Exploring South Africa's Conservative Turn and Economic Outlook

Dr Franz Cornier , who is CEO and founder of Franz Cornier Private Clients , which is a consultancy and risk economics analyst firm based in Johannesburg . Franz , welcome .

Really , what's been the reaction , and is there any ramifications for South Africa and Africa in general , with Trump coming into office ?

South Africa's sort of established media echoes a lot of that in the US . Fascism Trump is akin to Hitler . This is a huge setback for the world . So that's the first level of reaction . Second level of reaction is a bit different . I chair one of South Africa's polling firms and we thought , ahead of the US vote , we tested in South Africa .

So we said , trump versus Harris , how are you going to vote ? And the first thing we found is that there was a relatively low level of awareness of the American election as you go down the socioeconomic strata . But where there was awareness , the voting patterns were very similar to those in the US . The voting patterns were very similar to those in the US .

So amongst the graduate professionals , for example , the figures weren't precisely the same but they largely mirrored what we saw graduate professionals do in the United States .

And some of my poll colleagues and myself sat with the data and we thought if awareness of the American election had been universal through South Africa , what would have happened of the American election had been universal through South Africa ?

What would have happened and the result we're very confident in saying is that Trump would have beaten Harris amongst the South African electorate , and more so it wasn't pronounced , but there was a margin where Trump was marginally more popular amongst black South African voters than was the case for white South African voters .

You know , when we think about South Africa and we think of its history , we think of the apartheid strife , we think of the juxtaposition of races , and yet in this particular case we're seeing an underlying conservative thread . How do you reconcile that ? How does that make sense to you in the context of South African history ?

Majority of South Africans that were barred from voting could not express their opinions through the ballot box and were barred from socioeconomic upliftment within the country .

They didn't have quality education , they couldn't work certain jobs my grandmother and grandfather , for being an example of that father , for being an example of that and on that day , in that year , 1994 , millions of them voted for the first time and they voted for the African National Congress , the ANC , which reported nearly 63% of the vote in 1994 .

Also , on that day , half of those South Africans went home that day without having electricity . 50% of households in South Africa did not have access to electricity .

And what then happened in that year is that you had a lot of promise from particularly the early administration within the ANC , under the leadership of Nelson Medela , as well as that of Thabo Mbeki , which promised a better life for all and indeed was delivering in this promise .

What South Africans wanted was jobs , and they delivered on that From 1994 and that until 2008 , the number of people employed doubled . South Africa saw high levels of economic performance . In fact , under the leadership of Thabo Mbeki , which was between the years 1999 until 2008 , south Africa averaged GDP growth rate of about 4.2% .

And in the years 2004 until 2007 , south Africa was recording the same growth levels as what global markets saw of about 5% . Not only do we see that in GDP growth , we also see this in access to education , in housing as well . For every one shack , 10 formal houses were built .

The debt as well was cut in half in 1994 , just sitting at about that of 45% , and it was cut near to 23% by the time that Tabumbeki leaves office and for much of the older population in the country .

They saw , for example , them not having power , electricity to cook and have warm meals at night , particularly my grandmother who used to have to make fire at night in order for the family to have warm cooked meals to her now having an oven as well as that of her children having jobs , as well as that of future generations having economic opportunities .

It's divided by race Likely it's purported , due to its history , but that is not the case . About 80% of South Africans consider themselves Christians . They center right issues , that is , front and center of South Africans .

Dr Franz Kurnia , in chairing the SRF as well , publishes data on the top of mind issues for South Africans , and that is that of economic opportunity , such as that of jobs , such as that of education , as well as that of healthcare . Those are the core , fundamental pillars that center millions of South Africans .

The share of households without electricity falls from almost 50% to under 20% . At the same time , government debt to GDP levels are cut in half and the South African government records the first sustained budget surpluses since the modern South African state was put together in 1910 and 1911 . And there's this enormous lift and the country calms down quite a lot .

