Johan Fourie's blog

I'd rather be a comma than a fullstop

Smile, the beloved country

with 7 comments

South Africa is the feature of this week’s edition of The Economist. The magazine paints a pessimistic picture of South Africa’s future, summarised by the cover caption of “South Africa’s sad decline”. Its lead article makes two points: that the country’s bad economic performance is mostly but not entirely the result of the African National Congress, the party that has ruled South Africa since its first democratic elections in 1994; and that the only way to solve the current crisis is to make political competition a reality. This is not wrong, but it is quite weak and simplistic, especially coming from The Economist (as Ferial Haffajee, editor of South Africa’s City Press, agrees). South Africa’s future depends on much more than simply political competition, and its recent past is also more complex than the linear decline The Economist insinuates.

Thabo Mbeki’s reign was not all bad. Between 1999 and 2008 (his two terms), the South African economy grew at an average of 4.2% per annum. According to most development economists and across several poverty indicators, the high growth caused South African poverty to decline significantly in this period: the World Bank estimates that this was from a poverty headcount ratio of 38% in 2000 to 23% in 2006, although this may be too optimistic. See Yu (2010) for a more detailed analysis. We tend to forget that many of the problems we encountered over the last five years – electricity cuts, infrastructure failures, yes, even service delivery backlogs in cities – are partly the results of faster than expected economic growth.

More recently, legal (and illegal) immigration has continued to soar. If the country was really falling apart, why would thousands of (economic) migrants be tempted to our shores, and those that left earlier, to return? (Yes, push factors play a role, notably the bad economic conditions of Zimbabwe, DRC and Somalia, and the global economic crisis, but if, as The Economist would have it, other African countries are on the up while South Africa is going down, why don’t migrants stream to these countries? The answer: South Africa is still a land of opportunity.) Our financial system remains one of the best in the world. (Yes, that’s right folks: according to the World Economic Forum’s Competitiveness Survey, South Africa ranked third on overall financial market development, first in the regulation of securities exchanges and first in the strength of auditing and reporting standards.) We receive close to 10 million tourists annually who appear to enjoy the rural and urban wonders of South Africa, and these numbers continue to grow. Our companies are investing in African markets like never before, in manufacturing, retail, telecommunications, banking and agriculture. We are at the forefront of mobile technology and payments which could revolutionise trade and exchange. We have earned the right to host the Square Kilometre Array which will look further back into the past than ever before, and we continue to make new palaeontological finds that helps to unravel the history of mankind.

This is not to deny the many challenges we face. The prolonged mining strikes have dented investors and the public’s confidence, cost mining companies millions of earnings, and the South African government billions in unearned taxes (a back-of-the-envelope calculation suggests that lost tax revenue from these strikes equals the annual amount spent on bursaries for South African students). The Nkandla mess, where R247 million of taxpayers money will be spent to built a private residence for president Zuma in rural Kwazulu-Natal, reflects the general attitude towards corruption and cronyism in government. (Let’s be optimistic: as in the tradition of European monarchs who used to spend gazillions on summer palaces, perhaps in a century’s time, Nkandla will be as synonymous with South Africa as Balmoral Castle is with Scotland, drawing millions of visitors to the countryside.) HIV/Aids has dwindled in media attention, but it’s still very much real in the lives of millions of South Africans. The quality of education is bad. Crime is violent and personal security poor. Inequality persists.

But South Africa is not dead-and-buried. It’s not a failed state, or a banana republic. We are not hopeless. On the contrary,  after 18 years of democracy, reality has finally sunk in. We’ve realised we are not a miracle, even though the political transition was unique: we are “sad” only because the lofty (and perhaps unrealistic?) ideals we envisioned in 1994 did not materialise.

Perhaps, looking towards the next 18 years, reality is a better point of departure. And it suggests that there are still many reasons to smile.

Written by Johan Fourie

October 20, 2012 at 09:44

7 Responses

Subscribe to comments with RSS.

  1. […] because there are none. The first is the easiest to dispel. As I’ve said repeatedly on this blog, South Africans today are better-off than they had been under apartheid. This is confirmed by […]

  2. […] because there are none. The first is the easiest to dispel. As I’ve said repeatedly on this blog, South Africans today are better-off than they had been under apartheid. This is confirmed by […]

    Johan Fourie's blog

    December 8, 2013 at 13:33

  3. [...] an equal opportunity to prosper. But we have also not moved backwards, become poorer, or failed as The Economist would have us believe. Today, we suffer the anxieties of those that expected a radical [...]

