SA heading toward becoming a failed state, group says

Unless it changes its economic model and implements growth-friendly policies.
Image: Guillem Sartorio/Bloomberg

South Africa faces a precipitous economic and political collapse by 2030 unless it changes its economic model and implements growth-friendly policies, according to Eunomix Business & Economics Ltd.

Using a range of measures, the Johannesburg-based political and economic risk consultancy forecasts the country will rank near the bottom of a table of more than 180 countries in terms of security, similar to Nigeria and Ukraine, and have prosperity akin to Bangladesh or Ivory Coast. That’s a significant decline from its current position, though it should fare better on governance and welfare measures.

“Bar a meaningful change of trajectory, South Africa will be a failed state by 2030,” Eunomix said in a report.

The consultancy blames a structure created during the White-minority apartheid era that was designed to exclude the Black majority, creating one of the world’s most unequal societies. Since the advent of democracy in 1994, the ruling African National Congress perpetuated that situation by rejecting job-intensive growth policies and instead raising wages and subsidising the poor through welfare, Eunomix said.

While less than a quarter of the population is in work, South Africa’s wage bill as a percentage of gross domestic product significantly exceeds that of countries such as India, Thailand and the Philippines.

‘Dual track’

Eunomix’s recommendation for South Africa’s government is to adopt a “dual-track” strategy of developing and maintaining high levels of social support and paying for it by adopting an aggressive special economic zone policy, which boosts growth and employment, albeit at lower wages.

The ANC’s strategy is “a dichotomy born of apartheid, resistance and crystallised by ideological puritanism and entrenched interests,” the consultancy said. “The country should not choose between imagined opposites. It should adopt a dual-track approach that reconciles them.”

President Cyril Ramaphosa is “very clear” about the need for inclusive growth that addresses inequality, unemployment and poverty, his spokesman Tyrone Seale said by phone on Wednesday.

“Government, business, labour and communities are currently working on an economic recovery plan,” he said. “As South Africa we are clear about our plan to reboot the economy and the need to involve all South Africans.”

Former President Jacob Zuma ushered in a decade of low growth when he focused on increasing the role of the state, instead of supporting a private-sector led recovery after the global economic crisis of 2008, Eunomix said. Prolonged policy uncertainty in areas ranging from mining to telecommunications compounded the slowdown.

The economic impact of recurrent power cuts, rising unemployment and the loss of the last investment-grade rating on South Africa’s debt have only been exacerbated by the coronavirus outbreak.

“The pandemic is the last nail in the coffin of strategic fiasco,” Eunomix said. “The economy is unsustainably narrow and shallow. It rests on a small and declining working population burdened by very high debt and taxes.”

© 2020 Bloomberg

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We are already a failed state.
To keep blaming apartheid, after 25 years, is to keep letting the ANC off the hook. And their SACP policy making comrades and Cosatu that dictates the labour laws.

The NP and before them the SAP/ United party made significant strides lifting an entire generation of dirt poor whites to mostly lower middle class.
A generation is enough time.

The ANC has deepened poverty and inequality and every indication is it will double down the same path.
Blame Zuma alone but Ramaphosa shows every intent of continuing the most damaging instincts — erosion of property rights, BEE and of course increased centralization until we are even more of a one party state than we already are.

But bottom line its time for SA to stop the denial and accept that we are a failed state. The quicker we so that the quicker it can be dealt with.
Not holding my breath though.

Stopping the denial or accepting that we are a failed state will make no difference in my opinion. I cannot see how “it can be dealt with” successfully. We have the same population, the same mindset and the same state employees. To find enough excellence among that lot to make it work is impossible in this lifetime. As you say, no point holding one’s breath. May as well try make this lifetime last a bit longer and make the best of a bad situation.

So typical of moneyweb to delete comments..I echoed the MK Veterans sentiments on the ANC and my comment gets deleted

Why do we even bother?

South Africa is one big ‘special economic zone’ where companies have to give away ridiculous amounts of ownership and bear the brunt to economic wastages through failed policies that have been proved to destroy growth.

In short SA has become too risky to invest in. Regrettably, even more bullish European governmental developmental agencies like Solidaridad Network Southern Africa now deem South Africa as just too risky to invest in.

Simple solution. Cyril needs to update his definition of “our people” to mean ALL South Africans!

Proudly brought to you by The A.N.C. Don’t forget to vote

Wrong.
If you need an exact date when South Africa BECAME a failed state it was somewhere between 16-20 December 2007 at the 52nd National Conference in Polokwane when the #VoetsekANC elected Jacob Zuma and his supporters to the party’s top leadership and National Executive Committee (NEC)

The failed state is already here. All there is left is to see how much lower the ANC Commies still can go from here.

2030? A bit optimistic in my opinion. I suspect in the next 3-4 years inflation will start becoming a problem, ANC will not have been able to get state spending under control and that corruption will be even more absurd as the cadres try and squeeze the final bits of money out of the state.

Though luckily I will no longer be here to watch the circus. I am heading down under as soon as the COVID madness subsides, hopefully within the next 6 months.