It had a very violent 1960s , 70s and 80s . The share of all protest actions in the country that were violent , that share cut in half in the first decade after democracy . So there's an enormous democratic dividend In the subsequent decade , which takes us to the present , really on the moment of the global financial crisis .

But the domestic events in South Africa that exacerbate the consequences economic performance flatlines . The country runs out of electricity An amazing thing to have lived through . We went through several hours of the day where there was no electricity available . Job growth stagnated .

Real per capita GDP has fallen year after year for a decade plus in South Africa and as that happened , we started to pick up in the micro-political data that the country was changing .

There was a myth in South Africa it's a myth that I also saw held by Western diplomats that South Africa's young government could govern with impunity and there were no consequences for misgovernance or for slowing socio socioeconomic circumstances .

But we started to notice , between polling data and economic data , that public opinion was turning against the South African government , which was significant as this was the government of Nelson Mandela . This was his party , the African National Congress , which seen in African liberation circles as perhaps the grandest liberation movement the continent ever saw .

And progressively , as this played out over the 15 years into the present , we saw no firm reaction from the South African government to correct economic course , from the South African government to correct economic course . It became increasingly populist .

It started to make threats of expropriation of everything , from mines to banks , to land , to health care , and public opinion lost confidence in the government faster and faster and a few months ago about three , four months ago , in May of this year South Africa had a national election in which Mr Mandela's party , which once commanded 70% of the vote came in with

40% a natural , inbuilt immune response in its democracy to poor governance , which made it quite unique amongst post-colonial emerging markets which generally , when they got into trouble economically , easily transitioned into some sort of autocracy and a sort of terrible collapse after that . In South Africa's case , not at all . We held a perfectly free and fair election .

The government of 30 years got a hiding 40% of the vote . It was down 16 percentage points on what that had in the prior election , which was five years prior to that , and they walked away from power .

You get through the first couple of years fine . What happens when they're in trouble ? And they got into great economic trouble . Public opinion turned on a very short lag time .

So the very short lag time between economic underperformance , worsening circumstances and changing political opinions and , yeah , unique in post-colonial emerging markets confident to say that South Africa stages a free and fair election , yes , and the losing party walks away from power .

What actually happened and what is happening to fix that moved into ?

The core of the problem is that , in parallel with the corruption , the ideological bent behind government policy shifted firmly to the left .

I intentionally made the point for you earlier that South Africa's young government which , if you're not familiar with the history , coming out of apartheid had been exiled in the Soviet Union and East Germany Rack up the first budget surpluses in a hundred years . These guys were in many respects quite pragmatic and quite moderate . There were many reasons for that .

One that we may go into a bit more is that the young South African government , the young democratic government , is born into a unipolar world . Officially it's the end of history . The Soviet Union , the great ally of the African National Congress , has collapsed .

China is still emerging as a regional power , and so discretion is demanded because there are no supporters . You've got to win over the west , and I think that that was partially a reason for the discretion and moderation . Subsequently , we enter a multi-polar world .

The same discretion isn't required anymore and certain political actors are emboldened to make known their ideological preferences Russia , china , iran which is a key South African foreign policy problem .

And it's the ideological shift in policy to the nationalization , to state-centred development that is what fatally wounds the South African economy , the consequences of which , ironically , bring down the government that is driving that kind of left-wing populism through a free election .

The question you've asked me to answer is what happens next , and it's actually a very dangerous moment . It's a very positive moment We've had this election and peaceful transfer of power deserves to be celebrated but it's also very dangerous , and I'll tell you why .

In this way , before the election , there were groups that would sort of come past my office as it is , and some would have great influence , and they'd say what can we do to bring down this African National Congress government that's so corrupt , has done such damage to the economy ?

And I'd say , well , be very careful what you wish for , because you really want to collapse it . And they'd say , you know , of course , often people with more money than sense . And I'd say , well , what will you replace it ? And often they weren't sure and I said , well , then you've got no business trying to shift the South African government .

