Report: South Africa risks becoming a failed state by 2030

September 12, 2020 2:45 pm

Johannesburg, South Africa. Photo: Waldo Swiegers/Bloomberg

South Africa risks becoming a failed state in the next 10 years, according to a report by Eunomix Business & Economics Ltd, a political and economic risk consultancy group.

The Johannesburg-based group said an economic and political collapse will occur in the country unless the South African government changes its economic model and implements growth-friendly policies.

Using a range of measures, the report quoted by Bloomberg forecasts that South Africa will rank near the bottom of a table of more than 180 countries in terms of security similar to Nigeria and Ukraine, while its prosperity level would be comparable to that of Bangladesh or Ivory Coast.

It said although the projection shows a significant decline from the country’s current position, on measures relating to governance and welfare, the country should do better.

“Bar a meaningful change of trajectory, South Africa will be a failed state by 2030,” the report read.

Eunomix faulted the structure created during the white-minority apartheid era that was designed to exclude the Black majority.

It noted that since the beginning of democratic rule in 1994, the ruling African National Congress (ANC) had made the situation worse by refusing to adopt policies that could ensure sustainable growth and improve job creation, and instead focused on increasing wages and providing subsidised welfare packages for the poor.

The report explained that ex-President Jacob Zuma ushered in a decade of low growth when he focused on increasing the role of the state, instead of supporting an economic recovery driven by the private sector after the 2008 global crisis, adding that prolonged policy uncertainty in areas ranging from mining to telecommunications worsened the slowdown.

Eunomix said the coronavirus pandemic has worsened the economic impact of recurrent power cuts, rising unemployment and the loss of the last investment-grade rating on South Africa’s debt.

“The pandemic is the last nail in the coffin of strategic fiasco,” it read.

“The economy is unsustainably narrow and shallow. It rests on a small and declining working population burdened by very high debt and taxes.”

In its recommendations, Eunomix urged the South African government 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 supports growth and employment, although at lower wages.

Eunomix said ANC’s strategy is “a dichotomy born of apartheid, resistance and crystallized by ideological puritanism and entrenched interests”.

“The country should not choose between imagined opposites. It should adopt a dual-track approach that reconciles them,” it added.