SA must seize opportunity of tectonic global shifts to remodel its economy

Daily Maverick

3 hours ago

The GNU must use the global governance crisis and its chairing of the G20 as a catalyst for the country to reorient its incorporation into global production structures, remodel its economy, ignite social renewal and secure national self-reliance.
Despite its success in restoring diplomatic and economic interaction between South Africa and the US, President Cyril Ramaphosa's recent encounter with his American counterpart, President Donald Trump, also inadvertently cast an unflattering spotlight on South Africa's problem of pervasive crime and governance failures.
The globally televised Oval Office drama, broadcast in prime time, highlighted domestic troubles that successive post-apartheid governments have failed to tackle effectively.
It was a huge wake-up call for the year-old government of national unity (GNU) and an inflection point for the country's democracy.
South Africa is at a crossroads. It is caught in the middle of major geopolitical shifts and a global governance crisis, which has been amplified by the ascendancy of the Trump administration in the US, colliding with its internal governance failures. These governance failures are typified by a slew of social and economic problems that have hampered the country's progress.
These include a stagnant economy, high unemployment, poor public education and health systems, dysfunctional municipalities and state-owned enterprises, decaying infrastructure, endemic corruption, appalling public finances, widespread illegal immigration, an unwieldy and underperforming public service and rampant crime.
Decisions required
This moment of global turmoil and domestic crisis calls on the country's political leaders to make decisions about its future. It requires the GNU to make tough policy choices that will extricate the country from its social and economic stasis and launch it on a path towards national renewal and success.
South African leaders will do well to draw on historical lessons in terms of how the country can confront global adversity and propel a new growth trajectory. Take, for example, how the country responded to the destruction caused by the onset of World War 2. The war galvanised many countries, including South Africa, to accelerate manufacturing, starting with munitions, arms and other critical supplies. In the aftermath of the war, South Africa built its industrial capabilities and raised its agricultural productivity.
The foremost public policy consideration for the government at the time was post-war reconstruction. The Van Eck Commission, as well as the Social and Economic Planning Council, were set up with briefs to produce policy insights that would shape post-war development.
Their recommendations led to, among other matters, an increase in farm support, the creation of marketing boards for agricultural products and the expansion of manufacturing activities. The war acted as an anchor to ignite economic recovery, and import tariffs played a key role in nurturing the development of an infant industry. Medical supplies for military use were also produced locally.
Structural change was manifest on several fronts in the post-war years, especially between 1945 and 1970. During this period, there was a strong emphasis on capitalising on the conditions created by the war to stimulate local production and build the country's manufacturing capabilities. This sparked a rapid increase in national economic output and the growth rate, which averaged 5%.
Second, manufacturing eclipsed primary production as the main driver of growth. Third, there was a marked shift in demographic concentration from rural to urban areas. The growth of metropolitan areas stimulated demand for infrastructure, housing and other amenities. Various state-owned enterprises created in the 1920s through to the 1950s contributed to the development of a manufacturing path.
Eskom was formed in 1923 to produce cheap electricity for the railways and drive industrialisation. Iscor was set up as a monopoly to maximise the processing of domestic ore and achieve vertical integration in steel production. The Industrial Development Corporation (IDC) was established in 1940 to offer cheap finance to spur industrialisation. The IDC was instrumental in the founding of Sasol in 1950, which was created to produce synthetic fuels, mainly from coal.
Moreover, South Africa, under the Union Government, and later under the apartheid government, deployed industrial policy systematically. This combined tariff protection, import-substitution industrialisation and the creation of industrial champions anchored in cheap energy and steel to stimulate downstream production.
Industrial financing was funnelled to benefit not only the manufacturing sector, but also agriculture. These policy actions were central to powering South Africa's industrialisation and to catapulting the country towards national self-reliance.
This industrial transformation would not have been possible without visionary leadership, firm political will and effective governance. The state played a pivotal role in propelling South Africa's industrial development and securing the economic advancement of poor Afrikaners.
Hendrik van der Bijl, a brilliant engineer and technocrat who served as Director-General of War Supplies in the government of General Jan Smuts, was the driving force behind the creation of Eskom, Iscor and the IDC. Other influential public servants and scientists of this era included Frans du Toit and Etienne Rousseau, respectively founding chairman and managing director of Sasol, as well as Hendrik van Eck, head of the IDC.
Opportunities in 2025
The rapidly changing geopolitical landscape, coupled with a crisis of multilateralism, provides South Africa with the opportunity to change course. In the same way as their predecessors used a crisis moment to remodel the post-war economy, South African leaders must take advantage of the tectonic global shifts to implement long-delayed structural reforms and fundamentally alter the structure and growth path of the South African economy.
This means, among others matters, growing the economy and removing constraints to doing business, supporting the development of new sectors including innovation-driven industries, accelerating the inclusion of small and medium enterprises in the mainstream of the economy, reorienting trade and foreign policies, reforming state-owned enterprises, revitalising socioeconomic infrastructure, curbing illegal immigration, clamping down on crime, overhauling the public service and rooting out corruption.
Thanks to poor governance, South Africa missed out on opportunities to turn around the country's chronically underperforming economy and ensure that it fulfils its considerable potential, overhaul the flawed foundations of the country's social and economic structure and seriously tackle the underbelly of inequality, poverty and social exclusion.
This was the case, for example, at the height of the global commodity boom in the early 2000s, in the aftermath of the 2008/9 global financial crisis, and in the wake of the Covid-19 global pandemic.
The crisis of global governance, which coincides with significant geopolitical changes and South Africa's chairing of the G20, provides another opportunity. The GNU must use the intersection of these developments as a catalyst for the country to reorient its incorporation into global production structures, remodel its economy, ignite social renewal and secure national self-reliance.
The South African government today, unlike the erstwhile Union Government, is not reeling from the ravages of a global military war. But it faces conditions akin to war. It, therefore, must respond with the same degree of urgency and purposeful state action to what has become a dire national emergency.
However, it cannot do that in the absence of inspired and effective leadership, as well as strong state institutions. Without a meritocratic, competent, professional and ethical public service, South African policymakers will fail to implement far-reaching structural reform of the country's political economy. DM