This article was written by Jon Herskovitz, who passed the South African Economy under microscope during the past 17 years of ANC ruling.
EnterpriseAfrik think this article should be available to our readers to digest and make their own judgement. Is Africa well positioned to take advantage of the economic and financial crisis in Euro zone?
- Economy risks slide under current ANC policies
- Joblessness looks set to rise - analysts
- Growing debt, corruption eroding business confidence
JOHANNESBURG - Trevor Ghavala has
grown up in post-apartheid South Africa, and like nearly half
his young adult contemporaries he is unemployed and has little
chance of escaping a social underclass in which millions are
trapped.
"I don't have a job ... I've never had a job. I've been
asking people, doing crime," said Ghavala, 24, chewing on a
piece of bread as he squatted with his back to a wall in a
central street in Johannesburg's Soweto township.
 |
| President Jacob Zuma. |
South Africa's African National Congress (ANC), the
anti-apartheid liberation movement turned ruling party, came to
power in 1994 promising to help people like Ghavala.
But after 17 years running Africa's biggest economy, critics
say it has done more to enrich its leading members and allies
than to help the poor masses.
At the weekend, it will hold a lavish birthday bash to
celebrate its 100th anniversary with a golf tournament, banquets
and concerts by the biggest stars in South African music while
people like Ghavala struggle to eke out a living.
"I wish that Madiba was fresh back," Ghavala said, referring
to the popular clan name of former president and anti-apartheid
icon Nelson Mandela who, in a blaze of international goodwill,
led South Africa into a new era of multi-racial democracy.
Mandela, elected president of the ANC after it was unbanned
and he was freed from jail, led the country from 1994-1999. His
departure from power was seen as an example to African leaders
although the movement sees itself ruling for years to come.
It beat its nearest rival by more than 40 percentage points
in elections last year, but analysts warn the party faces a
defining moment in the next three years or so.
They say that if the ANC government keeps up its current
policies, South Africa risks slipping to new depths of
unemployment, debt and corruption that could swell the ranks of
the destitute like Ghavala and undermine long-term prospects.
Critics say President Jacob Zuma, an ANC veteran and
political backstreet brawler both before and since taking office
in 2009, has been a virtual bystander when it comes to tackling
the country's deep social and economic problems.
"We are deeply concerned about the current trajectory. A
rapid turnaround would be required in Zuma's next term," said
Neren Rau, the chief executive of the South African Chamber of
Commerce and Industry.
ANC PUT TO THE TEST
The ANC says it has made big strides in erasing the economic
and social injustices caused by decades of oppression of the
black majority by a white minority under apartheid.
The government says that when the ANC took over in 1994, 62
percent of households had access to clean water and about 50
percent had access to electricity. This has increased to nearly
95 percent and about 80 percent, it says.
Underpinning the economy is the most advanced infrastructure
on the continent, the strongest banks and a well-developed rule
of law and judicial system, making South Africa a stepping stone
for investment in Africa's quickly emerging states.
One constant that has kept the ANC government on the fiscal
straight and narrow and reassured investors has been the
National Treasury, led since 1994 by just two finance ministers
highly praised for their fiscal discipline.
The World Economic Forum's Global Competitiveness Survey
ranks South Africa as top in the world for its regulation of its
security exchanges, number two in the world behind Canada for
the soundness of its banks. It is also one of the easiest places
for a firm to raise money by issuing shares.
But the same survey also said South Africa has some of the
world's most rigid labour laws, one of its least productive
workforces and a broken school system that is staggeringly bad
at educating its students, given the money spent on it.
At the end of 2012, Zuma faces a party leadership election.
Despite a leadership style criticised as lacking vision and
ineffectual, he is widely expected to garner enough support in
the fractious party to win a second term as party chief and then
stay on as national president until 2019.
Against this background, analysts do not expect him to rock
the boat and upset left-leaning allies with pro-business reforms
such as loosening the labour market and state economic controls.
"As it approaches almost two decades in power and demands
for economic delivery grow more strident, the party's ability to
hold together in the same way will increasingly be put to the
test," Standard Chartered Africa analyst Razia Khan said in a
research note.
