No fear of ‘Mandela crash’ for Africa’s largest economy

2013-12-07 09:19

Economists slapped down speculation that Nelson Mandela’s death could prompt an economic and financial slump in South Africa, but warned the gains he inspired remain fragile.

Analysts pointed to a strong showing by the JSE yesterday and the rand despite news of his death, dismissing doomsayers who predicted the 95-year-old’s demise would spark a crisis.

The JSE All Share index was up around 1% and the rand rose against the dollar by almost the same amount.

“The lack of reaction in the [rand] today has been notable – the Zimbabwe scenario doomsayers have been silent so far,” said Peter Attard Montalto of Japanese bank Nomura.

“However, there is a disturbing minority in the South African finance community who push this line.”

Still, Mandela’s death prompted some introspection about his role in shaping the economy and its direction.

“Mandela’s role in the political development of South Africa is unquestionable,” said Shilan Shah, Africa Economist with Capital Economics.

“Significant economic progress was also made under his leadership. However, this is now in danger of being undone.”

Mandela’s boosters say he provided a stable political platform for the South African economy to recover from years of economic sanctions, while involving black workers.

He also rebuilt institutions riddled with nepotism, which for decades employed white workers regardless of their skill.

“Between 1980 and 1993, real GDP growth averaged 1.4% per annum. Between 1994 and 2012, average growth has risen to 3.3%,” said Shah.

But 20 years after the end of apartheid, South Africa remains one of the most unequal places on Earth.

The economy is growing far too slowly to bring down unemployment, which stands at about 25%.

Some blame Mandela’s administration for sowing the seeds for today’s problems, particularly corruption and mismanagement on the part of the ANC government.

Critics say Mandela was too eager to promote anti-apartheid allies to positions of power, despite shortcomings.

“Did he have weaknesses? Of course he did,” said his friend archbishop emeritus Desmond Tutu yesterday.

“Among them his steadfast loyalty to his organisation, and to some of his colleagues who ultimately let him down. [He] retained in his cabinet, underperforming, frankly incompetent ministers.”

Attard Montalto also questioned Mandela’s decision to “create a cadre of rich black empowerment businessmen who were not industrialists or really [if we are honest] job creators”.

The drive to rebalance white dominance of the economy remains highly controversial.

And his embrace of labour may have led to a governing alliance between the ANC, unions led by Cosatu and the SA Communist party, which while creating stability, seems to have made serious economic reform all but impossible.

“After the initial steps taken post-apartheid, the reform process has stalled. Cosatu’s process of collective bargaining has meant that labour costs have comfortably outstripped productivity gains over the past few years,” said Shah.

“As such, there has been virtually no progress made in reducing South Africa’s high rate of unemployment since the end of apartheid.” publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

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