The reason is this South Africans believe in democracy , something that was picked up through the transition years , the success of Mandela and then the great socioeconomic successes that accrued the democratic government . They deeply believe that if you vote differently , pick a different team , your life will improve .

If you play that card , you might only get to play it once .

If you play that card , you might only get to play it once , because if voters shift the government which has now happened and this new government newly delivered fails to live up to the socioeconomic demands , you will begin to degrade confidence in democracy , and what you will then be doing the flip side of that is opening the door to populism , one of South

Africa's greatest countervailing forces in favour of its long-term success . And the whole is true today is it's an utterly unradicalised society . It's very moderate , very pragmatic , despite the difficult and partly terrible history and we have now played the card , so we can't go back on that and there's a unity government in power . No one won an absolute majority .

The African National Congress party of the former party of Mr Mandela had been in power for 30 years .

It had a choice it could make a deal with some radical , populist fringe party , some really wild guys way out on the left fringe , the kinds of guys who said well , we should join the West's adversaries in fighting the Western liberal order and bringing it down . So ANSI had the obvious choice to go into government with these guys .

It could have done so , it was up to it .

The alternative was to go into a governing coalition with a party called the Democratic Alliance , had its origins in white liberal opposition to apartheid rule , which is a largely downplayed side story to the struggle against apartheid , and the African National Congress decided to make this deal with the formerly white liberal opposition and then liberal in the very liberal

sense of the word , liberal . And that's where we are at the moment .

The trouble is that neither side not this young new to national government liberal opposition-line government or the African National Congress's senior leaders , have the pull or the drive or the will and , I think , sometimes the insight to bring about the scale and depth of economic policy reforms necessary for the country's growth rate to pick up .

We forecast that at the moment at 1 , 1.5% , 2% to nearer the 4% or 5% that we think is necessary to crack the country's vast unemployment rate . I beg his mention that in some of his background To give you a sense of what the global unemployment rate this year is . So coming in to about 5% , and that's roughly true for high-income economies .

Low-income economies South Africa's rate 33% .

Amongst young black women , you will push it to over 70% and you can see why observers such as ourselves who realise we've done I mean this election result is a very significant and good thing , but the pool for potential radicalisation , should this new government fail to deliver , is such that we could very easily , five , ten years down the line , find ourselves in

a considerable degree of trouble .

to hire people in the economy . Are either of those strategies , or both of them , things that are on the table within South Africa ? What's your sense , becky ?

And going to what Francis mentioned , south African voters vote according to the material circumstances . As those improves , they tend to vote for the party , which is what Francis also mentioned , with the ANC receiving about 70% .

And should this new government fail to actually deliver on very much bread and butter , issues such as that of jobs , education and the support for the GNU would fall in a much more radical , populist type of government . Government unity party might take over At the table at this moment .

In terms of its policy , this government of national unity I would say that the country has definitely turned away from its worst option , but there's still a lot that needs to be addressed , particularly on its energy policy perspective .

Right now , south Africa's electricity has improved compared to what France mentioned earlier on , of the country witnessing about eight hours worth of blackouts per day . This was the worst in last year , as well as the year previously .

South Africa's electricity production has largely improved , from about electricity generation , which is essentially the generation power of the state utility in the country that of ESCOM , rising from about 50% in the worst of those periods those eight-hour blackouts to where it currently stands at about 70% .

That's largely the positive sign that we've seen in the country , as well as that of growth moving away from its limited growth potential of about 1% and slowly approaching 2% .

But in order for it to leap towards that 5% , 4% to 5% level that Dr Francis mentioned , we actually also need to see other policies emerging , such as that of education , educating much of the large pool of South Africans that are economically excluded .

In the country , only four percent of South Africans pass metric with a 50 percent mark and above , allowing them to get to university . Someone who has a university education in South Africa has higher chances of being employed compared to someone that's not .

