far less benign, political transition?
The crisis of rising expectations
The answers to these questions will be determined by trends in our economic, social, and political environments. For instance, if the economy performs very badly, expectations among the disadvantaged about rising standards of living will not be met. Should they have the means to do so, they may take steps to change the way in which the country is governed. Should the economy perform well, and meet expectations of rising standards of living, those same people may seek to maintain the status quo. Even a cursory examination of these trends shows that the questions raised about South Africa’s stability are not idle ones.
A point of departure for much of our analysis is that – contrary to popular opinion – significant progress has been made since 1994. However, as we will see later, this very progress has become part of the problem, as it has created what we describe as a crisis of rising expectations. On the economic front, for example, South Africa has managed to recover from the low growth and high debt and deficit levels racked up in the 1980s and 1990s. After dipping into negative territory in the early 1990s, the economy rebounded after 1994, averaging gross domestic product (GDP) growth of more than 4% in 2000-2008 and more than 5% in 2004-2007.[3] Inflation dropped from double digits in the late 1970s to 3-6% for much of the post-2000 period,[4] and the prime interest rate by more than half from the levels preceding South Africa’s transition.[5] The annual change in gross fixed capital formation, or fixed investment into for instance factories, rebounded into positive territory after 1994, having sat at negative levels since 1982.[6]
Despite weakening considerably against the American dollar in 2001-2002, the rand has (until recently) been relatively stable, especially when compared with the extremely volatile currencies that have wrecked a number of post-colonial African economies – with Zimbabwe a notable recent example.[7] Between 2003 and 2006 alone the number of registered income taxpayers in South Africa increased from 3.7 million to 4.7 million people.[8] Moreover, the budget deficit (the difference between what the government receives in income and what it spends) fell from 4.5% of GDP in 1994 to a surplus of 1.0% in 2008.[9] Similarly, government debt fell from 43% of GDP in 1994 to 27% in 2009.[10] GDP per capita, in real 2005 rands, increased from just under R29 000 in 1994 to just under R40 000 in 2013.[11] By 2013 almost 6 million net new jobs had been created since 1994.[12]
This economic progress has enabled great improvements in the socio-economic circumstances of South Africa’s people. In 1996, 64% of South African households lived in a formal house, 79% had access to piped water, and 47% cooked with electricity. By 2011, some 15 years later, these figures had risen to 70%, 90% and 66% respectively. What these indicators do not adequately convey is the scale of the services delivered. For example, South Africa saw the construction of no fewer than 2,9 million new houses, mostly built by the government or by means of government grants. The number of social welfare beneficiaries increased from about 3.5 million in 2001 to more than 16 million in 2013.[13] That makes the state the biggest single source of income for almost a third of households. By 2012, black households were identifying welfare as almost as important a source of income as employment.[14] The government has therefore been responsible not just for improving the physical circumstances in which people live, but also for an unprecedented injection of cash into the lives of poor people.
As a result the ANC has managed to retain more than 60% of electoral support in all four national elections since 1994, and – until recently, at least – the ruling tripartite alliance (comprising the ANC, COSATU, and the SACP) has also maintained a semblance of political unity. There is general respect for the rule of law (with important exceptions); constitutionally guaranteed institutions such as parliament, the public protector, and the South African Human Rights Commission (SAHRC); and the constitution itself. Considering the nature of the pre-1994 dispensation, these are all achievements worth celebrating.
The ANC has therefore not failed in the main to create a ‘better life for all’, as it promised in 1994. Any analysis that does not acknowledge this is flawed, and must necessarily fail to explain what is happening in South Africa today, let alone what may happen in the future.
However, it is equally clear that political tensions are mounting, largely due to the difficulty of meeting ever-increasing demands. A cruel irony for the ANC, and the government it leads, is that these improvements are fuelling ever-increasing expectations of further improvements that may not be met since not enough opportunities are being created for citizens, particularly young people, to improve their own lives. The irony is best expressed by the veteran ANC member of parliament and former treason trialist Professor Ben Turok who writes that ‘it is consistent with revolutionary theory that people are inspired to struggle when their living standards improve’.[15] This curse of rising expectations lies at the root of much of the social and political instability in the country, and its resolution therefore offers a key to understanding what will happen in the future.
Some negative trends
This curse is exacerbated by the fact that, while much has gone right since 1994, a great deal is also going wrong.
On the economic front, South Africa is unlikely to benefit again from the happy coincidence experienced in the early to mid-2000s of a commodity boom, declining interest rates, low household debt levels, and a weakening rand. Since then, global financial crises have dampened international credit markets, and the domestic household debt-to-income ratio now exceeds 80% – up from 50% in the early 2000s.[16] As a result, consumer spending, which accounts for more than 60% of GDP, is unlikely to boost economic growth to the extent it did in the early to mid-2000s.[17]
Given this, it is questionable whether we will soon reach or exceed the growth levels of about 4% of GDP experienced in 2000-2008. As the Minister of Finance, Pravin Gordhan, pointed out in his medium term budget policy speech on 25 October 2012, growth is likely to average less than 3% in the short to medium term.[18] Subsequently, a number of economists have suggested that a figure of about 2% may be more realistic.
Slower growth and less tax revenue have resulted in the government running out of the money it needs to implement its policies. South Africa’s 2013 budget deficit of 4.8% of GDP was considerably higher than that of other emerging markets such as China, Russia, and Brazil.[19] In 2012, a report by the UN Global Investment Trends Monitor suggested that foreign direct investment in South Africa might have fallen by as much as 43% over the previous 12 months even as it rose in other emerging markets.[20] And, in July 2012, the governor of the Reserve Bank, Gill Marcus, warned that the depreciating currency was becoming a significant inflationary risk.[21] In 2013, after growth forecasts had been downgraded to just 2% of GDP, she again warned that the economic outlook was deteriorating rapidly.[22] Therefore, over the past three to four years, the relatively strong growth, declining debt and deficit levels, and stable inflationary outlook that had characterised the economic environment earlier in the new millennium have all deteriorated.
Furthermore, analysts have increasingly criticised the contradictory nature of economic policy under President Jacob Zuma.[23] For example, the New Growth Path (NGP), developed by the Minister of Economic Development, Ebrahim Patel, envisages a ‘state-led growth path’ as a strategy for establishing a ‘developmental state’.[24] However, the National Development Plan (NDP), developed by the minister responsible for national planning, Trevor Manuel, favours a private sector investment-led growth model, thus contradicting the central thesis of the NGP.[25] Rudolf Gouws, the respected former chief economist of Rand Merchant Bank, now begins some of his briefings on the South African economy with a picture of two angled arrows painted on a road surface, pointing at each other.
Playing with a hand grenade?
The implications of lower levels of GDP growth and investor uncertainty will be felt most acutely in the lives of ordinary people. Despite the government’s welfare and service delivery successes, formal levels of unemployment remain extremely high, averaging more than 25%. Among young black people, aged 15 to 24,