“…..currently working on an economic recovery plan,”
Wait for it ….. yet another Master Plan, probably Plan Number 67 (since Plan Number 66 didn’t get off the ground).

How can you talk about inequality here, implying there should be equality of income, when there is such a wide inequality of mindset? Take two key factors:

The rich (basically middle class tax payers) vote for good government – the poor vote for large scale corruption and mismanagement.

The rich do not have more children than they can afford – millions of the poor have children they cannot afford.

The diagnoses and the prognosis are correct, but the medication is too little too late, therefore, the death of the State is imminent.

This is not rocket science! We need a Margaret Thatcher, not a Mugabe, Maduro or Lenin. The ANC does not have a Margaret Thatcher. The ANC only has Mugabe’s, Maduro’s and Lenin’s. The ANC is the problem, and cannot implement the solution. The voter is the source of the disease. The rest of Africa has proven that it is simply impossible to have a healthy economy while the voters are infected with deadly socialist disease. Then they thought covid is bad? We need to put the voters in quarantine if we want to rescue the economy. We need to sanitise the socialists if we want sanity in government.

This article is drawing the same comments (from the asme privileged groups) when it was published 20 years ago.

Gloria Gaynor say’s I will survive.

I agree with you, SA becoming a failed state under bANCrupt was already a foregone conclusion 20 years ago (when this article was published first, according to you). But just surviving should really not be your highest aim…

Perhaps.
But rather than engaging and debating other comments based on content, you opt for ad hominem?

If you disagree with other people then bring facts and reason out your argument. Add something otherwise why bother?

Collapse the economy = cheap land and housing.

How about getting the correct people to manage this country.

The ONLY way to do this is to equate a percentage vote to the amount of tax that individual pay, thus the more tax you pay the more your vote counts!

Is this not how the leadership should be chosen????

Then SA will become the Monaco of Africa!

Agree with a previous comment that 2030 is optimistic! In my opinion 5 years max.
This persistent “blame” culture is inherent with socialist ideology and will ensure the decline to a wasteland.
RIP SA

This was the same conclusion we reached during the 3 years that Brenthurst sponsored the SA Quo Vadis? seminars with Moneyweb from 2015 to 2017. These views were generally ignored or shouted down by people/investors who reacted superficially and emotionally to the deep-dive research into factors driving SA.
At the time we suggested that the SA equity market would face severe headwinds due to lack of growth opportunities and recommended selling out of listed property and getting into offshore technology and biotechnology.
Stock markets never lie and today, five years later, the JSE has delivered zero growth while global markets have averaged 15% with the Nasdaq doing 25% per annum.
Reg 28 has also, over the same 5 years reduced the real value of pensions by between 20 and 30%.
Countries never collapse…they just keep on falling.
Unless the ANC drastically changes economic course in the next few years, will we become Africa’s Argentia or Venezuela.

This is like a waiter taking breakfast orders for the next day after the Titanic hit the iceberg. Just further detritus in the poverty and misery upon this once great nation, that is ALREADY a failed state.

People talk about Zim 2.0. I have absolutely zero doubt that that is our future. 3 years, tops. If you’re not out by December 31, 2023 then you only have yourself to blame. I refer you to RW Johnson’s views on sovereign debt default and his 4 factors to achieve a successful resolution via an IMF bail out, then a stable national status:

1. Slash government wage bill;
2. Restore SOE’s via privatisation, management excellence and no state
support;
3. Make labour market flexible; &
4. Stabilise and improve education.

All requirements will never past the proto-Marxist views of the ANC, SACP, COSATU, SADTU etc etc. It is thus a scientific fact that SA is doomed, not political or emotional conjecture. Plan accordingly

Without getting political about it, do yourself a favour and watch the Youtube video of a William Buckley interview with John Vorster. Somewhere in the video Vorster says (paraphrased): Africa’s biggest problem is it’s population and it’s biggest export for years to come will be labour, just like Eastern Europe. I know many people who have 6 children and nobody in the household is earning a reliable income? Isn’t this the basic problem – too many people asking for handouts and not willing to work, and too few people to support them. How to fix this? 1 child policy? Education? Castration? Financially incentivising adoption or fewer child births? I don’t know, I’m just a chemical engineer thinking out loud.

On Tuesday I drove through at least 8 rural towns, the likes of Graaf Reinet, Dordrecht, Molteno, Elliot, Ugie, Matatiele, etc, during the day.
Same theme in every single one of them, 90% of the population loitering on the streets or at home unemployed, kids not at school, RDP houses falling apart, plastic hanging from the fences, rubbish all over the show, and a lot of newborn snotnosed babies playing in the dirt!!!

SA is not being governed at all, it’s voters are being paid to sit on their arses, eat and breed, that way they keep quiet so no governance has to take place because the ANC are incapable of anything else but transferring the Taxpayers money to their Voters.

It’s a very sorry sight considering the potential of the land, but we’re in the dwang, deep!!

ANC already completed the JOB!

‘A’ for excellent job done in under 30 years!

Former President Jacob Zuma ushered in a generation of low growth when he focused on corruption.

End of comments.

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