  4. [...] the average South African is better off today than they were ten years ago; in other words, Sir, there are more reasons to smile than cry. But, as everywhere, the average hides large disparities [...]

  5. [...] the Guardian and the Daily Maverick decried the cliché of South Africa’s imminent decline.  Johan Fourie posted a list of reasons to smile with the beloved [...]

  6. Johan, thank you for an interesting post. I think that there is scope for many more comments. Trying to figure out what recent events mean for the economy is no simple task and The Economist’s article, your post and the reply above show that different readings of the evidence are possible. My view on long-run paths of growth and development has recently been influenced by Acemoglu & Robinson’s Why Nations Fail. In South Africa we have a clear story of the weight of history, but are we now at a critical juncture? What are the forces that can make our institutions more inclusive?

    This afternoon we hosted Prof Raymond Parsons for a seminar and he spoke to precisely these issues. His take is that we have enough inputs on the table – the NGP has some practical plans, the NDP is the vision that shows the way. The challenges lie in reforms in taking decisions, mobilising talent and building trust. He gives some weight to the importance of leadership and building a compact amongst the social partners. Many people were critical of last week’s meeting between the president, business and labour and the plans that were put forward. Prof Parsons argues that it is fine that those plans are the same old plans – there are no others! The importance of such a meeting lies in building trust in each other and confidence in the plan.

    It is here that we can ask questions about long-run paths: market-led vs. developmental state. To my mind we’ll be on the right track with a pragmatic mixed-economy approach. If the more interventionist ideas hold sway, I’ll be worried about whether we can keep smiling.

    Waldo Krugell

    October 22, 2012 at 16:43

  7. Sorry mate but your argument is somewhat flawed. Electricity supply issues have little to do with faster-than-expected economic growth and a lot more to do with poor planning and even worse decision making on the part of government. Certainly, the growth of SA’s economy over the last two decades has put pressure on Eskom’s grid but this would be a given in virtually any developing nation. SA’s economic growth over last two decades has actually been fairly mediocre by most emerging market standards. Eskom in fact warned government long before the electricity supply issues began that it needed to expand but government purposefully prevented it from expanding in an attempt to lure foreign investment into the electricity sector. There was also a view at the time in government that Eskom was a monopoly and that government should instead be trying to encourage new entrants into the power market. The only problem was that the foreign investors weren’t interested (partly because Eskom’s power prices were among the lowest in the world). The result was that by the time government made a decision it was too late.
    I also disagree that our creaking infrastructure has all that much to do with economic growth. Go take a drive through Kroonstad. Almost every road in that town has been graded so that it is now a rutted dirt track, purely because the municipality’s inability to maintain and repair infrastructure that once existed. The roads, sewerage works and other infrastructure in virtually every small SA town are falling apart. This has nothing to do with economic growth and everything to do with inept management and poor decision making by officials who are appointed because they are deemed loyal cadres, rather than because they are people who can do the job.

    Yes, our companies are investing in the rest of Africa but a big reason for that is that domestic growth is slower than the rest of Africa (which again alludes to the Economists point that the rest of Africa is making great strides while SA is in many ways lurching backwards).

    We have also not earned the right to host the SKA. We have been awarded the right to build the first phase jointly with Australia and NZ with subsequent phases to be determined by the successful implementation of the first phase. Do you honestly think foreign nations would pour billions of dollars into a project in an African country with a history of political instability without having a back up plan? If SA makes a mess of the first phase, or if the ANC starts to nationalize banks, mines etc, there is every likelihood that it will be Australia who ends up building most of the SKA.

    I agree with you that “SA is not dead and buried” and that it is not a failed state or banana republic – yet. But I would contend that The Economist article never suggested that SA is a failed state. It merely made the point that while the rest of Africa appears to be making rapid progress, the continent’s largest and most sophisticated economy appears to be faltering.

    While I obviously understand that you are merely trying to encourage people to stay positive and to bear in mind that there is a lot of good in SA, I also genuinely believe that we cannot simply stick our heads in the sand and pretend that all is well. After all, to paraphrase Edmund Burke (although some cast doubt on whether the saying is his): All it takes for evil to prosper is for good people to pretend it doesn’t exist.

    Garth Theunissen

    October 20, 2012 at 12:12


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 296 other followers

%d bloggers like this: