Navigating South Africa's Political and Economic Changes

Hugo Kruger is a structural engineer from South Africa , currently living in France , who focuses largely on politics and the energy situation across the world , and we also have Becky Malobo . No-transcript .

I think what we could be seeing from South Africa , given these results , is that South Africa could become the most interesting emerging market in the next 10 years , and that's based off South Africa's institutions , such as that of free and open society , a democracy .

South Africa entered democracy in 1994 in order for its citizens to elect a government that will improve its life , as also to have that opportunity to vote out that government should it fail to do so .

And that's exactly what we've seen in these elections , with an ANC that has lost its majority 30-year governance in the country , 30 years since 1994 under the leadership of Nelson Mandela and now at the hands of Cyril Ramaphosa , with the ANC looking at its worst electoral performance , at 40% .

This is not only a party that has essentially seen defeat , but has also accepted its final result and leading to that number , it actually makes sense , as ANC voter support is anchored in by the lived experience of South Africans .

As lives and general living conditions in the country improve , the party support generally rises , and this was only seen in South Africa's history since 1994 up until 2008 , where ANC support rose , and it rose due to the fact that living conditions in the country dramatically improved .

In the early days of South Africa's democracy , about half of households in the country went home without having electricity . That number is down below 20% and in that same period we doubled the number of people employed from about 7 million to near 15 million by the time it was Thabo Mbeki's era in 2008 .

And at the same time , we were growing at the same level as other emerging markets , averaging about 5% , and the reward the party received is an ANC support reaching 70% .

In 2004 , under Thabo Mbeki and subsequent to that period , where we had 10 years of economic stagnation , youth unemployment reaching 70% , anc voter support has dwindled to where it currently stands at 40% . That is the expression of South Africans . The expression of South Africans .

That is the expression , through the vote , that they have simply frustrated with a governing party and have simply not voted for it and voted for other parties , or simply chose not to vote .

So it was sort of a hand of gesture to sell its government country . This is not because they wanted it . They were forced into coalition because they were losing support . So it's actually a coalition government . It's just they're trying to sell it . Now the coalition partner they've chosen is the Democratic Alliance , who's been governing the Western Cape .

They've governed well , as far as we can know . As we've seen in the statistics , they won the province outright , but they've struggled to sort of expand their base to the rest of the country , and that's had to do with demographics as well .

The Western Cape has unique demographics where it's the only province where the the black population is a minority , although there's still 30% of that Now . It's not at all . It's a totally racial outcome , but it's sort of like the racial groups clustered around votes .

So the first thing this government will be faced with it's always been a challenge in South Africa to maintain racial and tribal harmony , make sure people not tell each other , stop violence , any of those things . And fortunately , from the bigger parties , they've all committed to this , so that's a good thing .

Now , as to practically what they should do is infrastructure backlog . South Africa came out of electricity , running blackouts for almost five years and you know , even longer period before that , a month before the elections , and people didn't buy it and saying okay're saying okay , we'll fix it before the election . So the electricity crisis was number one .

Infrastructure backlog I mean the number of roads , the things that actually the basic just the basics in terms of government was not there , and this had to do with the ANC sort of following the path that the Congress party in India did , where they started entrenching themselves , they ran on the liberation brand far too long and they didn't realize that people were

not buying it anymore . So they'll have to get back to good old governance and then , I would argue , stop trying to be too big for our shoes internationally and defeat from your own responsibility back home .

South Africans , if you actually look at them , about 60% of South African households would prefer sending their children in Western institutions to get a quality education . That is an issue . And also , looking at that South African population is quite moderate in its way of thinking . It simply wants economic growth . It simply wants employment .

It simply wants jobs and wants to simply wants employment . It simply wants jobs and wants to focus more on domestic issues rather than foreign policy . So much of the actions that you've seen of South Africa on the international stage has been at opposite with what public opinion in the country has been , and this is also true throughout the years up until now .

