Latest forecasts for growth over the next few years average around 1.6%. This takes us back to the 1980s – the worst decade since unification in 1910.
Not content to confine himself to bullet trains and smart new cities, Cyril Ramaphosa ten days ago spoke of building ‘an entrepreneurial state’ to take advantage of the ‘digital revolution’. In such a state, the government’s own ‘appetite for risk and innovation’ would inspire ‘large-scale entrepreneurship and unlock economic potential’. In addition to providing funding and venture capital, this state should have the capacity ‘to determine the strategic direction of entrepreneurship’.
With easy access to other people’s money to fund moribund state-owned enterprises, and largely insulated from the consequences of their actions, successive governments run by the African National Congress (ANC) have already demonstrated their insatiable appetite for ‘risk’. As for inspiring entrepreneurship and unlocking economic potential, Mr Ramaphosa’s remarks would be ludicrous if his party’s track record was not so sad.
Nowhere is this more evident than in the mining industry, where, despite all the promises made and the change of minister, the third version of the mining charter has failed to reassure investors. The 2019 Mining Yearbook recently published by Miningm x thus quotes Paul Miller, managing director of CCP 12J Fund, a venture capital company that invests in low-risk mining projects, as saying that South Africa’s mining sector had become ‘uninvestable’ because investors do not know what will be in ‘mining charters four, five and six’.
Bernard Swanepoel, former CEO of Harmony Gold, says that Canada has great incentives for investment in mining exploration, whereas in South Africa ‘we treat investors like they are coming to steal our national treasure’. Neil Froneman, CEO of Sibanye-Stillwater, which a few years ago bought the Stillwater mine in the American state of Montana, said: ‘It has been an absolute pleasure to do business in the US. Within a week of announcing Stillwater, consular officials paid us a visit, thanked us for our investment, and offered any help that we needed in terms of operating.’
The ANC’s destructive impact stretches far beyond mining. Measured in lost growth, the cost of the depredations and policy failures of the last decade has been estimated at between R500 billion (by the Bureau for Economic Research) and R1.6 trillion (by Chris Hart). Jeremy Gardiner of Investec has been quoted as saying that an additional 2.5 million jobs would have been created but for Jacob Zuma, while the coffers of the South African Revenue Service would be R1 trillion fuller. (These numbers far outweigh the R50 to R60 billion that Pravin Gordhan says state capture has cost taxpayers.)
Latest forecasts for growth over the next few years average around 1.6%. This takes us back to the 1980s – the worst decade since unification in 1910 – characterised, as it was, by tightening economic sanctions and escalating violence. The Zuma years were like the years under PW Botha.
As for longer-term trends, the Monetary Policy Review published in April by the South African Reserve Bank said that this country’s ‘potential growth rate is at long-term lows’. All three of the forecasts cited by the bank for the next few years were, it said, ‘below the long-run growth rate of 2.5%’, the average over the last 50 years.
As for GDP per head, which declined from 1981 onwards and bottomed out only in 1993, it has declined or shown zero growth in each of the last four years. With economic growth predicted at around 1.6% for the next few years, and population growth of around 1.55%, this trend of declining GDP per head is likely to continue.
Making use of World Bank data, economist Mike Schussler recently produced figures showing that South African income per head in 1990 was 110% of the world figure, but that last year it was only 76% of the world figure. This spectacular nosedive is quite an achievement for a quarter of a century of rule by the ANC and its communist and trade union allies.
Of course, the Zuma regime caused enormous economic (and other) destruction. But the forecasts for GDP growth for the next few years suggest that South Africa’s growth performance under the first few years of Mr Ramaphosa might be even worse.
Kane-Berman is a policy fellow at the IRR.