Those are the issues that need to also be addressed , as well as firm policy proposals that will attract fixed investment .

Afford to wait to fix these things first in order to then be able to put plans in place to create stimulus for the economy ? Or do they need to do stimulus at the same time as they're improving the infrastructure ? What's your sense ?

Since 2010 , electricity production in the country has stagnated and declined in 2019 , as well as that of 2020 . And that has also kept the growth potential of GDP per capita in the country .

What needs to happen is that we need to rampantly , massively increase electricity production in South Africa , which , in this instance , 90% of South Africa's electricity comes from coal , which is something that we can talk about in terms of the international pressures to limit fossil fuels .

This is a major issue in South Africa because you're keeping about 20 million South Africans poor if you're not increasing electricity production in the country . I would say much more of what the government could do right now is increase electricity production .

There are some concerns in terms of the government of National Unity's energy proposals , particularly from some of the parties , but at this moment , they're doing the right calls , in which the maintenance has been quite moderately been maintained in terms of the coal power stations . The energy availability factor , which is .

The capacity of the state utility has largely improved , but there still needs to be a lot more ground that needs to be made in terms of actually improving the capacity and adding more generation to the grid of South Africa .

The centerpiece of both American and European Africa doctrine is to get Africans to turn off their decarbonized economies and turn off the most efficient sources of energy that they have .

It's a simple matter , in South Africa's case , to refit parts of the failing coal fleet and we will generate we've done the estimates more than enough electricity to take any energy-imposed cap off a future economic growth rate .

But I've had discussions with South African government officials who are afraid of doing this because of the threats the South African economy faces from Western diplomats who say we will punish your exports etc . If you do not do this . So number one is the return to coal jettison .

The green agenda and I say that explicitly so I can't be misunderstood In the longer term , 20 or 30 years into the future , south Africa should transition into cleaner energy sources .

Nuclear would be the most sensible thing to do , most likely , but in the short term our environmental concern is 15 to 20 million unemployed , mainly black South Africans , victims of the former apartheid administration , who will remain victims of poverty and desperation and dependency , and all the horrors that go with that , if the South African government is not given

the scope to refit the coal fleets . And number one you refit the coal fleet , then you're away . Number two we spend on education a comparable amount , even in dollar terms , to some of the world's leading emerging markets that themselves produce very good education results . We produce very poor results .

Only six in a hundred South African kids that graduate high school do so with a passing , what we would call a passing grade in mathematics 50% .

The current is opposed in the hands of a Democratic Alliance candidate , the small liberal opposition party that's joined the ANC in government . No sign of challenging union dominance . So , number one , you dump the green stuff , you burn coal . Number two , you challenge union dominance in education .

The problem is not primarily a resource construct , it's an ideological and union construct . And the third thing that you need to do South Africa taxes capital on arrival .

If you wish to invest in South Africa , the South African government might even allow it , but first you will be offered conditions to meet , and one of those conditions is that you have to surrender a share of the equity in your business to what are called empowerment partners , and it's a scandalous business .

To act as a fig leaf for a rent-seeking exercise , where the share that you surrender in your company as you invest goes to the politically most connected .

And the critics of this arrangement are predictably branded as racist and right-wing dinosaurs of no place in a modern , socially just society , which is nonsense , because the critics I'm one of them right-wing dinosaurs at no place in a modern , socially just society , which is nonsense , because the critics I'm one of them are of the view that the country needs highly

effective empowerment policies . We call these things empowerment policies just to put a bit of irony on it , and highly effective empowerment policies that are state-backed , so it's legislative , to advance poor South Africans out of poverty and into the middle classes .

And the sort of thing that you would want to do is school subsidies , for example , in very school subsidies , for example in very poor communities , maths programs ensure that any young and poor South African they'll chiefly be black that could pursue study in either a technical or academic field is not denied that opportunity because they cannot afford the fees that

young entrepreneurs in poor communities are able to access the seed financing that they need to get businesses and the like off the ground .

