SA must seize opportunity of tectonic global shifts to remodel its economy

Despite its success in restoring diplomatic and economic interaction between South Africa and the US, President Cyril Ramaphosa’s recent encounter with his American counterpart, President Donald Trump, also inadvertently cast an unflattering spotlight on South Africa’s problem of pervasive crime and governance failures. 

The globally televised Oval Office drama, broadcast in prime time, highlighted domestic troubles that successive post-apartheid governments have failed to tackle effectively.

It was a huge wake-up call for the year-old government of national unity (GNU) and an inflection point for the country’s democracy. 

South Africa is at a crossroads. It is caught in the middle of major geopolitical shifts and a global governance crisis, which has been amplified by the ascendancy of the Trump administration in the US, colliding with its internal governance failures. These governance failures are typified by a slew of social and economic problems that have hampered the country’s progress. 

These include a stagnant economy, high unemployment, poor public education and health systems, dysfunctional municipalities and state-owned enterprises, decaying infrastructure, endemic corruption, appalling public finances, widespread illegal immigration, an unwieldy and underperforming public service and rampant crime. 

Decisions required

This moment of global turmoil and domestic crisis calls on the country’s political leaders to make decisions about its future. It requires the GNU to make tough policy choices that will extricate the country from its social and economic stasis and launch it on a path towards national renewal and success. 

South African leaders will do well to draw on historical lessons in terms of how the country can confront global adversity and propel a new growth trajectory. Take, for example, how the country responded to the destruction caused by the onset of World War 2. The war galvanised many countries, including South Africa, to accelerate manufacturing, starting with munitions, arms and other critical supplies. In the aftermath of the war, South Africa built its industrial capabilities and raised its agricultural productivity. 

The foremost public policy consideration for the government at the time was post-war reconstruction. The Van Eck Commission, as well as the Social and Economic Planning Council, were set up with briefs to produce policy insights that would shape post-war development.

Their recommendations led to, among other matters, an increase in farm support, the creation of marketing boards for agricultural products and the expansion of manufacturing activities. The war acted as an anchor to ignite economic recovery, and import tariffs played a key role in nurturing the development of an infant industry. Medical supplies for military use were also produced locally. 

Structural change was manifest on several fronts in the post-war years, especially between 1945 and 1970. During this period, there was a strong emphasis on capitalising on the conditions created by the war to stimulate local production and build the country’s manufacturing capabilities. This sparked a rapid increase in national economic output and the growth rate, which averaged 5%. 

Second, manufacturing eclipsed primary production as the main driver of growth. Third, there was a marked shift in demographic concentration from rural to urban areas. The growth of metropolitan areas stimulated demand for infrastructure, housing and other amenities. Various state-owned enterprises created in the 1920s through to the 1950s contributed to the development of a manufacturing path.

Eskom was formed in 1923 to produce cheap electricity for the railways and drive industrialisation. Iscor was set up as a monopoly to maximise the processing of domestic ore and achieve vertical integration in steel production. The Industrial Development Corporation (IDC) was established in 1940 to offer cheap finance to spur industrialisation. The IDC was instrumental in the founding of Sasol in 1950, which was created to produce synthetic fuels, mainly from coal. 

Moreover, South Africa, under the Union Government, and later under the apartheid government, deployed industrial policy systematically. This combined tariff protection, import-substitution industrialisation and the creation of industrial champions anchored in cheap energy and steel to stimulate downstream production.

Industrial financing was funnelled to benefit not only the manufacturing sector, but also agriculture. These policy actions were central to powering South Africa’s industrialisation and to catapulting the country towards national self-reliance. 

This industrial transformation would not have been possible without visionary leadership, firm political will and effective governance. The state played a pivotal role in propelling South Africa’s industrial development and securing the economic advancement of poor Afrikaners.

Hendrik van der Bijl, a brilliant engineer and technocrat who served as Director-General of War Supplies in the government of General Jan Smuts, was the driving force behind the creation of Eskom, Iscor and the IDC. Other influential public servants and scientists of this era included Frans du Toit and Etienne Rousseau, respectively founding chairman and managing director of Sasol, as well as Hendrik van Eck, head of the IDC.

Opportunities in 2025