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Once we were bankrupt — the uncomfortable truths of history

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Oscar van Heerden is a scholar of International Relations (IR), where he focuses on International Political Economy, with an emphasis on Africa, and SADC in particular. He completed his PhD and Masters studies at the University of Cambridge (UK). His undergraduate studies were at Turfloop and Wits. He is currently a Deputy Vice-Chancellor at Fort Hare University and writes in his personal capacity.

When we despair about the current technical recession in South Africa, when we sling insults and generalisations at the current crop of leaders about how corrupt and incompetent they are, let us also be aware of the dire situation they inherited in 1994.

I listened to a speaker at the Franschhoek Literary Festival this year vent about how incompetent and corrupt the ANC government is. Then I was reminded that he desperately needed to sell his book, which was premised on a thesis that had fallen flat amid recent political events. But sell his book he must. And so his thesis — of the ANC having ruined this country since 1994 — had to continue unabated.

I stood up during the Q&A session and posed a simple question.

Are you aware that when the ANC took over government in 1994, it found the fiscus in a dire state. In fact, more to the point, the country was in the red, in debt to the tune of US$23-billion — in other words, bankrupt — and that it managed over time to fix that and now has healthy reserves to the tune of $65-billion, which it managed to build up over the last 24 years?”

Which does mean we can now borrow on our own terms and stave off the IMF and World Bank, at least for now.

I mention this because while I made this factual statement, some whites in the audience were shaking their heads in disbelief.

They never stopped to ask why it was deemed important to stop the RDP election promises so desperately needed by our people and yet revert to a neo-liberal macroeconomic strategy dubbed Growth, Employment and Redistribution (Gear).

Basically, a self-imposed structural adjustment programme in line with the preferences of the IMF. Having to urge our people to endure a further five years or so of continued suffering and pain.

After all, our people were so used to it that we might as well, for the benefit of future generations. This, I reiterate, was successful. Successful to the extent that we find ourselves in a much better economic situation than in the late ‘70s and throughout the ‘80s and ‘90s.

But Gear was jobless growth, I hear some of you screaming, which is not entirely true, but growth it was nonetheless.

From a virtually bankrupt state to a thriving trillion-rand budget, South Africa’s economy is undoubtedly a world away from what it was 20 years ago for sure, whether you believe it or not.

In an article by business reporter for BBC News, Matthew Davies, group economist at Investec Annabel Bishop says South Africa’s economy has “essentially doubled in real terms” since the fall of apartheid, growing at an average of 3.2% a year since 1994, as opposed to only 1.6% a year for the 18 years prior to the end of white minority rule.

She also says the real tax revenues have effectively doubled since 1994, which has enabled the government to expand social welfare.

The state provision of basic services has been extensive,” she says.

Now let me return to the empty coffers the apartheid National Party left us as a welcoming gift.

A debt of $23-billion — what was to be done? This incompetent, corrupt governing party of Nelson Mandela, according to some of you, had to find solutions to this problem lest the very “miracle” of the new SA and the reconciliation project fell apart.

What did they do, I hear you asking. Well, sound and uncomfortable financial decisions were taken, such as not investing in energy supply infrastructure at the time, because we did not have the resources. Yes, it meant some blackouts years later, but if you ask me, it was worth it, because we could borrow some money on our terms to further invest in building the infrastructure years later, and we will soon see Medupi and Kusile power plants fully up and running.

In fact, according to another commentator, Amukelani Chauke:

Looking back to 1994, it’s hard to believe how far South Africa’s economy has grown.”

Statistics generally paint a picture of truth. Today, millions of South Africans have jobs and are able to access basic services such as water, sanitation and social grants are reaching more than 15 million people in need of assistance.

South Africa is now ranked by the World Bank as an “upper middle-income country” and it has earned its position as the largest economy in Africa.

The 20 Year Review South Africa 1994-2014 shows that the GDP had reached $384-billion in 2012 compared with $136-billion in 1994. The review depicts the strides the country has made since the dawn of democracy, and also illustrates the challenges that have been faced.

Furthermore, according to a 2014 article, a report released by investment banking giant Goldman Sachs, South Africa’s Gross Domestic Product almost tripled to $400-billion; foreign exchange reserves had increased from $3-billion to nearly $50-billion, and a growing and sizeable African middle class had been created, within two decades of freedom.

Perhaps the most striking successes since 1994 are the creation of a growing and sizeable African middle class, increased real wages for the employed, and the extension of social welfare and services to underprivileged communities,” said Colin Coleman, managing director at Goldman Sachs International.

Coleman, who heads investment banking for sub-Saharan Africa, says in the first 14 years of democracy the country’s ethnically African middle class more than doubled in size and in the past two decades real GDP per capita increased by 40%, while 10 million South Africans, one out of five, graduated from the “lower to the middle and higher income bands”.

The National Development Plan (NDP), supported by the New Growth Path and the Industrial Policy Action Plan, sets out what still needs to be done to achieve sustainable economic transformation. These, with the President’s “New Dawn” strategy, should further cement our path to economic emancipation in South Africa. The key actions of all these include:

  • Maintaining large-scale but sustainable public investment in infrastructure to facilitate economic growth, with improved maintenance and a well-defined financing strategy;

  • Improving the quality of basic education and substantially expanding higher and further education, linked to stronger ties between enterprises and Further Education and Training in particular, to provide the skills required by a growing economy;

  • Ensuring that regulations are implemented as efficiently and cost-effectively as possible, without imposing unnecessary delays or red tape, to create a business-friendly environment;

  • Continuing to increase financing for industrial development and small and micro enterprise in the context of a strong industrial policy focused on bolstering employment and growth;

  • Improving energy security including through development of shale gas, while continuing more generally to take advantage of opportunities and minimise the costs from greening the economy;

  • Maintaining a countercyclical fiscal and monetary stance, bolstered by innovative approaches such as stronger local procurement and investment by state-owned enterprises;

  • Enhancing regional development through increased investment in logistics combined with the establishment of regional value chains, to facilitate regional economic growth and integration; and

  • Stronger measures to address workplace conflict, above all by working with stakeholders to address inequalities and improve communication and career development, to create a more stable workplace environment for growth.

The NDP further states that it is only through effective partnerships across society that a virtuous cycle of rising confidence, rising investment, higher employment and increased productivity and income can be generated.

So when we despair about the current technical recession in South Africa, when we sling insults and generalisations at the current crop of leaders about how corrupt and incompetent they are, let’s also be aware of the uncomfortable truths of our history and where we come from.

It would be too convenient to believe a well-managed, wealthy and resourceful country with billions in reserves was handed over to the black government and that in fact they have messed it all up since then. Far from it.

We can never justify corruption and certainly not incompetence, but let’s not throw the baby out with the bathwater when it comes to finding lasting solutions and remembering our most recent past. DM

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