If the South Africans do those three things coal unions and education and remove the tax on inward investment , then it's very difficult to see why the South African economy would not reach a growth rate of three , approaching four percent , which is the forecast average for emerging markets over the next five to ten years .

So how do you see the role of foreign policy working within all of this within South Africa , and how is it affecting the potential for doing the four things that you're talking about ?

Imagine you're seeing a map of the world Off the east coast of Australia , the Solomon Islands . The Imperial Japanese realized how very important those were after the attack on Pearl Harbor in cutting Australia off from the protection of the American Navy , from the protection of the American Navy .

Thirty years of very expert Chinese diplomacy into the present culminated in the election on the Solomon Islands this year . And the Solomon Islands are marching deeper and deeper into the Chinese orbit . There's a security pact there now that allows Solomon commercial vessels to operate .

If those vessels feel threatened in their subjective judgment , they can now call on the chinese navy to back them up . Draw a line from the solomon islands through the out of the south pacific , through the indian ocean , past india , to djibouti . If you don't know where that is , it's on the bubble man dub straightab Strait , where you narrow into the Red Sea .

Before you get to the Suez Canal . There's a Chinese naval facility there now and it mirrors an American and some other naval facilities , and so to a degree , parity has been reached . Naval parity is being reached on the gateway to the Suez Canal . Draw a line down from the Suez Canal , which is Egypt , to the southern tip of Africa .

If you were very precise , you'd draw it to a little town called Simonstown , which has been a very influential naval base for the past 200 years . The Simonstown Naval Base is up for grabs at the moment in terms of the great sort of struggle between global powers . If you draw a line from the simon's town base back to the solomon islands , you have a triangle .

You can kind of see it in your minds . The triangle covers the south pacific I think eisenhower called it america's lake . I think it was eisenhower . I might be wrong , but that's not entirely true anymore the Indian Ocean Rim . You've got to get on with the Indians to do that .

They're increasingly influential , but 80% of China's crude oil passes through that zone and you cover the gateway from the Indian Ocean to the Suez Canal , the Mediterranean and to the South Atlantic . And the South Atlantic is important .

It hosted the opening naval exchanges of the First and Second World Wars that were definitive in determining control of the North Atlantic and ultimately settling that conflict . China's making vast progress in the Solomon Islands . It's made progress in Djibouti .

If you put it this way , if you control all three X's on the map , you have extraordinary geostrategic control the South Pacific , the Indian Ocean , the Atlantic and the entryway to the Mediterranean . So South Africa does matter a little bit Now , despite its small size and that its image of the bastion of global democracy and human rights is somewhat tarnished .

Yeah , right .

One is Western diplomats and there are exceptions and if they're listening to this they know who they are , because they're very few make serious analytical mistakes in Southern Africa , to the point of confusing what they believe are their allies .

The analysis leads them to believe certain countries are allies , but those countries see themselves as adversaries of the West and their apparent allied behavior originates only from the brief unipolar moment at the end of the collapse of the Soviet Union . A second mistake is strategic . Westerners arrive in southern Africa and think .

The way that Westerners think and behave must surely be the way that other people think and behave .

And one of the I think it's a lagging and increasingly important weakness that arose from the end of history era in the West is the idea that the last threat to the Western liberal order , that it collapsed , led Westerners to start to believe that hard power politics , terrance , power through strength would become less and less important and that if the world was

going to become an increasingly liberal order , you could get away really with just being nice . So they make basic analytical mistakes on Southern Africa's governments , the point of mistaking adversaries for allies .

They then apply hopeless strategies to try and move the behavior of those countries , often by indulging and appeasing behavior that they really shouldn't , being very reluctant to bring hard power forward , which simply invites more problematic behavior on the part of the African peers .