And in regards to that , in terms of , do we see a change in South Africa's foreign policy ? I think in these election results , it could result in a change in South Africa's foreign stance , given that it's going into a coalition with the DA .

However , I don't think it will really play a pivotal role in terms of really having much of what to say in terms of its foreign policy , but would much rather , and would be best suited , in fact , to look at domestic policy in the country .

Now it's china , and then the us about 30 percent each , more or less , and imports , exports . And you can add the us strategic allies , japan , western europe together it's more than 50 . So it's a point just made for some time . If the us wanted to really topple the south african government , it's not to give the CIA any ideas .

It would have been very easy to do so . So what are we doing ? Antagonizing our largest trading partners ? This is the first point . Well , at least you can be quiet Now .

The South African government had the idea that they could learn from India with non-alignment , but in my view , the literally non-aligned country is India , because India's population is big enough and the economy is big enough to say no to everybody . South africa has the economy the size of maryland .

Here we are grandstanding on the world , whatever one's position is on russia , ukraine or israel , palestine and you know we have the differences over those things . Just from a realism point of view , it's completely naive to have taken the stance that they've taken and now they've forced into a coalition with the DA .

And it's worth pointing out that two of those four of the DA's previous leaders were Jewish South Africans . I don't know what is going to happen with the foreign policy stance , but I don't think they can maintain that level of posturing . It will be very difficult . It's going to be a very uncomfortable marriage for them .

And then , just in the US perspective , last year the US Foreign Relations Committee was Republican , staffed , okay said well , let's just review our relationship with South Africa , let's just review our relationship with South Africa .

And they realized well , south Africa has this very good relationship with the US called AGOA , where you basically have a free trade agreement . But it works out the math that the US taxpayer is a part of our economy . And people have been pointing this out to the government and saying are you trying to antagonize your largest trading partner ?

I mean , you're completely naive . You're not Indian , we don't have a military , we don't have the economy . We're much better suited just to focus on domestic things and stay out of any fight around the world . That's my view . Just stay out of it , even if you don't agree with it .

But they've been totally naive over those things and I think part of the backlash also came from that , because some people are saying what about the economics ? And we see people vote for inflation , as is the most case in the world . Some people saying what ?

What sort of changes does South Africa need so that it can begin to do as well as some other countries that have made some substantial changes ? I know Botswana is considered an example .

It always brings it down to reality and National Congress has been an attack on private property , has been an attack on free markets , has been an attack on social economic indicators in the country and in order for that to improve , they simply need to reverse the policies that are implemented .

In fact , going to these elections , just three weeks before these elections , the ANC according to polls if you look at the social research foundation , which has been phenomenal in terms of actually tracking party support by parties six weeks before elections anc voter support was sitting at about 45 percent three weeks before the elections and until they signed the

national health insurance , which essentially is the nationalization of private health care in the country . That's a threat to about 9 million South Africans which , by the way , are predominantly black South Africans they support dwindles to 40% . The revolutionary talk , which also Hugo touched on , does not resonate with the majority of South Africans .

South Africans want common bread and butter , issues such as economic growth , which needs to be the key policy objective of this new government . Growth , which needs to be the key policy objective of this new government actually growing the economy . A percentage increase in GDP performance in the country is about 100,000 jobs .

This is job levels which has been stagnant over the past 10 years , where we've only netted about 2 million jobs , whereas from 1994 until 2008 , we actually doubled the number of people employed .

That's income for millions of South Africans , as well as dependency rates in the country of the national health insurance , such as that of expropriation without compensation , which fundamentally weakens property rights in the country and has driven down fixed investment levels to the point where growth has really struggled to surpass 2% over the past 10 years .

So in order for the new government to actually improve the living conditions of South Africa , it actually needs to reverse its policies it has been implementing over the past 10 years . It needs to improve its education levels , which have been quite disastrous .

About 4% of South Africans manage to pass the metric grade 12 with a mathematics pass rate of about 50% and above . That's important because when you go to university in the country , you need a math pass rate of 50% and above , and only 44% , if you look at the cohort of pupils in the country , manage to get that level .

