No amount of champagne, cakes or booze-fuelled parties can mask the reality of the what the ANC has become.
Notes for a briefing to the Atlantic Council in Washington DC on 1 September 2016.
Read part one HERE.
PART TWO OF THREE
If the era of 1994 to 2007 was characterised by gradually rising economic growth rates and falling debt levels, the era from 2008 until today has shown the opposite. Public debt levels have roughly doubled since 2007 (a figure that excludes generous guarantees to wasteful state-owned companies).
Economic growth that had averaged 5% in the four years to 2007 came in at 1.3% in 2015 and South Africa might very well find itself in recession by the end of this year. Formal private sector job creation has been effectively stagnant for five to six years (while public sector employment increased by roughly 25%, thus placing further pressure on the budget deficit).
The example of public sector employment is a very good prism through which to view the post-2007 government’s concept of a ‘developmental state’. Essentially, money was being borrowed to employ more government workers, even as growth levels declined and investment levels tailed off.
The full gamut of indicators we track to develop an advance view of the South African economy appear dire at this point. These range from mining and manufacturing production indices to residential property prices, vehicle sales, credit extension and default numbers, business confidence indices, consumer confidence indices, and consumer spending itself.
The most telling number of all is that, in real GDP terms, South Africans are again becoming poorer – as they last did in the volatile and very violent 1980s.
The political consequences are turning out to be severe for the ANC and may bring about political shifts approaching the significance of those in 1994 - when a once powerful and entrenched administration was dethroned by its antitheses.
My colleagues have identified a near perfect inverse correlation between the change in the real after-tax incomes of households and violent protest action in the country. We find the same correlation between household incomes and confidence in the future and the government.
The political shifts triggered by South Africa’s recent economic underperformance have shaken the seemingly once impregnable political edifice of the ANC. In South Africa’s 2014 national elections (the most recent), just more than a third of all eligible voters (South Africans over the age of 18) turned out to cast their ballots for the ANC.
This was a far cry from the over 50% of all eligible voters who turned out to vote for the ANC in 1994. Today there are more people over the age of 18 who are entitled to vote but choose not to do so than there are people who chose to vote for the ANC.
If half the non-voters vote again, but do not vote ANC, then the party will lose its national majority, ushering in a new era of what will probably be coalition politics for South Africa.
The prospects for such an outcome must now be taken seriously. Earlier this month South Africa staged local government elections. Support for the ANC fell to a record low of 54%.
More importantly, it lost its outright majorities in major urban centres. Its support in poorer rural communities also declined but in a country that may be 80% urban within 20 years the future voting market has swung in favour of the opposition.
To its left, the party now faces a passionate, if misguided and at times vulgar, challenge from the Marxist inspired Economic Freedom Fighters, led by a former ANC youth leader.
To the centre, the ANC faces a challenge from the Democratic Alliance – the party that had its nucleus in South Africa’s white-liberal anti-apartheid tradition, although it now has a black leader and has moved to the political centre, more social democrat than classically liberal, in an attempt to attract more black voters.
In the considerable aftermath of those polls, four trends rose to the surface.
The first is that younger and more educated voters are turning against the ANC. Our own research now suggests that as an individual’s level of education and income increases, he or she becomes more likely either not to vote, or to vote for an opposition party.
The second is that urban and more upwardly mobile people are leaving the party faster than more rural and poorer people – although the latter, too, are beginning to abandon the ANC.
The third is that, in the run-up to this month’s polls, more than ten ANC candidates were assassinated – seemingly not by rival party forces, but by their own party colleagues. In-fighting and internal recrimination is likely to reveal deep-seated divisions that can no longer be kept hidden.
Fourth is that a significant number of young people did not bother to register or vote. If that changes, political outcomes will swing to significant new extents.
The forces as they are stacking up – both politically and economically – suggest an environment primed for a high degree of change.
From an analyst perspective it seems foolish for the ANC in government not to appreciate that its political mandate rested in large part on its economic performance. In sacrificing that performance in pursuit of ideological goals, the ANC created rising new demand for a political alternative. The absence of an obvious political rival to the ANC started to matter a great deal and the implication of the destruction of its former black rivals therefore took on a new degree of importance.
What is the newly emerging political alternative to the ANC? From which political quarter may the ANC now face defeat?
Before we get there, must the ANC now necessarily face defeat? Has it passed the point of no political return?
Our view is that the only way for the ruling party’s national majority to survive another decade in power is to pull off an economic reformation. It will have to introduce policy reforms sufficient to draw massive amounts of new capital investment into the economy, in order to raise growth rates to levels sustainably approaching 5% of GDP. At home, many South African analysts and economists are sceptical that this can be done.
Their scepticism is well founded in that the economic crisis facing South Africa is a self-made crisis, crafted in the cabinet, and in the face of well-argued criticism and advice that the ‘developmental state’ policy framework adopted by the government after 2007 could have but one set of consequences.
Now that these consequences are in evidence, there is still no concerted effort on the part of the cabinet to change policy direction. In fact, a number of ministers are continuing to push for interventions that will harm sectors ranging from education to healthcare, security, mining, agriculture, tourism, high-tech services, banking and financial services, and manufacturing.
Or take the example of a recent proposal by the ANC itself, following a series of meetings to assess its poor electoral performance, that the government move quickly to introduce a new national minimum wage. The ANC is losing support because of low growth and high unemployment and part of its response is to raise wage levels.
How is this possible, we are often asked by outside observers? Why does a country with such obvious potential continue to promote policies that are so harmful to its economy and the prosperity of its people?
END OF PART 2
*Frans Cronje is a scenario planner and CEO of the IRR, a think-tank that promotes political and economic freedom.
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