This is the fourth of a five-part series setting out why South Africa blew up a week ago, arguing that the blow-up was not due to a planned insurrection, that the experience will not see the government change tack and reform, and that the country will destabilize further, and suggesting what you should consider doing to survive the consequences. The analysis is based on our initial thoughts, read against our long-standing advice. We will add to it, and so improve it, over time, but are confident that the bones of it are right and will hold up to future critical scrutiny.
What is the ‘tide of revolution’ we concluded part-three with going to look like? This kind of analysis is very simple and very logical and it does not take a think tank full of analysts to make sense of it.
Put simply, two of South Africa’s paradigms will change. The first is that the ANC in its current form may not govern South Africa for very much longer. Dealing with the consequences will require a fundamental mind-shift, given that for arguably 50 years the primary ‘South Africa’ question has remained: what will the ANC do with it? The second is that, depending on what replaces the party, we may confront the break-up of the Union of South Africa into fragmented enclaves that have appropriated for themselves what were once the functions of the state.
What follows is a setting out of the building blocks that, when stacked one upon the other, will map our route to those paradigm shifts.
First, is the very well-established set of relationships between government policy, investment, economic growth, job creation, living standards and political stability. Trust these relationships and learn to read them and they will lead you with a high degree of precision into the future. When government policy is hostile to investment and property rights then economic growth slows, living standards stagnate, ANC support falls, and political instability accelerates.
Second, for reasons of ideology in the main, the Ramaphosa administration is not prepared to countenance the reform necessary to reverse that negative downward spiral into a virtuous upward spiral of reform, investment, growth, prosperity, and political stability. Business, the media, and civil society, with exceptions, will for their part not countenance sufficient criticism of the Ramaphosa administration, meaning that no firm pre-emptive effort at policy reform will be forthcoming.
Third, as reform stultifies the government will run out of the money it needs to run the country. The budget deficit has only been eclipsed on three previous occasions since the formation of the Union and on each of those occasions the deficit triggered a political transition of sorts. Short of cash and unwilling to reform, the government will raid saving and pension funds and then print money. This is the chief purpose of its expropriation efforts now in train. It will not borrow heavily from external financiers, as it believes this will see it surrender policy sovereignty.
Fourth, it will run out ever more quickly of the electricity it needs to grow the economy. Andre de Ruyter is doing his best at Eskom. But there is no prospect of Eskom again supplying the quantum of electricity to take the rate of economic growth to above 5% and keep it there. The much-vaunted energy reform decisions of a month ago were taken reluctantly in the face of sweeping outages and some tense moments in the Eskom control room. That is not reform but crisis management and fire-fighting. Reforms need to be taken willingly and enthusiastically out of the sincere belief that they herald a better way of running the economy, not reluctantly after the institution in question – as was the case for SAA – has collapsed beyond the point of bankruptcy and operational ruin.
Fifth, is that support for the ANC, which has fallen to its lowest levels – it is polling under 50% for the bulk of potential voters – will remain under pressure, heralding the prospect of the party losing its national majority. At the same time influential endorsements for the official opposition, which is now in the right shape ideologically to offer South Africans a clear alternative to the ANC, will not materialise because of the racial and related sensitivities engineered to head off such endorsements. Hence, as the country destabilises, disaffected people will continue to be discouraged from voting for the Democratic Alliance by the media and civil society, with the result that this avenue of political expression will remain an anathema to many who will instead vent their anger via joining violent protests.
Sixth, as the likelihood rises within the ANC that its time is up, this will greatly exacerbate factionalism, infighting, and internal party instability which will breed more populism, seize the few remaining prospects for reform, and see the government come to shower sparks on its own prairie.
Seventh, the intellectual deficit in the government and the ANC will deepen. One should be polite, but the people advising the President, sitting on his various commissions, and drafting the government’s recovery plans are not of a calibre to think South Africa out of its current predicament. It is in fact their plans, which vacillate across varying degrees of economic stupidity, that have brought South Africa to ‘her chaotic state’. If you doubt that, just think again of the silliness in saying that the policy of expropriation without compensation will bring investor certainty and more investment. Or listen to the ‘thick as planks’ media commentary of the ‘security cluster’ ministers.
Eighth is that the credibility of the government, most local analysts, and much of the media and organised business will deteriorate. It was a terrible mistake of them all to endorse the Ramaphosa reform narrative in the absence of compelling evidence for this. Now, unless they concede their error, that collective will look inept and will not be taken seriously again by people who commit serious capital to the country. A very dangerous point is reached when the government and a country’s analyst community are simply not believed by investors.
Ninth, as reform stultifies further, the government runs out of money and starts raiding pensions, ANC support slips, party factionalism deepens, the government’s intellectual deficit deepens, and most analysts cannot be trusted, the political instability of South Africa will worsen very quickly. Expect peaks and troughs of instability – much like the patterns we have grown accustomed to during the coronavirus pandemic. The peaks will grow in intensity, scope, and scale with a focus on looting all productive assets and burning economic and physical infrastructure.
Whilst such actions to date have not, in our view, been driven by insurrection, that will now change, given an emerging understanding of the political potential inherent in the scale of the violence that was triggered in KwaZulu-Natal. We will now begin to see the type of organised incitement that qualifies as insurrection from the trained people in our midst and targeted at prominent industries, whites, Indian and Asian communities, and conservative blacks. Later the racial agitation will take on an ethnic dimension of inter-tribal conflict that in some regions will simmer into a low-boil civil war. The security forces will be quite overwhelmed, the intelligence service will remain inept (it is staffed by stunningly stupid people and so wracked with deployed cadres and affirmative action that there is no way back and the government will increasingly have to make do with private contractors advising it), and the loyalty of the army and the police will begin to wobble.
Tenth – what happens now? Since 2014, I have held that events along the lines of the above will most likely culminate in the political defeat of the ANC. Over the years since, I have tended to play up that result, going as far as to suggest that a new political movement may replace the ANC peacefully, and that, modelled on the GEAR era, it might take South Africa back to prosperity. But as the events of the past week sink in, and so too the inability of the government and some in business to comprehend their origins let alone reverse the policies that caused these, I am less sure. The prospect of a real coup at around the moment of an ANC defeat is something I had been dismissive of before but now fear that might have been a mistake (in fact, in a note to clients next week we will warn of this very eventuality).
Given that the ANC might not peacefully relinquish control, I think that there is now an equally plausible fork in the road that we flagged in the first of our trilogy of books on South Africa’s future, A Time Traveller’s Guide to South Africa’s Next Ten Years – published in 2014. That now equally likely fork is that the country will fragment into a series of enclaves in a great South African balkanisation or break-up of the Union decision of 1910.
Enclave-formation happens where the ability of the state to execute its functions shrinks and these are then taken over by communities. As a consequence, different types of enclaves appear. One will likely emerge in deep rural areas under the authority of what will effectively be akin to the homeland leaders of pre-1994. A second will emerge on peri-urban fringes under the authority of power-brokers such as the taxi industry, whose very effective efforts at law enforcement these past 10 days affords them a power they will not willingly surrender, and which they may use to expand their economic empires. A third will be suburbia under the authority of ‘body-corporates’, private service providers, and private security that will enforce order. There will also be others.
- Read the final part of the series on what you should do in the Daily Friend tomorrow.