And then if you read contemporary Western or European , American or European Africa policy and doctrine , it's counterproductive to Africa's development needs because it focuses on two things .

One is decarbonization , which Africa is in no position to do , and in fact any African leader that followed the advice of Brussels , for example on what to do on energy , would probably tempt a social uprising and a change of government , Whereas that same person , if they were to listen on energy to the advice they received from Moscow or Beijing , would do much

better by their own citizens in terms of improving their lives . That's an extraordinary point to have reached in this battle . And the second issue I call almost cultural evangelism of Westerns who introduce DEI-type thinking into Africa , which has catastrophic consequences , especially when it comes to the question of excellence and merit in appointment processes .

Africa has a very limited skills base . It exports its best people around the world it's always done that and policies that don't prioritise merit above all else in hiring practices , firms , company boards are not in the developmental interests of the continent .

Our second area , where the advice African governments would get from Moscow and Beijing is better than what it's getting it has today got from a lot of Western capitals . So I think , broadly , western policy towards Africa is horrifically ignorant , misaligned , strategically inept and counterproductive to Africa's development needs .

And that is why , if there's a sense amongst security thinkers and diplomats that the West is on the retreat in Africa and in some places it is not everywhere that sense of retreat is informed by these strategic errors .

If the South Africans can find common cause with Mr Trump on questions of climate and energy , that lifts a cap off South Africa's future economic growth rate . Likewise , if the s skepticism of DEI programs translates into policy towards South Africa and Africa broadly , that can only be to the advantage of South Africa's global competitiveness and the like .

So I think , potentially . Yeah , there are issues that need to be dealt with . There's an element within the South African foreign policy establishment that acts as a stalking horse for chiefly Iran . I think you can't fault the South Africans for trading with China , you kind of have to do that .

And another discussion the South African assessment on Russia and the conflict in Ukraine is complex and I think it might even resonate with elements of the Trump administration . It certainly wouldn't with the Biden administration .

So if the South Africans can get over these foreign policy hurdles , these flashpoints and they're very serious they culminated in an act for Congress last year , the South Africa-US Bilateral Relations Review Act that demanded of the administration to report to Congress on whether South Africa was threatening US national security interests .

Now , by the time , you are winning a bipartisan support for such a request in Congress of the past 18 years in your case it might be eight or 12 . We'll see . So I'm pretty much alone in the analyst community . There are some others , but we're a minority , who think that this could be extremely positive for South Africa's long-term development .

What you see and have observed over this last month , does it give you any hope that we can sort of reconstitute our relations with both South Africa and Africa in general ?

One of the negative signals that I saw , particularly for the other side of the Democratic Party , is that I saw families taking their kids away from schools and homeschooling their kids , as well as individuals that would have voted for a Democrat in 2020 now looking to consider a Republican vote , and that's largely due to domestic policy , but as well as that of

foreign policy internationally , including that of South Africa , for example , south Africa stands to benefit immensely from that of a Trump administration the points in which Dr Franz Cornier has mentioned from that of a Trump administration the points in which Dr Franz Cornier has mentioned . We have .

South Africa's total trade with the US sits at about 7.5% as a proportion of our total exports . One of the things that is constantly weaved into South Africa , or the concern about South Africa , is the Goa trade agreement , which is essentially how South Africa has no import duty taxation on its products to the US .

That is actually increasingly small compared to the total proportion of total exports in the country . Agoa is only about 2% of South Africa's total exports .

But rather , what South Africa stands to benefit from a Trump administration is really moving away from certain foreign actors such as that of Iran , which is the point that France has also made a different player compared to that of Russia and that of China . From us it's much more .

The benefit for South Africa would be much more aligning that with the West and we stand to gain quite immensely from that , from our trade particularly , as well as that of in line with administration that will definitely use much more of hard power than what the previous administration has been doing that both will help the South African economy thrive again and

provide some strategic counterbalance for the United States .