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Mandela’s Health Exacerbates South Africa’s Fragile Political, Economic State

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Recent reports have stated that Nelson Mandela, South Africa’s icon of freedom, democracy and human rights, is making a slow recovery in a hospital. But even so, the fragile Mandela has just turned 95, and many are wondering what the future holds for South Africa, a nation that albeit long considered one of the strongest economies in Africa, is nevertheless plagued by a host of problems, including sharp economic inequality; high unemployment; violent crime and a staggering AIDs epidemic that has, over the past years, taken a heavy toll on South African society.

Is Mandela the glue that holds together a fragile nation, as many have alleged? Will his passing give way to widespread mayhem and allow, as many have predicted, racial tensions to gain the upper hand?

There’s no doubt that Mandela occupies a position of great symbolic importance for South Africa and for the entire world, said Riaan Nel, managing partner of Detlefsen Nel & Associates in Eugene, Or.

However, Mandela retired from public service a decade ago and his role and influence on South Africa have waned considerably since that time, said Nel, who was a member of the constitutional assembly that finalized the negotiations between the African National Congress (ANC) and the previous governing party of South Africa .

What’s more dangerous to South Africa are its growing institutional weaknesses, political as well as economic and social. These pose a far greater threat to the future of the nation than the eventual passing of its national hero, Nel said. South Africa’s one-party rule system, which has been in effect since Apartheid was abolished, is largely to blame, he said.

There is no strong opposition to the ANC, and this has greatly undermined the value and vitality of the political institutions that were set up after the abolition of Apartheid and in turn, impacted South Africa’s economy, according to Nel.

Evidently, a vibrant and credible opposition that can penetrate the ANC’s hegemony would help a great deal and at this stage in the history of South Africa, particularly with respect to stimulating economic growth.

As Africa’s largest economy and a BRIC nation, South Africa has always been coveted for its wealth of natural resources, but investors have also recognized the country for the high caliber of its financial market development, regulation and sophistication, said Oliver Bell, manager of T. Rowe Price’s Africa & Middle East Fund.  

“The regulation of the Johannesburg Stock Exchange was ranked number one in the world, as was the strength of South Africa’s auditing and reporting standards,” Bell said, and “South Africa is ranked second for both the soundness of banks and the efficacy of corporate boards.”

But the country’s glow has been waning on many fronts, not least in terms of its economic growth.

“Many other African countries such as Nigeria are growing fast and by contrast, South Africa’s economic progress seems stale,” Nel said. “There has to be some kind of institutional reform, even if the economy of South Africa is still growing and many companies are doing well, because it’s clear that the shine that was there after Apartheid and in the following years has now waned.”

Stimulating economic growth will also help to counter the other troubles that haunt South Africa, namely crime and violence.

Although there’s been a steady rise in the South African middle class, there is also a real need for reforms that would narrow the long-term divide between the middle and upper classes (black and white) and the mainly black poor, Bell said.

“This divide is leading to mounting social pressures as the demand for yet higher wage increases on top of a now huge Social Grant bill, compounded by the lack of investment by both the government and private companies in the past decade is leading to structural deficits in the budget, which are further compounded by lower mining and manufacturing volumes as South Africa becomes less and less competitive in the world,” he said. Nel is nevertheless optimistic for the country’s future.

“In South Africa, the vibrant Black and White middle classes want the same things,” he said. “They are committed to democracy and have a converged interest in solid and sustainable economic growth and a functioning, growing economy.”

To the extent that those interests can push the ANC to enact much needed reforms, particularly reforms that address poverty, then the country has a strong chance of regaining a strong standing in the global economy.