June 6, 2017    7 minute read

South Africa: What Is Holding Back Its Future?

Untapped Potential    June 6, 2017    7 minute read

South Africa: What Is Holding Back Its Future?

Increasingly, the outlook for South Africa has worsened under the Zuma tenure with increased persistence. Zuma has used his strong-arm tactics to undermine the institutions to which he should be held accountable by propping government positions with officials sympathetic to his cause and blinded by their own political ambitions.

ANC veterans recently wrote to the National Executive Committee (NEC) expressing their desire that the “NEC has to step up and play its role as required by the ANC constitution”, further citing that Zuma’s supporters have placed their own narrow political and financial interests above those of the country.

The South African Reserve Bank cut the country’s 2017 growth forecast to an ominous 1%, the World Bank gave an equivocal outlook projecting the South African Economy to grow by 0.6% this year, cutting its January projection by 0.5 percentage points.

The South African economy has seen a deterioration of investor confidence, following the country’s downgrade to junk status, additionally experiencing higher policy uncertainty resulting in dejected growth projection. The loss of confidence in South Africa has resulted from a culmination of political, social and economic factors within the country.

Eskom in Crisis

The World Economic Forum notes “sustained power cuts, caused by under-investment and a shortage of generating capacity, have damaged the South African economy” with “the key element of how energy moves from generation to consumption” mostly being overlooked.

Eskom, the largest public electricity utility producer in Africa, has had a turbulent time of late financially and politically. Most notably, the recent saga regarding Brian Molefe’s refusal to accept his second dismissal as Eskom CEO after the original revelation of his links to the now infamous Gupta family has acted as an impediment to the economic growth of South Africa.

Molefe was shockingly re-instated as Eskom CEO just over three weeks ago after Public Enterprises Minister Lynne Brown believed this was a better value proposition for the South African fiscus. Reliant energy generation is key to a better South Africa on its journey from a newly industrialised country (NIC) to first-world classification.

Molefe stands in the way of not only Eskom but all of South Africa by lodging a desperate application with the Labour Court in Johannesburg to have the decision to remove him as Eskom CEO declared invalid.

Finance Ministers’ Roulette

Jacob Zuma on the 9th of December 2015 fired Nhlanhla Nene without justification, only to instate David van Rooyen without good cause leading to chaos in the financial markets as the South African rand dropped as much as 5.4% against the dollar in a single day.

David van Rooyen’s stay as Finance Minister only lasted 6 days as public and business outcry mounted with the van Rooyen appointment roughly costing the South African economy R500bn (£22bn) in losses due to rand depreciation.

Zuma brought in Pravin Gordhan who stabilised the economy as a respected individual within the international finance community, only to be replaced by an unknown quantity in Malusi Gigaba in March who previously served as minister of Home Affairs.

Gigaba’s appointment was swiftly followed by the downgrading of the SA’s economy to non-investment grade (BB+) by Standard & Poor’s (S&P) and Fitch. The economic landscape for South Africa now looks very uncertain with the term ‘radical economic transformation’ making the rounds as Gigaba aims to address the plight of the left behind people.

South Africa needs to remain a secure destination for foreign direct investment, but the current noise coming from South Africa only increases the risk of investment to a level deterring investment to fuel economic growth.

Although the economy has seen the manufacturing and retail sector somewhat recover, the economy continues to languish, with the risk of a technical recession on the horizon.

The Gupta Family

The Gupta family, particularly Ajay, Atul and Rajesh Gupta, built an empire in computers, mining, media, technology and engineering in the post-Apartheid era.

The controversy surrounding the family originates from its close links to the Zuma family, where Zuma’s son, Duduzane has acted as a director to several Gupta companies. It is utterly evident that the Gupta’s have captured the state after a barrage of dishonourable leaked e-mails.

The e-mails show the influence of the Gupta family on the presidency and a range of areas of government. The Guptas have come under increased pressure as their dealings become more evident to the South African public. The Gupta family has seen their financial might constraint partially as numerous South African banks closed their accounts citing “suspicious transactions” and reported them to the Financial Intelligence Centre (FIC).

However, the Guptas have had some respite with a much-needed relief in the form of an R70m value-added tax (VAT) refund payment from the South African Revenue Service (SARS), only leading to more questions than answers.

The Gupta family have made themselves part of the fabric of the financial and political environment in South Africa, heavily linked to the events surrounding Eskom, the Finance Ministers’ and other governmental contracts and operations.

Similarly to Molefe, the Guptas hold South Africa back from fulfilling its potential, only to benefit themselves and those in their camp.

Ramaphosa or Zuma 2.0

To achieve immediate progress within South Africa change must come from the ANC. Many would advocate the Democratic Alliance (DA) having taken over key municipalities including Pretoria and Johannesburg.

However, internal distraction with Helen Zille’s suspension and understandably blind faith from the public for the ANC structure no matter its condition, ultimately means the true veterans need to reinvigorate the ANC to its foundation.

The ability of the ANC to go back to its roots was proven after the death of Ahmed Kathrada, the last member of the freedom fighters to pass from the Rivonia trial. Fundamentally, South Africa’s future is in the hand of either Cyril Ramaphosa or Nkosazana Dlamini-Zuma.

Deputy ANC president Ramaphosa was the convenor of the Constitutional Assembly, the platform from which the constitution was negotiated and launched. He is a proven businessman indicating he has the vision to lead South Africa into economic prosperity.

On the other hand, Dlamini-Zuma represents a continuation of the current political environment within South Africa which would leave many disgruntled hoping for positive change.

Where Does SA Stand?

South Africa is in a state of dissolution. Believed by many South Africans to be the leading light within the African continent, Prince Mashele told South Africans to take a cold shower, “South Africa is just another African country, and always will be”.

To state South Africa will remain just another African country is a bleak analysis of what the future holds. South Africa can be a special African country in its own right. However, reality has shown for it to currently be no less exposed to corruption, political jostling nor resistant to change compared to a country like Nigeria.

The heightened economic disparity between the wealthy and poor in South Africa has fueled the crime rate to rise. This has not only created an element of fear for one’s own safety within the country but driven ambitious and capable individuals to emigrate to more politically and economically stable climates.

South Africa is crumbling like the ruins of Mapungubwe reflecting the concept that great cultures and ideas can fade in the progress of time.

The Future

South Africa needs to empower the voices of its ambitious young and old citizens to push for the change they desire without hesitation. South Africa’s sluggish progress has been its own doing.

South Africa needs to stabilise its internal turmoil to attract foreign direct investment that can make a difference and stimulate South Africa to the place in the African sun it desires.

Confidence needs to be restored in the institutions holding its political leaders to account, while at the same time not restraining current individuals in achieving their ambitions.

A resistant South Africa will alienate its own citizens as it alienates itself from progress. However, change within South Africa will bring hope for a future that does not inhibit ambitions but rewards it.

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