The second factor is the high level of intellectual poverty in SA’s ruling class. Forgive the arrogance, but it is nearly impossible not to notice this sad state of affairs. The excellent work that people, for example, on the National Planning Commission have done to isolate problems and suggest solutions has gone flying over the heads of the body politic. And this is not just in the ANC, but in the higher ranks of the civil service and large chunks of the private sector too.

There is no deep sense of how economic growth is achieved. It’s entirely awol. In its place is a heightened sense of entitlement and self-righteousness and, yes, ignorance.

A friend mentioned a quote to me from the turn of the 20th century Viennese writer Karl Kraus, which has stuck in my brain: “The situation in Berlin is serious but not hopeless. The situation in Vienna is hopeless but not serious”.

I’m trying to work out which one of those options applies most to SA. Perhaps a bit of both. DM/BM

Categories:

Tags: