This article was previously published by Taihe Institute
South Africa’s 2023 outlook remains grim primarily due to self-inflicted crises. The most pressing concern is the state electricity provider – Eskom’s – inability to provide sufficient capacity to meet power generation needs and the consequent supply chain issues. As a consequence, South Africa has experienced unfaltering nation-wide timed electricity blackouts, which have severely impacted economic activities. Farming and mining activities, the largest contributors and employers in the South African economy, have also declined steadily due to erratic power supply. The current conditions have given many investors concern that the Mandela Magic South Africa is associated with is no longer fit for purpose.
Much of the context finds its origins in the post-1994 democratization euphoria. A previously sanctioned apartheid government expedited a period of opening up. However, past leaders’ willingness to embrace international markets caused irreparable damage to domestic industries, like textiles. While the South African government was figuring out what degree of government facilitation was needed to protect industries for future development and growth, industries such as mining thrived.
The commodity boom of the late 1990s allowed South Africa to experience a golden age of politics and contributed to an acclaimed African Renaissance well into the early 2000s. Against this backdrop, South Africa’s image as a diplomatic darling and economic powerhouse that boasted a diverse market offering and infrastructure construction and that made contributions to African peacekeeping, has changed significantly. And the panacea of promised South African growth was very much under pressure at the onset of the 2008 recession.
The unimaginable arrived with the impact of the COVID-19 pandemic on the South African local economy and a series of rating downgrades. And South Africa’s highly unequal population further contends with the overall impact on the health sector and local economy sectors has further increased the challenges for economic recovery.
In addition, the pressures of climate change are limiting the agricultural sector’s ability to implement sustainably, and are devastating living standards of people inhabiting informal settlements. Perhaps the Just Energy Transition, a vision aimed to achieve net-zero carbon emissions by 2050, may be put on hold as integrating job creation and rapidly installing generation capacity to sustain domestic supply requirements and regional trade demands cannot find synergy as yet.
The political economy of the Southern African region has been similarly impacted by global market conditions and the pressures of climate change. South Africa’s neighbors also struggle to improve local conditions and fight poverty exacerbated by political instability. In cooperation with the Southern African Development Community (SADC) Mission in Mozambique (SAMIM), it remains in South Africa’s best interest to continue supporting regional efforts to quell the insurgency along with its northern border Mozambique. With no clear exit strategy, South Africa is obliged to sustain the costly mission to prevent further regional instability.
Zimbabwe, which also shares a border with South Africa, has been plagued by instability and hyperinflation for more than 20 years. Hopes remain that the 2023 elections will change Zimbabwe’s political dynamics and engender greater power sharing between the ruling party ZANU-PF and opposition parties, including Citizens Coalition for Change (CCC). However, poor overall access to consumer goods and social infrastructure and reports of continued unlawful detention and arrests impact the human security of Zimbabweans, continue to drive migration to South Africa and surrounds. Increased migration places pressure on South Africa’s welfare system and the economy of many South Africans who are dependent on access to free or subsidized health and education infrastructure, as well as low skilled jobs. Local South African discontent has roused xenophobic and anti-African sentiments, which erupt in sporadic community violence. In 2022, protests erupted in Eswatini, landlocked in South Africa and Mozambique, with activists calling for the removal of the King of Eswatini and implementation of democratic reforms. South Africa brokered a series of negotiations. However, King Mswati III is reluctant for change.
South Africa is a major trade partner of the Southern African region through SADC and the Southern African Customs Union (SACU). In addition, there’s also the African Continental Free Trade Area (AfCFTA), which holds promise for creating an equitable trading space, but progress is incremental. The AfCFTA focuses on formalized sectors and a large proportion of intra-African trade takes place informally, but impetus to improve mechanisms in this regard has grown.
Structural inequality impacts the developing world hardest. While great store was placed on “the Great Reset” – an economic recovery plan drawn up by the World Economic Forum (WEF), economic anaemia, pandemic recovery, populist leadership and renewed geopolitical competition severely hinder the developing countries’ ability to adopt any common advance. In 2023, levels of inflation, partially caused by the Russia-Ukraine war, continue to impact global growth. For developing countries with high levels of debt and rising interest rates, inflation weakens business investments, stymies social infrastructure investments in education and health, and interrupts climate change mitigation strategies.
Davos 2023 was an opportunity for Team South Africa to rally captains of global industry. However, President Ramaphosa skipped the meeting to tackle South Africa’s loadshedding electricity crisis and address discontent within the ruling African National Congress (ANC). And so, pursuing partnerships was constrained by both domestic exigencies and regional instability.
What plans are in place to mitigate this?
In addition to several economic recovery and industry building plans, the 10-point plan to radically reverse electricity supply issues cannot avoid the negative impact of governmental bureaucracy and other red tape.
In 2023, political parties will orient themselves to the 2024 national and provincial elections. South Africa’s strong democratic history of independent elections is a reaffirmation of South African political legitimacy, strong institutions, rule of law and independent judiciary. However, election orientation limits political focus on coping the existing service delivery issues.
South Africa maintains its international image as a middle power, crafting a niche for itself as a bridge builder due to its capacity to mediate difficult conversations. Its BRICS presidency in 2023 draws attention to the African agenda focused on issues of trade and finance, and the Just Energy Transition, among others. However, administrative inefficiency, stale leadership, sluggish change, and strife within the ruling hierarchy may mar the remainder of 2023. It is hard not to vacillate between extreme pessimism and tremendous optimism for the extensive opportunities that reform should generate. The government must set a positive tone for achieving South Africa’s national interest and maintaining both African and global relevance.
Arina Muresan is a senior researcher at the Institute for Global Dialogue associated with UNISA, her views do not necessarily represent the view of the Institute for Global Dialogue’s.