Labor regulations in the country are a problem , which have restricted much of the low-skilled workers in the country and they need to be reabsorbed in the economy , like the point that I've mentioned earlier on about 70% of youth unemployment rates in the country .

That's a large economic exclusion in the country to the point where we now have those frustrations seen on the streets , as seen in protests , where 30% of protests in the country turn violent . Those are the frustrations of economic stagnation in the country which needs to be addressed in the next five to 10 years .

Is the country at a point where people are really willing to accept the fact that , in order to be able to create economic growth , they're going to have to accept a degree of inequality and things being out of balance in a way that they might not have been willing to do a couple of years ago ?

If you look at , you can look at in any sector , like , for example , infrastructure , which Hugo can touch on , our rail networks , which is the movement of freight in the country , has stagnated over the past 10 years , since 2008 . And at the same time , we're seeing a massive movement of goods in the country through trucks on the road .

And not only that , but , speaking about electricity , where we've had power outages over the past 10 years , we're seeing an increase in private electricity generation to the point where ESCOM , which is the state-owned power utility , its electricity production as a total in the country has dwindled from 90% to about 80% and that gap has been taken on by the private

sector about 80 percent , and that gap has been taken on by the private sector also into this .

We do not like the revolutionary talk that we see from politicians , and much , much of that push towards more Marxist way of thinking , more left-leaning way of thinking and discrediting free markets largely comes from politicians . It does not represent the mindset and the public way of thinking within South Africa .

Okay , but that's far away than what you would say you know as a marx , leninist . But of course , during the cold war it is true that there was an ideological battle of Africa and many of the ANC's in exile , if you will , those so-called liberation fighters , trained in the former Soviet Union and they brought some of those ideological ideas with them .

Now the ANC were riding a few good waves . Number one you had the Mandela Wave of reconciliation , which was genuine at the time . You had the apartheid government with good infrastructure , which was served mostly to the white population , but nonetheless they had something to back off .

And then , with the opening up of South Africa to the world , sanctions came off at the time , so we had some economic growth . So they were riding all of these good waves . And now these Marxists who took power , some of them thought it's because of our ideas that we got good . It's because of our ideas that we got good .

It's because of our ideas , as opposed to seeing what else happened . It's not correlations . Causation is a good example of that . And when living standards started stagnating and crashing down , the population pushed back to the intro without them realizing it . And you know , I think , even in the former Soviet Union , eventually economics worked out .

You know , you could not deny it for a long period of time . So this is what we saw . So I think they have rejected some of the revolutionary talk .

I don't think all of it is out , because we still have some parties and some people voted for this and that , but by and large , 60% of the population voted for a government that is pragmatic on business and on infrastructure , which we'll see going forward infrastructure , which we'll see going forward .

This is a party that had quite rampant revolutionary talk in its policy as well as its public standing , and it could have easily made a coalition with the EFF , which is much more radical than the ANC , and could have also made a coalition with the MK , but chose not to Because the consequence of that again going to the point that I earlier made , that ANC

voter support is anchored in by the lived experience of South Africans Marxist way of thinking , a move away from pragmatic type of policies , would have resulted in the death of the party and ANC members . Some members within the ANC understood that and chose not to do a coalition with the EFF as that would have largely been a done deal in terms of their death .

Their support levels would have dwindled even below 40 percent because predominantly , predominantly south africans are not that way of thinking . They do not like these types of policies that the government has implemented over the past 10 years , which has led to economic stagnation .

I mean , the definition of a , of a government , is that a government , a government , is defined by having a monopoly and control over the use of force . We do not have that . The south african government does not have a monopoly and control over the use of force . We do not have that .

The South African government does not have a monopoly on the use of force . For every private security officer , there's about 100 South Africans . Compare that to a public sector the SAPs as we call them , south African Police Service there's about 400 South Africans . It's about four times higher than what you see in the private sector .

