Can Grass-roots Reforms Reverse South Africa’s Stunted Growth?
The world gradually lost interest in the affairs of South Africa after the miraculously peaceful handover of power in 1994 from the white government of F. W. de Klerk to a government of national unity under the black-led African National Congress (ANC). Since then, there has been a steady stream of reports that the country has been overtaken by corruption and mismanagement under the rule of the ANC — nowhere more so than in the office of the presidency, where the current incumbent, Jacob Zuma, has faced numerous legal charges, including misappropriated funds for improvements to his home. Other critics point to ongoing economic problems: Unemployment is at 27%; the economy is stagnant (the IMF projects GDP growth of 0.1% this year and 0.8% in 2017); and, sovereign debt-to-GDP is about 50%, or double that of 2008. A recent IMF economic report noted that “income inequality and unemployment remain among the highest in the world, and growth has waned in recent years.”
For a view of South Africa’s prospects, Knowledge@Wharton spoke with R. W. Johnson, a distinguished British academic and journalist, who is currently a South Africa correspondent for the London Sunday Times and a contributor to the London Review of Books. He grew up in South Africa, was a Rhodes scholar and Oxford don, and then returned to the country in 1995 as director of the Helen Suzman Foundation. He lives in Cape Town.
Knowledge@Wharton: South Africa is on the southern end of a very large continent. Why should the rest of the world be concerned with political and economic trends there?
R.W. Johnson: There are two reasons why they might be: One is that South Africa has more mineral riches than any other part of the planet. It has more than 70% of the world’s platinum, for example. Second, it was seen as a prototype of a black-white race war which then suddenly did not happen, and instead, we had negotiations and peace. After, we had the Mandela presidency and peace and reconciliation. Since then, the political situation has all gone to pieces and we are now back to a pretty bad situation. The whole world invested quite a lot in the idea of South Africa as a multiracial success — and if turns out very badly, then it would actually be bad for race relations around the world.
Knowledge@Wharton: When people think of the country, one name comes to mind — Nelson Mandela, who took over as president from de Klerk. How would you describe Mandela’s legacy?
Johnson: Very mixed. He was a dear old man and we were very lucky that he was the sort of man he was, but he was a completely hopeless president. He didn’t know what the job was and he didn’t really do it. But he had a generally good influence on society and was a voice for toleration. Unfortunately, that has not continued, and the ANC now resorts to all-out racial propaganda against its political opponents, and the feelings are mutual on the other side.
Knowledge@Wharton: The ANC has been in power since 1994. What has it done right and what has it done wrong since then?
Johnson: Actually, some of the big, right things were done by F. W. de Klerk when he was president between 1989 and 1994, such as the abolition of apartheid and the introduction of universal suffrage. With the ending of things like detentions and censorship, society became freer and people could say what they wanted. It’s a free and open society and we have had regular and free elections, so all that is good. And for a while, the ANC had a reasonably successful economic policy, but the extremes of affirmative action and “black empowerment” policies, such as providing corporate equity for blacks, have been ruinous. When you take opinion surveys, black voters don’t approve of these policies, but nobody pays attention to them. Affirmative action just serves the elite.
Knowledge@Wharton: Nepotism, corruption and mismanagement are hallmarks of the South African government and many other countries. What is distinctive about the South African brand of incompetence?
Johnson: The reason why it is so widespread in Africa is anthropological. The extended family system is very much there, so, in an African family if your nephew asks you for money, you must help the person; it’s an absolute obligation. Then, if you are in government, you get them a job. The difference in South Africa is that it is the most sophisticated economy on the continent, but our education level is one of the worst.
Knowledge@Wharton: Perhaps the saddest element is how well a few people live in South Africa and how poor are the living conditions of the vast majority of people. Is income and wealth inequality worse now than under apartheid?
Johnson: Yes, without a doubt. This is because the social structure of apartheid — the privileged whites and Indians, and the mixed race in the middle class — is still there. But superimposed on it is a new elite class of black people in government and business that’s very, very corrupt. In the past, the richest whites were people who pioneered industries, but now for the richest blacks, it’s not clear where their money comes from. There has been a large transfer of resources from the bottom to the top and smaller transfers away from whites; now, you can see white beggars and white squatter camps. Resources have been transferred to the new elite and very little redistributed to the poor, amid one of the world’s highest unemployment rates.
