South Africans, on the whole, are at the end of their tether. This ranges from the wealthy suburbanite who is looking into emigration options to the township dweller who wakes up every morning to a growling stomach, and another day of unemployment.
And every day there is news about South Africa’s continued (and now seemingly inevitable) decline. Just last week there were reports covering topics ranging from the country’s collapsing infrastructure to the mass exodus of skills, particularly engineers.
And warnings about South Africa becoming a failed state are now commonplace and are no longer just the domain of Afropessimists, with even former ANC cabinet ministers raising this alarm.
All of this is true. Any South African with two functional eyes can see how the country has gone down, over the past ten years in particular. In addition, our economy continues to suffer from sclerotic growth, with most forecasts putting growth for this year at about 1.5%, far below the levels necessary to make a real dent in poverty and unemployment.
But if we take a step back, perhaps things are not as bad as they appear – we aren’t seeing the wood for the trees, as the saying goes.
Prerequisites
A colleague recently related a tale of attending a dinner at which South Africa’s continued slide towards becoming a failed state was a topic of conversation. One of the attendees, who hailed from West Africa originally, pointed out that South Africa still had a long way to go before becoming anything like many countries in that region.
This is not to say that South Africa will not eventually become a failed state, but that the slide can be arrested and perhaps it will take longer to fall than we think.
Of course, anecdotes, while useful, are not data. And there is some evidence that South Africa could be set for economic growth (with caveats).
Charlie Robertson, chief economist at a company called Renaissance Capital, believes that there are three prerequisites for a country to achieve economic lift-off. These are an electricity supply of more than 300kWh per capita, a fertility rate of fewer than three children per woman, and a literacy rate of more than 70%.
South Africa passes all three tests successfully. Our basic literacy rate is about 90%, and in 2020 South African women had an average of 2.4 children (a sharp decline from the four children per woman in 1990). And despite the recent travails with Eskom, the per capita electricity supply which South Africans receive is far above the minimum level noted by Robertson.
Of course, even if these prerequisites are in place, it does not mean that prosperity is inevitable. Another economist, Stefan Dercon, based at the University of Oxford, looks at the example of Bangladesh to see how the country has advanced. In the past 30 years its per capita income has increased fourfold, the poverty rate has halved, and the average woman has two children, rather than four.
While Bangladesh meets Robertson’s criteria, Dercon argues that what has also contributed to Bangladesh’s success is that the government basically stayed out of the way of the country’s development. There were no grand development plans or commissions or pompous slogans like ‘Vision 2030’. The government took a step back and, for example, didn’t stand in the way of the country’s burgeoning textile industry, which has played a large role in Bangladesh’s development.
As the Financial Times notes, a number of countries around the world (including Bangladesh) and in Africa are now where South Korea was in 1975. Today South Korea is not only a major economic success but also a democracy, showing that the two need not be mutually exclusive.
Foundation
South Africa has the basic elements for its economy to grow rapidly and make a sustainable dent in poverty and unemployment. But what South Africa has, which Bangladesh did not, is a government which believes that it should be the primary driving force in the economy, rather than being, at most, a facilitator for the economy to expand.
Yet South Africans are increasingly bypassing the government anyway, and it’s not just those with high incomes.
Thirty years ago, if people needed a telephone line, they were dependent on the government service provider. Today, if people need a phone they have only to take themselves off to their nearest cellphone outlet and in no time they have just what they need. Imagine, for a second, if the government had a monopoly on the provision of cellphones, as it does on electricity. Most South Africans would likely be communicating long distance by pigeon, or smoke signals. They might even attempt telepathy.
The ubiquity of cellphones, especially smartphones, not just in South Africa, but across Africa, has also seen strong growth in things such as mobile banking, which has allowed more people to access the formal finance sector: another key to development.
And while having a forward-thinking government which facilitates economic growth rather than retarding it is the ideal, Bangladesh has shown that a having a government which simply gets out the way can also lead to strong economic growth.
Of course, this ‘getting out’ is not ideal. A government which facilitates economic growth while providing a safety net for those at the bottom, and can perform basic functions, such as filling potholes and seeing that police and teachers do their jobs, is optimal. However, the South African government has increasingly shown that it is unwilling and, increasingly, unable to do any of this.
South Africa could be on the cusp of economic growth which would change the country forever and see rapid declines in poverty and unemployment. But as long as the ANC remains in power, we will have to watch while other countries become more and more prosperous and the direction of travel for South Africa continues in the opposite direction. But the end of the ANC could perhaps be closer than we think.
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