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The Political and Economic Unraveling of South Africa

The Political and Economic Unraveling of South Africa

South African President Jacob Zuma. Source: qz.com (Reuters/Stefanie Loos)

South African President Jacob Zuma. Source: qz.com (Reuters/Stefanie Loos)

By Jacob Hess

Legal disputes between South Africa’s President Jacob Zuma and his Finance Minister Pravin Gordhan have escalated further going into November. Just six days after separate allegations were dropped, Gordhan was charged with running a surveillance unit in the South African agency according to Reuters. This unit was “suspected of spying on politicians, including President Jacob Zuma” putting a wedge between two of the highest officials in the country despite both of them saying “they support each other.”

The situation has left South Africans sifting through corruption charges in search of the truth about their government. Too frequently, they are finding that their fragile democracy, just 22 years of age, is corroding from the inside. After being elected by the people of South Africa in 2009 and again in 2014, Jacob Zuma has allowed the government of his country, once led by Nelson Mandela, to be associated with corruption and scandals. Somehow, the many accusations and charges have failed to take down Zuma despite the investigations of South Africa’s own Public Protector. The consequences have implications beyond the political unraveling of the relatively young African democracy. The nation’s status as a high growth emerging market has come under fire as Zuma and Gordhan’s corruption charges have left international investors questioning their business decisions in their economy.

After South Africa was brought out of the apartheid era by the leadership of Nelson Mandela, it embarked on a period of economic growth. Historically, democratic societies have been perceived as safer investments, as shown in Pastor and Sung’s 1995 research. Trade and foreign capital started flowing in after the economic sanctions imposed by the rest of the world were lifted as apartheid ended. According to World Bank data, foreign direct investment averaged $48.3 million from 1990-1993, but after the first election, it rose to an average of $1.6 billion from 1995-1998. The influx allowed Mandela to realize his aspirations outlined by the Freedom Chart, an anti-apartheid document signed in 1955.

The newly capitalized economy allowed the prosperity of the population to increase along with education and health levels. Gross national income increased 125 percent from 1990 to a peak in 2012.  The literacy rate, which was already one of the highest in the continent of Africa, rose from 82.4 percent in 1996 to 94.2 percent in 2015. Similarly, infant mortality rate improved falling from 47.4 per one thousand infants in 1990 to 36.8 in 2012. A better, more inclusive political system had allowed South Africans to achieve the change they wanted with Mandela. The international financial system looked up the nation favorably and categorized them as one of the “elite” emerging economies grouped by the acronym BRICS (Brazil, Russia, India, China, South Africa). Its GDP annual growth rate would jump from near zero in the early 1990’s to almost 5.6 percent in 2006. A vision for a more stable society, both politically and economically, appeared to be in focus.

Jacob Zuma’s career as a corrupt politician began well before he was the most powerful man in the country. As early as 2002, reports of investigations into a suspect arms deal stained Zuma’s record, but never enough to keep the blemished man from the presidency. A year after the corruption claims were raised, the Former National Director of Public Prosecutions Ngcuka admitted that a case against him could not be won. As a deputy president in 2005, Zuma’s association with a fraudulent financial advisor forced him to step down after the conviction of his colleague. After a short break from the courts, Zuma would find himself being charged with rape. However, he was acquitted, and a year and a half later, appointed by the African National Congress to be the president of South Africa over the incumbent Thabo Mbeki.

Zuma’s rise to power convolutes the idea of a South African democracy and calls into question the gradual changes seen in the country’s past twenty years. The transition from apartheid, where a minority population of white South Africans ruled over the black majority, has been met by a form of crony capitalism in which the rich elites have amassed their support and resources behind candidates they favor. In the race against Mbeki, Zuma was seen as a less autocratic option that could satisfy the masses with more progressive policies while keeping a blind eye to corruption. This explanation of Zuma’s ascent, examined by William Gumede is his African Affairs’ briefing, is evident in the president’s handlings of the wealthy Gupta family and his tax minister Gordhan. The political unraveling is best described by Stephen Chan of the University of London as he writes, “The theme of the moment is plain and simple: theft on a national scale by those who control the party and the state alike.”

In the end, Gordhan and Zuma may or may not resign, but the damage has been done. The world no longer believes in a clean South African democracy; instead, it sees a government and economy hijacked by a ruling majority it broke free from over twenty years ago. The South African rand’s implied volatility, measure of instability in exchange rates called, climbed to 19.93 percent after reports of Gordhan’s arrest reached the market. Yields on the South African government’s bond increased as well, a signal that political uncertainty in the country’s financial markets had strengthened. Finally, Fitch Ratings Ltd. And S&P Global Ratings agreed on a downgrade of the rand’s investment grade to the lowest rating, BBB-.

President Jacob Zuma’s performance as the leader of South Africa has endangered the progress made by a democratic society still wounded by the effects of apartheid. The longer the people of the people his country tolerate his apathetic, corrupt rule, the more he will alienate the international community from the opportunities that the developing market could provide. If the South African government cannot move forward in a clean, proactive manner, the need for regime change needs to be addressed as the next election cycle nears.

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