Business, Economics and Jobs

South Africa's cautionary tale

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Workers paint Main Street Life, an old industrial building in downtown Johannesburg that was redeveloped as an apartment complex and boutique hotel with restaurants, a rooftop bar and an art house cinema. While in recent decades central Johannesburg has become derelict and notoriously dangerous, some areas are changing as a new generation of artists and innovators moves back to the city.

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Erin Conway-Smith

South Africa’s future looked bright when apartheid ended and Nelson Mandela became president. It looked hopeful when international trade and other economic ties with China strengthened, and that much more so when, in 2010, South Africa was brought into a small club of countries expected, at least by some, to play a big part in global economic growth — Brazil, Russia, India and China, plus now South Africa, the BRICS.

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For a time, South Africa seemed poised to lead an era of “Africa Rising,” democratically and economically.

BRICS leaders, from left, India Prime Minister Manmohan Singh, China's Xi Jinping, South Africa's Jacob Zuma, Brazil's Dilma Rousseff and Russian President Vladimir Putin, pose for a club photo in Durban on March 27.

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Alexander Joe

Now, South Africa has its worst unemployment figures in more than a decade — closing in on 30 percent. Its economy dipped into recession in early 2017. Its national credit rating has been downgraded by all three major rating agencies. And many South Africans see Donald Trump’s approach to governance as nothing new; they’ve been living with their own version under President Jacob Zuma for eight years.

“Maybe Zuma is a watered down version of Trump,” says Mpho, a senior in international relations at Witwatersrand University in Johannesburg. “In terms of their behavior, not caring for the rule of law, making a state about yourself, running it like your own little store, where you can fire and hire as you please — maybe with regards to that, they are similar, right?”

The difference, Mpho says, is that Americans “knew who Trump was, but still they elected him.” South Africans, he says, “didn’t see it coming. ... President Zuma was one way, and then later he revealed who he was. And now, it’s so difficult to get rid of him.”

Zuma, 75, was an early activist in the anti-apartheid African National Congress. He served 10 years in prison with Nelson Mandela, then went into exile and came back in 1990. His ANC credentials allowed him to rise. And yet, he has been accused, over time, of rape, racketeering and corruption.

He was able to beat most of those charges, but South Africa’s highest court ruled in March 2016 that he violated the constitution by using government money for private home improvements, including building a swimming pool, amphitheatre and cattle enclosure. 

South African opposition parliamentarians struggle with officers trying to remove them before President Zuma's State of the Nation address in February 2017

South African opposition parliamentarians struggle with officers trying to remove them before President Zuma's State of the Nation address in February 2017.

Credit:

Mary Kay Magistad

Beyond personal misconduct, Zuma has not shown himself to be particularly skilled at spurring economic growth or creating opportunities for a nation still healing and transitioning from almost half a century of institutionalized racial segregation. A national development plan created during Zuma’s tenure envisioned South Africa’s GDP doubling or even tripling by 2030, creating so many new jobs that unemployment would fall to 6 percent.

Economic growth was forecast to be between 3.3 percent and 5.4 percent; it’s been far lower. In late 2016 and early 2017, there were two consecutive quarters of negative growth — the textbook definition of a recession.

Scene in Soweto, Johannesburg, South Africa

Scene in Soweto, South Africa

Credit:

Mary Kay Magistad

All this while South Africa relied on China as its largest trading partner. Since 2010, China has purchased half of South Africa's commodities. When a slowing Chinese economy caused demand for those resources to fall by almost 40 percent in 2015, South Africa's economy suffered. China's economy has since recovered some, but the episode served as a reminder that the Zuma government’s tendency to rely as heavily as it has on China hasn’t been a robust strategy for ensuring South Africa’s economic growth.

Similarly, while South Africa’s accession to the BRICS — a term coined in 2001 by Goldman Sachs Asset Management Chairman Jim O’Neill — seemed full of promise, the BRICS themselves have not all lived up to that promise, individually or as a group.

Of BRICS countries, you've got Brazil, which is in freefall, has been in freefall, and shown a total political economy as an abject failure,” says Martyn Davies, managing director for Emerging Markets and Africa for Deloitte Africa. “We've got Russia, which is entirely statist in approach, in a country no one should be emulating anywhere. You've got China as a great success country but it has its own very, very unique approach to how it manages political economy. You add India, which under Modi has used the BRICS summit in Goa as a whip for Pakistan, and South Africa, which sort of believes it’s created this new sort of G7 counterweight to the West, whatever that is. What of substance comes out of BRICS summits?”

Fans of the BRICS appellation counter that this grouping, and others like it, help highlight the fact that the global balance of power is shifting toward a multi-polar world, in which more voices and perspectives need to be considered.

