South Africa’s electorate will on Wednesday decide whether to give the African National Congress a further five years in charge of the country that it has governed continuously since the first post-apartheid election in 1994.
The vote is widely seen as a referendum on the competence of the one-time liberation party over those 30 years. Africa’s most industrialised nation has changed dramatically from the hopeful early days of the “rainbow nation” under President Nelson Mandela to the power outages, high unemployment and corruption that has blighted the country and its stuttering economy over recent years.
The seventh general election since the end of white-only rule is predicted to be the closest yet, with polls suggesting that the ANC will lose its majority for the first time since it came to power.
This would mark the end of an era of unquestioned dominance by the party stretching back through those three decades. It would also force President Cyril Ramaphosa and his leadership into a coalition to retain power, potentially resulting in a deal with one of the opposition parties that have spent the campaign highlighting the ANC’s poor economic performance over more than a decade.
The Mandela-led government after 1994 stabilised key institutions such as the central bank and treasury and relaxed capital controls after the chaos of the final years of apartheid. It achieved annual growth rates of between 4-6 per cent in those early years.
But South Africa’s GDP per capita, which was roughly double the average in other emerging markets when the ANC came to power, has lost ground rapidly as a consequence of lacklustre growth and the country’s inability to create sufficient jobs to satisfy the growing population.
“South Africa has a growth problem, which has intensified over the last fifteen years,” Ricardo Hausmann, a Harvard university professor, wrote in a report this year. In that time, according to Hausmann, “sustainable growth drivers increasingly faded away, leaving an economy driven only by consumption”.
The reduced output is in part owing to a crippling power crisis at Eskom, the state-owned electricity company, that has gripped the country since 2008. This escalated to the extent that it cut power to households on 280 days last year.
All of this has placed a ceiling on South Africa’s GDP growth rate, reducing the country’s competitiveness and its productivity.
Indeed GDP per head is now higher in Algeria and Egypt than in South Africa. The country will pass another unwelcome milestone next year when it falls below the average for developing economies for the first time.
In 2009, Cosatu, South Africa’s biggest trade union federation and an ANC ally, called for “South Africa’s manufacturing sector to be given another breath of fresh air” through a policy of weakening the rand from seven to 10 to the US dollar. Now the currency, which is at more than 18 to the dollar, is viewed as testament to an underperforming economy and a poor investment climate.
Ramaphosa has made much of the “nine lost years” under Jacob Zuma, who as leader from 2009 to 2018 presided over the looting of state-owned enterprises that dominate the economy.
But South Africa’s economy has barely grown since he replaced Zuma five years ago, and has achieved just 1.8 per cent overall for the whole of his period in office. The economy is “the worst performer among major emerging markets during this time,” according to Capital Economics.
“The rand has fallen by more than you’d expect in recent years which is a reflection of the lack of confidence in the economy,” says Dawie Roodt, chief economist at Efficient Group, a consultancy. “If you have strong economic growth and low inflation, you have a strong currency — and South Africa hasn’t had that for some time.”
Export volumes have fallen along with the rand, which points to structural blockages on South Africa selling more goods to the rest of the world. In 2022, coal shipments from a key export terminal fell to their lowest level since 1993, reflecting a deep crisis at Transnet, the state port and freight rail monopoly.
“Producers have battled to get their products to ports given the problems on the trains, be it fruit or commodities,” said Iraj Abedian, founder of Pan-African Investment & Research. But even when they get there, inefficiency at those ports means they have struggled to export. There have been cases where shipments of grapes and citrus fruit have had to be destroyed because of the long delays, he said.
Weak exports have also hit tax revenues, helping to push South Africa’s debt from about half of GDP when Ramaphosa took office to just below 75 per cent. Interest payments on debt is the fastest-growing expenditure item in South Africa’s national budget, consuming 21 per cent of every rand collected.
“This is a problem in a country where export inflows have been materially and adversely affected due to infrastructural faultlines.” said Abedian.
South Africa’s inability to create jobs fast enough had meant that more of its 60mn citizen have come to rely on social grants than ever. While these grants are a necessary lifeline for millions on the breadline, they are being supported by an increasingly thin tax base.
“It’s a completely unsustainable system,” Claude de Baissac, founder of the advisory firm Eunomix, said of South Africa’s welfare spending, which he calculated was the highest per capita in the world.
“You have a Scandinavian-style welfare system in a country where the development markers, particularly on health, housing and education outcomes, are at a third world level,” he said.
Simultaneously, education outcomes for public schools have fallen, which means that not only has the country’s poor growth led to a lack of jobs, but also that many South Africans are not equipped for those that do exist, creating a huge unemployed population reliant on grants.
This lopsided structure will be placed under even more strain by Ramaphosa’s pledged to roll out a “basic income support grant” for all unemployed South Africans within two years, as well as a new form of national health insurance.
Sanisha Packirisamy, an economist at financial services group Momentum Investment, puts the extra cost to the fiscus of the health insurance and basic income grant at more than R430bn ($23.3bn), which would have to largely be funded by weighty tax increases.
Despite the ANC’s manifesto commitment to reducing inequality in South Africa, this has not happened. Instead, the country’s inequality gap has widened to the extent that it is now the most unequal society in the world, ahead of the likes of Brazil, Turkey and Mexico.
The ANC government introduced policies of economic empowerment to ensure that Black South Africans were afforded more opportunities, but this has largely created wealth for Black elites.
Hausmann, the Harvard professor, said “Black South Africans continue to face poverty and joblessness at very high rates, and overall wealth, although racially more balanced, remains as concentrated in a narrow few as it was at the end of apartheid.”
Abedian, of Pan-African Investment & Research, cited two other factors behind widening inequality — lacklustre GDP growth, which led to deindustrialisation, and the extent to which the wages of government and public enterprise executives had soared out of control.
Almost 38,000 government employees in South Africa earned in excess of R1mn per year, which is more than three times the R322,000 that the country’s national statistics body said the average worker earned annually.
Those salaries were being paid out of the fiscus for very little output, said Abedian. “If these government employees were ensuring the economy grew faster, or deliver more services, it would be worth it, but we haven’t seen that. So instead, this level of non-productive costs has simply widened the gap between the ‘haves’ and the ‘have nots’.”
The ANC rode on the coattails of its reputation as South Africa’s liberation party during its first decade on power, even strengthening its majority to nearly 70 per cent in the 2004 election under president Thabo Mbeki.
But the party’s electoral standing and moral authority slipped under his successor, Zuma, as a series of corruption scandals enveloped the governing party.
Though Ramaphosa pledged a “new dawn” when he took over, his stance as a conciliator has meant he has not decisively purged the ANC of corruption. Ramaphosa has also struggled to reinforce institutions that were badly damaged over the previous decade, not least South Africa’s criminal authorities.
The most recent polls suggest support for the ANC stands at about 42.3 per cent, on a turnout of 60 per cent, depriving the party of its majority. The same polls put its nearest challenger, the opposition Democratic Alliance, at 23.4 per cent.
A study released this week by researchers Afrobarometer found that South Africans consider “unemployment, electricity and corruption” as the most critical issues they faced, with 85 per cent of respondents considering that the country was “going in the wrong direction”.
Nearly half those respondents say they “do not feel close to any political party”, an indication that the ANC will have an immense task not just in this election, but in future ones.
This story has been updated to clarify that there is a lack of new jobs in South Africa.
Letter in response to this article:
South Africa’s ANC has chance to course-correct / From Matthew Akalusi, Gatineau, QC, Canada
