There’s cause to be optimistic about South Africa’s economic prospects

7 Mar 2024

South Africa’s economic trajectory is steadily changing for the better. It must be underpinned by South Africans acting together to intensify the reconstruction and recovery project.

Pessimism in South Africa’s discourse on the economy has been unrelenting. It is understandable that there is impatience with the constraints affecting economic growth and job creation, against the backdrop of a slow recovery from the devastating impact of Covid-19 and the slow burn of geopolitical tensions.

Of course, some of the negativity cannot be divorced from the election season, with many who hog media columns having their political preferences. But this may be too simplistic a conclusion, as there are layers to the doom and gloom. And evidence-based reflection may be kindling a new realism.

Geopolitics

The first layer of the negativity attaches to South Africa’s international relations, with the country having gone through tense moments around the Ukraine conflict, including the Lady R cargo ship saga and its implications for South Africa’s relations with the US.

Israel’s onslaught on Gaza and the bold action by South Africa in taking genocidal concerns to the International Court of Justice (ICJ) also generated apprehensions about implications for South Africa’s economy and security. In addition, South Africa’s strong relations with China have been thrown into the mix.

The dominant argument has been that South Africa is making choices that are against its national interest. Yet the pundits on these matters ignore equivalent choices made by most countries in their relations with China, with preferences for strategic derisking rather than decoupling.

On Gaza, the statement by US Vice-President Kamala Harris on Sunday, and the positions of European Union members — collectively and variously — show growing impatience with Israel cocking a snook at the ICJ. On Ukraine, the logic of Africa’s approach, aimed at finding a solution that takes into account the root causes of the war, has hardly been challenged.

With growing geopolitical turmoil, particularly tensions between China as a rising power, and the response of the US as a dominant incumbent, the question is whether a Thucydides Trap of armed conflict is avoidable, given the latter’s security doctrine. If the tensions escalate, Africa will have to find a balance that is premised on its economic and developmental interests and protection of its sovereignty.

In a research project that the Mapungubwe Institute for Strategic Reflection has initiated, the central argument is that South Africa should strive for a collective non-partisan approach to this, and avoid all manner of big power fifth columns.

Exasperation

The second layer of the negative discourse can be characterised as exasperation with the many difficulties that the economy faces. This is understandable. But the extremes in this narrative include assertions that the ANC was, from the inception of democracy, not ready to manage a sophisticated economy and has disastrously failed since 1994.

Ignored are the growth rates attained in the first 15 years of the new dispensation, the millions of jobs created, the growth in the middle strata, and many other indicators. The weaknesses of the past decade are piled together as reflective of systemic failure over all the three decades of democracy.

At the extreme end of this argument is the eerie suggestion openly expressed, for instance, in an SABC interview by one (African) participant at the DA manifesto launch event: that apartheid should come back and “the Boers” must rule, because the situation was far better then. Others openly vaunt nostalgia for Bantustan rule, with Bophuthatswana used as an example of a territory that used some mysterious “clan culture” to pursue a form of traditional developmentalism.

State capacity

The third layer of the negative discourse relates to poor state capacity reflected by the myriad real challenges, especially in electricity generation, freight logistics and water provision. But a sleight of hand is then used to discount the degradation of state entities during State Capture, which has proved difficult to reverse. It’s the ANC that did it, the argument goes, and its efforts to rectify the mistakes must be ignored.

However, it looks like the Ides of March are operating in counter-intuitive fashion, with some elements of realism starting to set in. Any “news junkie” would have noticed three opinion pieces in a single edition of Business Day last Monday objectively outlining progress that is being made in the reform project.

One of the articles was by Peter Attard Montalto (“How the Treasury is holding it all together”), arguing that important and positive issues were “being missed in the reaction to the Budget”. In the same edition, Brian Kantor (“Will the Budget promise be fulfilled?”) argued that “this government has delivered a Budget that takes fiscal policy on a quite different and very necessary path, for all the good reasons that were made clear in the Budget Review”.

The other opinion piece was by Michael Avery (“Reform momentum is gathering steam”). He referred to remarkable progress at Transnet in dealing with logistics challenges and reported that “some of the master plans are showing results (forestry, global business services, digital, tourism) and others are nearing completion (renewable energy)”.

He also cited, “excellent progress on remedying our deficiencies identified by the Financial Action Task Force to get off its greylist as early as next year” as well as “the hugely important passing of the Public Service Amendment Bill in one of the houses of Parliament…” and concluded that “it would be churlish not to recognise that at long last reform momentum is gathering pace”.

Positive trajectory

Hopefully, these assessments reflect an enduring realisation that solutions are being found to the challenges. This reinforces the view of some “mainstream economists” who argue that South Africa is starting to climb out of a low-growth path and that, if the reforms are sustained and the immediate logistics and electricity problems are systematically tackled, the country can move to a growth trajectory of some 4% within a few years.

Of course, it would be foolish to rule out the possibility that things can get worse in one area or another before they get better. And this includes the possibility of sabotage by domestic and foreign malign forces, campaigns to delegitimise the Electoral Commission and other state agencies and the orchestration of violence. This needs to be watched, and South Africans should unite to prevent and punish such malevolence.

But, in the broader scheme of things, the trajectory is steadily but surely changing for the better. And so, one does not have to embrace a Panglossian extreme optimism to acknowledge this, as long as this is underpinned by South Africans acting together to intensify the reconstruction and recovery project and ensuring that the tide of economic change lifts all boats. DM

Joel Netshitenzhe is the Executive Director at the Mapungubwe Institute for Strategic Reflection (Mistra).

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Positive trajectory