We have more private security offices in the country compared to that of the public sector and that's South Africans simply choosing to opt out from the state due to the receding state as it fails to meet basic living standards .

South Africans choose to opt into the private sector and I think much of the pragmatists within the ANC understand that and they understand fully well that , should they go more of the revolutionary talk , it would result in their death .

Not only would it result in their death , but dramatic economic consequences for South Africa , to the point where we could even see hyperinflation in the country , as that coalition would go to the printing presses where South Africa would see hyperinflation , to the point where you see in Argentina , as well as that in Nigeria and the fact they chose not to go for

that option is quite a remarkable thing in this country , and that's why I've been quite optimistic after these elections .

So , first of all , you would like a country that just works . You would like South Africa to be like Spain or Italy , or even Germany , if you will . You just travel there . It's a nice place for quality . It's not a violent country , it's the same levels , things of that nature , basic needs met before we try and dream to be the grandstanding country .

And then you know , other than that , I would say , towards the rest of Africa . I mean , julius Nyerere was the president of Tanzania , he was a socialist or something . He gave a speech in South Africa in 1994 . He said South Africa could be used for the development of the rest of Africa .

Now , given the infrastructure that inherited from the apartheid government , the ANC was arguably in a better position back then , because a lot of it has deteriorated . It was still in a relatively okay position .

With regards to that , they say okay if we are going to come with some developmental model , which will be a mixed economy it will not be a Marxist economy , that's for sure probably more aligned with the US and the UK than even Western European countries . But if you can come up with an economic model for the rest of Africa , I think we'll be okay .

But we need to know our size in the world first of all . We are a country as big as Western Europe more or less it's Germany plus France plus Italy , together with a population that's less than France . So it's a highly dispersed population .

In many ways they're concentrated in one or two provinces , and you need to first understand where your country is and what its own potential is before you can try and grandstand . So I'd like to say just fix the country at home first before we go do anything else more ambitious than that .

The Democratic Alliance being that of a party , a multiracial party , which its voters are established middle income class voters , combining with that of the ANC , which is now a rural party , is the joining of two forces .

And in fact , another voting bloc which needs to be emphasized , which I think will become more prominent in the upcoming elections , is the aspiring middle income class that comes from rural parts of South Africa , like myself , coming to urban dwellings in order to seek economic opportunity . That is about 35% of the voting bloc in the next elections .

That is the voting bloc in which the ANC needs to attain and take advantage of and gain that voter base and should it do so , it would be quite a remarkable union of forces . We have an established middle income class joining in with an aspirant middle income class , and the economic opportunities that may arise from it could be great .

It could also I know this could be quite difficult replicate what the country's seen in its early democracy , where growth averaged about 5% , doubling the number of people employed , increasing GDP per capita to the same levels , or to about the same growth levels of what we saw with global averages . I see much more upsides with this coalition deal .

Of course there are risks and I'm sure we don't have particularly enough time to speak on those risks , but should this coalition work , it would usher in a new prosperity in the country to the point where growth dramatically rises . It breaches the 2% cap which has been seen over the past 10 years .

The number of people employed rises and not only that , but South Africa's position in the global state has significantly risen Due to what you see in the Middle East right now . There's driven up shipping around Cape Town by 70% , according to the IMF .

Should this coalition take advantage of that the domestic factors , but as well as that of the international factors South Africa could easily be one of the most interesting emerging markets over the next 10 years .

We have not printed money to the point where we see hyperinflation , and usually in countries that see crisis like South Africa , they go to the point where we see hyperinflation and usually in countries that see crisis like South Africa . They go to the parenting presses . Our population is not violent , in the main very moderate , want common bread and butter issues .

They want to send their kids to very quality education . They want private healthcare . They want to also have a job . That is fundamental for a society of success over the next 10 years . I see quite a lot of upsides , but of course we need to be quite aware of the risks at play as well .

Gentlemen , thank you so much for joining us and giving our audience a view of what's happening in South Africa and for being guests on the Feudal Future podcast .