Will South Africa face a second lost decade?

By: Jason Musyoka

The lost decade?

In January 2019, in Davos, president Ramaphosa claimed that South Africa was emerging from a lost decade. This rhetoric gathered storm, with the public divided on whether it was justified. Most of us expected former President Jacob Zuma to protest. This he did, citing that under his watch social grants expanded, the ARV programme expanded to become the largest in the world, the National Development Plan was put in place and two universities were built. These achievements according to Mr Zuma, and a section of the public, disqualified the lost decade label. But what exactly constitutes a ‘lost decade’?

The meaning of ‘the lost decade’

The term was first coined in reference to Japan’s economy between 1991 and 2000. Between early 1970s and late 1980s, Japan rose from the ashes of World War II (literary and figuratively) to catch up with North American and European industrialized economies. In the 1980s, Japan’s economy was roaring, posting the largest per capita Gross National Product in the World. Investors were scrambling to invest in Japan, and banks offered easy credits to businesses. In the 1990s the economy went burst, as the number of non-performing loans skyrocketed, and the stock markets crashed. Unemployment increased from 2.1% in 1991 to record 5.5% in 2002, and during the same period, Public debt soared to 100% of GDP as the government tried to spend money to kickstart the economy.

The US economy is also considered as having gone through a lost decade which started with the burst of the dotcom bubble in 2000 and ended with the burst of the housing bubble in 2008. During this period returns on dividends were lower than during the great depression in the 1930s, and net job growth was almost zero, with the crisis wiping out 33% of all manufacturing jobs. By 2009 unemployment soared close to 10%.

Lastly, Economists argue that Latin America lost about half a century following independence in the 1820s, while Africa lost roughly three decades between 1970s and 1990s. In both cases, the regions were characterised by high levels of political instability, capital flight, economic stagnation and dramatic rise in unemployment.

The structural patterns of contracting national economies as described above, justify the ‘lost decade’ label. In other terms, a ‘lost decade’ refers to spectacular fall of macro-economic indicators for a period extending about ten years. “Lost” as opposed to ‘gain’ also suggests that on the whole, there was little progress made from the period preceding the one under analysis.

Economic evidence of South Africa’s lost decade

So was the last decade a lost one for South Africa? To answer this question, we turn to the performance of the economy, using 2008 (or thereabout) as a reference point, depending on available data. First the positives. One of the commendable successes of the past decade was the decrease of AIDS related deaths from 42.06% in 2007 to 22.18% in 2018. This was largely due to the ARV programme under Mr Zuma’s watch. Mr Zuma is also right that social grants expanded coverage from 11.8 million South Africans in 2008 to 17 Million in 2017. This, however, is a double edged sword. Social grants help cushion the poor. But expanding social grants coverage while unemployment increases, the number of people living below the poverty line increase, and the economy is trapped in slow growth; is not sustainable.

If we turn to the negatives, GDP growth declined from 3.6% in 2008 to 1.3% in 2017. The economy went into recession in 2009, following the global crisis, it missed a technical recession by 0.3 points in 2015, and in 2018 it went into a second recession in just ten years. Unemployment rose from 22.5% in 2008 to 27.6% in 2017, mere 0.2% below the highest since 1994. In other words, the combined policy choices and activities between 2008 and 2017 did not contain (let alone reverse) soaring unemployment. In 2017 there were just three million more people below the poverty line than in 2009.

Turning to perceptions on public service corruption, out of 180 countries, South Africa ranked number 54 in 2008, falling to number 71 in 2017. Government debt to Gross Domestic product almost doubled from 27.8% in 2008, to 53.1% in 2017. Also, between 2007 and 2017, electricity Tariffs increased with 356% compared to 74% of inflation increase.

On the whole, South Africa’s economy was a sinking ship between 2007 and 2017, even if there were few capitalists who jumped out with some spoils. The poor, the working class and the middle classes were all casualties, some in greater ways than others. If we use the Japanese, American, African or Latin American macro-economic indicators as descriptors of lost or gained decades, then based on the above indicators, South Africa lost a decade.

Should we anticipate the ‘second coming’ of the lost decade?

