Emerging markets are under stress again in the global downturn that’s accompanied the Covid-19 pandemic. Few of their stories are as compelling to a world audience—and as exasperating–as South Africa’s.
Prolonged African successes are still exceptional, and so many wanted to believe that after the Nelson Mandela presidency his country had been redeemed from its apartheid past. Celebrations replaced boycotts and a new democracy welcomed investment in South Africa.
But the last decade hasn’t been as heralded. In fact, it’s bordered on being disastrous for South Africa, tainting more than just a hopeful symbol. The nation is the continent’s second-largest economy (but three times the GDP per capita of the biggest, Nigeria) and remains the corporate and financial capital of Africa.
The long setback followed a broad general upswing since the end-of-apartheid throes of the early 1990s (with a brief relapse during the emerging-market squeeze of the late 1990s). The better times had continued until the fallout from the global financial crisis of 2008 was compounded by the corrupt, autocratic presidency of Jacob Zuma. Over these last 10 years, the value of the rand currency has dropped by 57% against the U.S. dollar.
Even after Zuma was forced out, South Africa suffered through strikes, high crime and power brownouts and was already falling off badly before the global pandemic. Per-capita GDP declined from 2015 to 2017, and recession followed in 2019.
Although still essentially a one-party state, under the African National Congress, the nation cannot muster the political will to rationalize its state industries. Debt is increasing (junk status since 2016), along with the tax burden. Even before Covid-19, South Africans were suffering an unemployment rate near 30%, far higher than that among youth. Yet civil servants have managed to boost their compensation by 40% in real terms during the same decade of decline for others.
So much has contributed to the ups and later downs of post-revolutionary South Africa that you could write a book about it. In fact, two capable journalists recently have done so. A simple take might be that in an attempt to share the wealth created under primarily-white domination, that wealth has been fitfully parceled out and not enhanced in the process. Not enhanced and, in critical respects such as infrastructure, not even sustained (see the Eskom electric utility).
A heavy-handed response to the novel coronavirus might have been understandable in a country that suffered so memorably during the AIDS years and is not far from other recent African afflictions. But the government did unnecessary damage to business sectors, including its globally-recognized wine industry through a series of alcohol-related clampdowns. Constraints on the Web, such as high prices for data, hampered e-commerce.
Central banks around the globe have thus far staved off an even sharper economic contraction, and hopes for a turnaround soon have bolstered prospects for emerging markets. The rand and the Johannesburg stock index are off their spring lows. South Africa has always been blessed with natural advantages; maybe a run of international luck will give its leadership one more chance at redemption.