- Author, Jonathan Josephs
- Role, Business reporter, BBC News
A leading figure in South Africa’s second-largest political party has warned that failure to fix the economy “could end in violence that nobody wants”.
In the wake of the election, Dion George, who oversees economic policy for the Democratic Alliance (DA), told the BBC that political parties must “set aside our deeply held ideological perspectives” to get the economy growing again.
The African National Congress (ANC), the party that ended white minority rule in 1994, came out on top in last week’s polls but fell short of an outright majority and is trying to form a government of national unity.
South African President Cyril Ramaphosa of the ANC said the concerns of citizens must be the priority.
“These issues include creating jobs and growing our economy to be inclusive, the high cost of living, service delivery, crime and corruption,” he said recently.
Almost eight million people are unemployed across the country, meaning the unemployment rate is 32.9%.
It is one of the highest in the world and has been labeled a “ticking time bomb” in a UN report.
Amid ongoing power outages hampering business operations, the statistics office this week reported that the economy shrank in the first three months of this year – with manufacturing, mining and construction suffering particularly.
Last year South Africa’s economy grew by just 0.6%.
“A lot of small businesses have actually closed” due to widespread problems with energy supplies as well as the state’s transport and water networks, says Busisiwe Mavuso, chief executive of the influential lobby group Business Leadership South Africa.
Its members include local names such as Bidvest Group and Absa Bank as well as international companies such as Amazon, Volkswagen and Nestle.
Ms Muvaso says the “business environment is not favourable” and that “the call from her members is for the government to really fix the basics”.
The central bank says foreign investment fell by a third last year amid trade difficulties in a country that the International Monetary Fund (IMF) nevertheless predicts will return to Africa’s largest by the end of this year.
French bank BNP Paribas and British oil giant Shell are among the big, foreign names pulling out of South Africa.
In a recent failed takeover bid for miner Anglo-American, Australia’s BHP made it clear it did not want the company’s South African assets.
Despite having a presence in South Africa for more than 120 years, Shell says its exit is part of a wider overhaul of its business.
Competition for investment is fierce and Ms Mavuso says “we’ve made it really hard for capital to land here”.
“East Africa is eating South Africa’s breakfast,” she jokes, while remaining optimistic that the size of the domestic market and the rule of law will ensure a return on investment once the economy recovers.
For both foreign and domestic companies, Ms Muvaso says, the government needs to “create an environment that is conducive to investment” – and that will bring the jobs South Africa so badly needs.
With so many people out of work, there is widespread inequality and he warns that this means “you will never be able to achieve social stability. So we are definitely in danger of eroding social cohesion.”
Among people aged 15 to 34 the unemployment rate is 45.5% and the frustration caused by the lack of jobs is easy to find among young people in Johannesburg.
“Business opportunities for young people” must be the new government’s priority, says unemployed 23-year-old Tebogo Mokobane. “I’ve been looking for two years for a job as an animator and so far I haven’t found anything.”
Siphiwe Masila, a 24-year-old financial analyst, agrees: “More opportunities and jobs for the youth” are paramount and should be “more accessible”.
The constant power outages concern her and 24-year-old student Philasande Mnguni, who says his “biggest frustration is just service delivery” at a time that is difficult for “a lot of South Africans”.
South Africa has been described as the most unequal country in the world and there is criticism from the left that the economy is simply not working for the majority of the population.
The Economic Freedom Fighters (EFF) – the fourth largest party – called for greater nationalization and expropriation of land so that the country’s wealth can be shared more evenly.
The party says some of the ANC’s more business-friendly policies and sweeping black economic empowerment legislation have failed to address the country’s underlying problems, which are the legacy of the racist apartheid system that ended 30 years ago. years.
The difficulties faced by many to make ends meet in a stagnant economy led the government to increase a range of social payments in February’s budget.
More than 24.5 million people, or 39% of the population, receive some form of financial assistance from the government. It is one reason why public debt has risen to 74% of the country’s annual income and that the IMF warned in April that “decisive efforts are needed to reduce spending”.
South Africa’s Ministry of Finance has warned that “debt servicing costs are choking the economy and public finances”. They now account for 20% of all government spending, more than basic education, social protection or health.
Looking at the electricity problem, the DA’s Dion George says it is “probably” important for the government to borrow money to fix the country’s crippled energy grid, railways and ports. But he admits it will be difficult to afford.
Another option he says is to “change the model, bring the private sector into it,” which would ease the strain on public finances.
With the centre-right DA taking 22% of the vote, it may have some influence on future policy and also wants labor laws such as minimum wage rules to be relaxed to boost employment.
“It’s the prices of workers out of the market, employers are not willing to employ people at the minimum wage rate,” says Dr George. His white-led party is proposing an exemption for 18- to 35-year-olds who have been unemployed for two years.
But it is the kind of politics that puts the DA at odds with South African unions, an important ally of the ANC.
The unions have warned the ANC against entering into any agreement with the DA.
“We reject any coalition with the DA,” Solly Pheto, general secretary of the South African power union federation Cosatu, said earlier this week.
“This is a political party that called for the abolition of the minimum wage, the NHI and saying that workers have too many rights.”
NHI refers to the National Health Insurance Bill, which promises universal healthcare for all and was signed into law by President Ramaphosa shortly before the election.
Mr Phetoe’s comments show the real fears from the ANC’s support base that the DA will not support their welfare programme.
The DA, for example, opposes both the black empowerment policies of the NHI and the ANC.
Dr. George responds that “we must contain the power of unions in our economy.”
He says that while ANC Finance Minister Enoch Godongwana agrees with him that South Africa has a growth problem, they disagree on whether the ANC has a spending problem.
“Choices have to be made” to get the economy growing again, “because if we don’t do that … we’re going to end up with a bailout, we’re going to end up with an economy that’s not growing. Of course, heaven, we may end up with violence that no one wants.”