David Monyae, far left, codirector of the Confucius Institute at the University of Johannesburg, and John Stremlau, second from left, visiting professor of international relations at Witwatersrand University

David Monyae, far left, codirector of the Confucius Institute at the University of Johannesburg, and John Stremlau, second from left, visiting professor of international relations at Witwatersrand University

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University of Johannesburg

“Whether we like it or not, the US is on the decline as a hegemon,” says David Monyae, co-director of the Confucius Institute at the University of Johannesburg, and a former policy analyst with the Development Bank of Southern Africa, where he helped design BRICS policies. “If you look at the US, its stake in the global economy has drastically been reduced. ... So the view is that either the hegemon and Western countries, if they were smart enough, they would change, because they have control over change. But if they leave it, the pressure will come from the periphery. So countries like BRICS will become legitimate. The structures of IMF, World Bank will become illegitimate. But it's even worse with the coming of a Trump administration, that you can't see the differences between Zuma and Trump.”

In the midst of this shift, Monyae says, China’s trade, loans and investment throughout much of Africa have given Africans options and opportunities they didn’t really have before. Some 10,000 Chinese companies, most of them private, are now doing business in Africa, on top of the Chinese government’s bilateral efforts. 

The pan-African, non-partisan research group AfroBarometer, in a 2015 survey, found that an average of 63 percent of people surveyed in 38 countries across Africa, found China’s impact in Africa ‘somewhat’ or ‘very’ positive, with South Africans being a little on the lukewarm side.

Che Smith is on the warmer side. A former South African diplomat in China a decade ago, he now heads efforts to bring Asian trade to Cape Town, with Wesgro, the Western Cape investment and trade promotion agency.

I do think it's a very strong relationship, and it's a great relationship,” Smith says. "I find that the Chinese are extremely more willing to cooperate and to help than what other partners have been. “

Che Smith heads efforts to increase Asian trade and investment with Cape Town, with Wesgro in Cape Town, the government's trade, tourism and investment promotion agency

Che Smith heads efforts to increase Asian trade and investment with Cape Town, with Wesgro in Cape Town, the government's trade, tourism and investment promotion agency

Credit:

Mary Kay Magistad

Smith has been particularly focused on China’s pledge to make $60 billion available for infrastructure and other projects in Africa over the next three years, but is concerned that time is ticking, and Africans haven’t yet come together and agreed what projects would best benefit not just one or two African players, along with China’s ability to extract resources, but the whole African continent.

“We always know that there is no such thing as a free lunch. But, how can we as Africa, or as South Africa, leverage off the pledges that we've been given?” Smith asks. He says he worries that the looming deadline to use the money could lead to African infighting, and to squandered opportunities.

Slowness in responding to such an opportunity may be linked to mixed feelings some Africans have about becoming too economically reliant on China.

Chinese market in Johannesburg

Chinese market in Johannesburg, South Africa

Credit:

Mary Kay Magistad

“There is a very ambivalent response to the China-Africa relationship coming from Africa, kind of a twinned expression of 'yay! This could be great for us.' And also 'ohhh, this could be problematic in the future.' And it very much pendulums back and forth, on both of those kind of reactions,” says Cobus van Staden, co-host of the China in Africa podcast, and a media studies senior instructor at the University of Witwatersrand in Johannesburg.

Criticisms and concerns about Chinese trade and investment in Africa, from civil society, include “they’re making it difficult to move unpopular presidents or parties out,” van Staden says. “Also, there's a lot of anxiety about debt. There's a kind of a debt bomb waiting for Africa in the future. Anxieties about low levels of refinement of African resources, anxieties that Africa is again trapped in a relationship with exporting raw resources, which are processed elsewhere and then get reimported as manufactured goods.

“To be fair, I think China is, to a certain extent, sensitive to that particular issue. And some facilities for processing some of these minerals and oil and so on, are slowly being put up over Africa,” he says. “But Africa being again trapped in that kind of unhealthy economic relationship that they were trapped in with the West, that is a big concern.”

Cobus van Staden, cohost of the China in Africa podcast, and a media studies senior lecturer at the University of Witwatersrand in Johannesburg, South Africa

Cobus van Staden, cohost of the China in Africa podcast, and a media studies senior lecturer at the University of Witwatersrand in Johannesburg, South Africa

Credit:

Mary Kay Magistad

To use a phrase favored by the Chinese government, many African countries would like to see more of a "win-win" in trade and investment — with China and with other partners. Some of that comes with good governance and smart negotiations that don’t end with lopsided deals greased with personal payoffs on the side. China comes in as a pragamatic player, but one that has seen the value in investing in Africa, in a way that other economic powers had not, for too long, van Staten says.

“And I think in that sense the Chinese engagement is very, very powerful, because it just presents a different way of thinking about Africa — that it's not just, 'oh you poor people, we need to help you with aid,’" he says. “Africans have become quite sensitive to that, and also quite tired of it.”

South Africa is still in transition, in finding its own way as a democracy, an economy and a once and possibly future model for other African countries. The 2019 presidential election could bring change that helps spur growth and create jobs. Jacob Zuma’s tenure has been a reminder, for many South Africans, that it’s hard to be a positive force in the world without good governance at home, a sentiment with which some Americans can now relate.

“Now that Trump is reminding people that, in fact, America can be more of a problem than part of the solution, more of an antagonist than a partner, it's important for South Africans and everyone else to look to themselves, to reassess what is best for their interests and their values, and then to work with other like-minded partners,” says John Stremlau, an international relations professor at the University of Witwatersrand and a former US State Department deputy director for policy planning. “This is a very important and big point for South Africa, and South Africa's democracy,”