BOWING TO THE UNIONS
Unemployment has been a chronic problem for the ANC and has
also contributed to an alarmingly high murder rate, among the
highest in the world outside a war zone.
About 40 percent of the adult population is jobless - a
percentage expected to rise substantially in the coming years -
and this is seen driving crime and widening economic inequality.
"If the same pattern of job loss continues, we will reach
very shortly, in three to five years, a situation where more
people are unemployed than employed," said Andrew Levy, who
heads a leading private South African labour research group.
"Economically, there will be a continually higher burden on
those who are working because government will try to do more and
more to ease the lot of the unemployed," Levy said.
ANC governments have poured billions of dollars into job
training programmes only to see much of it lost to corruption or
incompetence and the education system fails to provide basic
skills.
The country has lost about a million jobs in the past two
years, with the manufacturing sector the hardest hit. Many of
these jobs will not come back because labour has priced itself
out of the market.
The average factory worker in South Africa earns about six
times as much as a factory worker in China and is less
efficient. Industries in sectors which were once internationally
competitive, such as footwear, have faded.
South Africa adopted rigid labour laws in large part because
of the governing alliance between the ANC and the major union
federation COSATU, a pact which was formed in the anti-apartheid
struggle and continued after the ANC formed a government.
Zuma and other ANC leaders have tried to keep COSATU and its
2 million members close to them, not wanting to alienate a major
source of votes by enacting labour reforms that would make it
easier for firms to hire and fire workers.
There are four major measures before parliament aimed at
appeasing COSATU that will be at the heart of the legislative
agenda this year. The bills place more burdens on employers,
make it more difficult for them to hire seasonal labour and
drive up personnel costs.
BUDGET UNDER STRAIN
While joblessness looks set to rise, so too does the
country's growing debt as pressure mounts on the ANC to open the
taps to still more welfare spending.
The squeeze on state finances will likely push South
Africa's debt-to-GDP ratio above 50 percent in the next three
years for the first time under ANC rule, economists said. This
would put the country's credit rating under pressure and could
make it more expensive to borrow money.
"Debt levels will continue to rise as a percentage of GDP
until 2016 when they should plateau at around 55 percent," said
Peter Attard Montalto, emerging market economist at Nomura.
The budget is already under strain to pay the wages of more
than 1 million civil servants, many of whom belong to
COSATU-affiliated unions.
"South Africa's debt position will likely become more
precarious, especially if economic growth continues to
disappoint," said Anne Fruhauf, a specialist on Africa at
political risk consultancy
Eurasia Group.
If the global economic crisis leads to slower growth in
South Africa, and lower tax revenue as a result, the government
wage bill could well reach about 50 percent of tax revenue
within three years, leaving even less money for other spending.
On top of this, the government plans to begin rolling out a
National Health Insurance programme it said will cost 125
billion rand ($15.6 billion) this year, about 13 percent of the
state budget.
"PREDATOR ELITE"
There is also a growing clamour from ANC supporters to
improve delivery of electricity, running water, schools and
other basic services to the poor. Analysts say this is
undermining the ANC's voter support.
Improvements the ANC has made so far have not satisfied the
poor black majority, which sees progress as too slow and
complains of incompetent local officials. Scores of violent
protests have added to the pressure for better services.
The country has also slid in Transparency International's
highly regarded gauge of perceived corruption, from 38th in the
world in 2001 to 64th in 2010, a trend that worries many
citizens, long-time ANC supporters among them.
"The problem is the leaders. They must deliver, They are
corrupt," said Soweto resident Mzwandile Sifile, expressing a
widely held view.
Corruption has also undermined investor confidence.
There is also growing anger with ANC economic empowerment
policies that were nominally designed to reverse apartheid era
curbs that had largely shut blacks out of the economy.
Many see the programmes as benefiting just a few people with
ANC connections. COSATU has said they have lined the pockets of
a corrupt "predator elite".
"We are still waiting for the delivery," Soweto resident
Sifile said. "We are still hoping for the best."
Source: Reuters