The onset of the above disastrous performance was the ANC’s internal struggles, which wound up in smaller parties carving out of the ANC. Evidently, the ANC -and the country was perhaps, less decayed during the first decade of democracy, than it currently is. The storms which started in 2005, delivered the first split. What followed was devastation of the economy for a decade.

The ongoing media reports featuring the showdown between the ANC Secretary General and the President points to Déjà Vu all over again. A lot of analyses have already drawn comparisons between Mr Magashule’s date with political fate, with that of former president Jacob Zuma, during the period that the latter was the deputy president of the ANC and of the Republic. The campaign for Mr Magashule’s support is not only defiant, it is also conspicuous. Like Jacob Zuma, Ace Magashule has been mobilising support from the party’s branches, in search for ‘numbers’, which in his strategy would overturn the party’s National Executive Committee’s (NEC) ruling demanding that he step down from his position within thirty days (along with those implicated in corruption). The count down started on Monday 29^th March.

Mr Magashule has not left the public wondering what his response to the NEC’s ruling is. He has publicly claimed that his blood is black, green and gold, referring to allegiance to the party’s colours. Worth noting is that this response begs a question, rather than answer one. The lingering question is whether Mr Magashule will step down, not whether he will leave the ANC. This is the second major political showdown within the governing party in just over a decade.

For the most part, Mr Zuma was understood from his affiliation to the unions, and thus, almost all bets were on probabilities of a more equal society, with the poor and the working class taking over governance systems. In retrospect, that was not to be. The opposite instead happened, with the unrestraining of the most brutal forces of crude capitalism, by which to date, recovery is not in sight, yet.  By the end of Mr Zuma’s presidency, even the most optimistic analysis conceded grounds to the existentialists, and joined the proverbial art work of drawing parallels between South Africa and 21^st century Zimbabwe, or failed states such as Congo and Somalia. For a country whose moral shadows towered to the ends of the earth just two decades ago, this was a spectacular descent.

The re-emergence of political currents which shaped South Africa’s first lost decade.

There is reasonable consensus that President Ramaphosa has restrained the political winds which were clearly sinking the ANC boat. But he is no Messiah. In the process of calming these currents, new ones have emerged, or more accurately re-emerged. On the surface, issues seem reasonably clear, concluding that Mr Ramaphosa’s ANC is serious about corruption. Factually, this argument holds. But the social and political consequences force a re-look at Karl Marx’s wisdom that personal forces are infact, social forces, and to separate the two is a fool’s errand. Mr Magashule, or Jacob Zuma before him, seem to follow Karl Marx philosophy.

It is self-evident that Mr Magashule’s supporters are broadly located within the far left of the political spectrum, while Mr Ramaphosa’s supporters on the other hand are, in general terms, moderate. The leftists are by and large disciples of the Radical Economic Transformation (RET) movement. The RET narrative is evidently popular among young people, and seeks to fast track the process of change from the socio-economic patterns engineered under apartheid, ruthlessly if need be. So much so that engaging in shady deals easily fits into the RET narrative. The slow process of socio-economic equalizing is unjustifiable, that much is true. But the ANC has been in power since 1994, and is therefore largely responsible for the failure of economic democracy over the past three decades. This conversation (about the failure of the party to deliver socio-economic equality) is entertained within the party. This debate has become the theatre from where the ideologues retreat for performance.

The current battle lines are therefore not so much between the corrupt and moralists, than they are between ideologues and pragmatists. This ideological schism is what will in all probability shape the next decade of the ANC, the state and the country. Although all indicators point to a return to a downward slide of the ANC, like they were during the first ANC’s showdown, opposition parties are too fragmented and opportunistic, to rise to the occasion. Ultimately, the ANC will still be in power for the foreseeable future, and therefore the country will bear the consequences of its breakdown. The ANC is in greater trouble than it was in 2007. While the same might not be said of the country, the baseline of macro-economic indicators is troubling. From rising inequality and poverty, to strained fiscus, to remarkably underperforming parastatals, the risk of a second lost decade is conceivable.

This prediction however lies in who between the ideologues and the pragmatics within the governing party, will wield more influence on the party and the country.

Dr Jason Musyoka is a senior researcher at the University of Pretoria’s Department of Political Science. He is also the CEO of The Frontline Group.