South Africa is between decline and renewal

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Sean McLaughlin | Contributing Author | Free Market Foundation | mail me |


How to get rich in the 21st century details how India’s prime minister wants his country to reach rich world status by 2047. His formula lies in incentivising homegrown industry, a diversified services base, and a relentless focus on what’s good for the economy.

The oil-rich gulf state Qatar’s answer involves constructing new entrepots, building Education City, a university campus that will cost USD 6.5 billion, and span 1,500 hectares. Then we have SA, one of the last standing experiments in social engineering, choked by archaic race-based employment legislation.

A 21st century timebomb

Take your pick of SA’s problems and you would think that SA will never join these middle incomers finding a way to rocket ahead: gang violence; political assassinations; gender violence; train hijackings; industry mafias; floods; wildfires; bankrupt municipalities; ballooning government debt; catastrophic unemployment; stubborn inequality; failing state-owned enterprises and lastly, power cuts for up to 12 hours per day.

21st century problems will add to these crises, including the proliferation of well-armed drug cartels, foreign powers engaging in misinformation wars, and Artificial Intelligence (AI) killing low skilled jobs.

Many would say the only recipe SA holds is that for a 21st century timebomb. That may well be SA’s destiny. Or it may not be.

John Endres, CEO of SA’s Institute of Race Relations (IRR), illustrates how non-state actors rapidly fill the voids left by government, and harmful government policies are simply ignored. He refers to this as the ‘Weakening of the detrimental state’. The world could learn from the ingenuity of ordinary citizens in SA towards solving these problems: providers of onsite water infrastructure (bore holes); private fire engine services; volunteer forces fighting wildfires; world class private medical care.

Advance the thinking on this and you may have SA’s answer to succeeding in the 21st century. When the ‘detrimental state’ becomes the ‘enabling state’ or ‘lean state’. This is very possible in the coming years. In this scenario, competent non-state actors take the lead in running the country through ‘social innovation’ and the enabling government becomes more of an administrative entity.

Think the national revenue service that relies on transparency NGOs. Think the rural village powered by a microgrid.


IRR CEO John Endres’ axis of the role of the South African state


Many would counter that the replacement to the current administration may in fact become an ‘emasculated state’ or ‘destructive state’. Yet there are several reasons as to why this doomsday tie up of the ruling African National Congress (ANC) with the populist Economic Freedom Fighters (EFF) may not materialise. It may be short lived. It may fail to achieve its objectives. It may be survivable.

Political defections

One thing is for sure: the ANC’s endgame is in sight. And the break-up of the ruling party may be very ugly indeed. Its support can drop like a stone over the next 5-10 years, in a self-perpetuating vicious cycle of implosion and vote loss. It will lose government positions in key provinces from 2024-2029. That is patronage lost, drying up money with which to fund the party. That may also have the ANC mafia continue to turn on each other, over jobs in government. These may well be dangerous times in SA, mirroring 1990s pre-election political violence. As the house of cards crumbles, more information will come out about past wrongdoing. What really happened about Iran?

There are other factors, defections will continue, long term demographic trends are against the ANC’s ageing voters. Business support for the party can turn on a sixpence, as it did with other parties in previous turning points in history. The current President, keeping the party together, must step down in 2029 at the two-term limit.

Set the wheels in motion for these factors and the pro-market Democratic Alliance (DA) quickly closes the gap to the largest party. The DA has proven its competence in governing the Western Cape province. This year’s election will precipitate this process in other provinces as the ANC’s loses its majority in the populous Gauteng and Kwazulu-Natal provinces.

I contend that there is something unique about the Western Cape and that that experience cannot be replicated elsewhere, albeit on different time scales. The ANC had a long history and a good showing in that province, winning the provincial ballot in 2004. Yet now the ANC is slowly disappearing in the Western Cape and is projected to attain around 19% of the provincial vote, according to information provided by the Social Research Foundation (SRF). That is astounding. It also suggests that when the ANC loses a province, it will likely struggle to regain it.


ANC share of the vote at simultaneous national and provincial elections (three major provinces)


Current polling data in these graphs were provided to the author by the Social Research Foundation (SRF) and prepared by the author. Current polling data are not a projection of election results.


Source: Social Research Foundation (SRF)


Source: Social Research Foundation (SRF)


Source: Social Research Foundation (SRF)


In an interview with Wayne Duvenhage, OUTA CEO, he told me how he favours a post-ANC amnesty on wrongdoing in office. Coming clean in return for immunity. That may make the ANC’s inevitable downfall more orderly, with members less likely to incite violence. It would also reduce risk of an ‘us and them’ mentality developing in the post dominant-ANC era.

Short-lived coalition

In the turbulent times of SA’s post ANC landscape, expect a few shabby, short-lived coalitions, Johannesburg 2021 style, at various levels of government.

Commenting on African fatigue with democracy amidst rising coups in 2023, Ken Opalo, associate professor at Washington DC’s Georgetown University, states how:

“Ritual electoralism and governance reforms do not constitute a magical portal to a well-ordered society.”

Yet democracy looks to be SA’s future, with time very quickly running out for the ANC to start opening the dictatorship playbook. If below 50% of the vote this May, it will likely never command a national majority again. With this, and given increasing opposition participation in the political system, the transition is well underway.

Democracy is alive and very well, with the growth of new, centre right parties approximate to the DA.

The short walk to prosperity

The private sector has been forbidden to lift the country to the level of its potential prosperity. If the growth-sapping ANC can fall very quickly, and if politics at a national level can centralise, then economy can also be turned around very quickly, given such a low base.

Growth-killing legislation has compromised a generation, from the Labour Relations Act of 1995 giving unions business-crippling powers, to Black Economic Empowerment (BEE) demanding race-based targets for business ownership, and NHI pursuing the nationalisation of the country’s high performance private healthcare industry.

In this vein, a coalition of the two largest parties (ANC and DA) may soon be a good combination, with the DA demanding that these above policies are off the table completely. That would be an immediate boost to financial markets.

BEE, for all its good intentions, significantly hinders job creation. It should be replaced with the IRR’s Economic Empowerment for the Disadvantaged (EED), a scorecard rewarding firms for contributions such as job creation, exports, or schooling provided. With normalised labour laws, SA’s unemployment plunges.

With normalised competition law, investment floods in. There is a very long list indeed of businesses and investors, domestic and foreign, ready to invest in the country when the day comes. With semi effective policing, crime falls, and SA takes uncontested top spot as the world’s most exciting and diverse tourist destination, dovetailed with immense global interest in environmentalism and conservation.

In conclusion

Call this ‘low hanging economic fruit’. These are not deep structural problems of the type that require national referendums to be repealed. If you volunteer for economic damage in legislation, you can also volunteer to remove it.

Much of this may seem far off now. None of us know if SA will recover. But the turning point has passed. History will revere those who fought to turn it around. Decline breeds renewal, and there is no shortage of glory on the other side.


 



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