“The whole world invested quite a lot in the idea of South Africa as a multiracial success — and if turns out very badly, then it would actually be bad for race relations around the world.”
Knowledge@Wharton: Zuma has been president for seven and a half years and is beset by legal and political difficulties that have been growing for a long time. Many people wrote him off a few years ago. How do you account for the fact that he has clung onto power?
Johnson: First, he’s a masterful player of the patronage game. Eighty-five percent of the ANC’s national executive committee holds state positions that are ultimately the gift of the president. That makes it very difficult to revolt against him. Second, he manipulated into power several regional premiers who are his buddies and they control key provinces. Third, he represents the Zulus, the biggest ethnic group, and he’s the first Zulu to lead the ANC since Albert Luthuli in the 1950s. And if you tried to chuck him out, there would be hell to pay with the Zulus. But at the end of 2017, the ANC will elect a new president and power will flow to that person, and everybody who wants a job will be hoping for his patronage. Zuma faces term limits and cannot run again for president of South Africa.
Knowledge@Wharton: Opposition parties, such as the Democratic Alliance (DA), tend to struggle to build credibility when they have been in the wilderness as long as the DA has. What is your estimation of the DA’s capability to govern?
Johnson: The DA has done a good job running Cape Town and the Western Cape province, and it recently captured most of the big cities in the municipal elections in August. We are all hoping that they will repeat their good government in Pretoria, Johannesburg and Port Elizabeth. They know that competence at a municipal and provincial level is their chief card and if they do a good job, this will encourage voters to give them greater power. But they have an uphill task. Among black voters, who comprise 80% of the total, there is a strong sentiment to support the party of liberation. But the emotional tie is breaking down.
Knowledge@Wharton: The economy is stagnating, and the country’s credit rating is near junk status. How much of this is due to government mismanagement and how much the fault of forces beyond South Africa’s control?
Johnson: The government likes to claim the latter (there’s been a very bad drought and commodity prices are low), but this is largely due to poor government policies. Key areas of the economy face chronic uncertainty. Mining is in perpetual crisis. The government says that mining companies must have 25% black ownership, but many who owned the 25% have cashed it in, so the government says they are no longer black empowered, and companies must divest another 25%. But the companies have rejected this, saying they can’t go on effectively giving away their equity.
This ridiculous dispute has gone on for over a year and nobody will invest in a mining company until it is settled. The same is true in agriculture, where more than 90% of the land that’s been redistributed has become overgrown with weeds and is unusable. Oil companies won’t explore off the South African coast, because the government has brought in a law that the state must receive a 20% stake right away without putting money in, with an option to buy another 30% at a lower-than-market price.
Knowledge@Wharton: In your 2015 book, How Long Will South Africa Survive?, you asked whether the ANC would lose power soon enough to avoid national disaster. What’s your prediction today?
Johnson: They are gradually moving to a situation where their share of the vote will go under the 50% line and they will then need a coalition to rule. Alternatively, they may split if they have to go to the International Monetary Fund for a bailout. The IMF’s conditions would probably be unacceptable to the communists in the government and the unions. In the local elections, the ANC’s share of the vote went down to 54%.
“Oil companies won’t explore off the South African coast, because the government has brought in a law that the state must receive a 20% stake right away without putting money in, with an option to buy another 30% at a lower-than-market price.”
Knowledge@Wharton: If the ANC’s decline continues, will the party be willing to accept defeat?
Johnson: That situation looks rather positive in light of what happened after the local elections. The handover of power to the DA in the three large cities was very difficult, due to the tremendous loss of patronage. Yet the results were declared and power was transferred reasonably peacefully.
Knowledge@Wharton: If a multinational was considering an investment in South Africa, what advice would you give to the decision makers?
Johnson: I’d say wait, because things may well get better. The only greenfield investment at the moment is a big Chinese car company that is building a plant here that may be immune from the black empowerment rules.
Knowledge@Wharton: You seem moderately optimistic about a peaceful transition of power in the not-too-distant future. Is this correct?
Johnson: Yes, if you look at Zimbabwe from 2000 on, there was a two-thirds majority for the opposition and they were never allowed to win. In South Africa we have had regular, free elections. When the opposition wins power in Cape Town or wherever, they take over. The population expects it. If the ANC misbehaves, it loses votes and ultimately it will lose power. The openness brought about in the early 1990s is a part of the political culture of the country and that is a powerful thing for good in the long run.