On Wednesday, SA will enter a new era. That sounds dramatic, but the truth is that this new era will be very like the old era. The sun will rise on Thursday, the moon will set and the ANC will in effect still be in power. Some things will change. Many won’t.
From my perspective, in what I call the radical centre, I can tell you now that judging by the election campaign, many things that should change won’t and many things that shouldn’t change will. But overall, the broad trajectory of SA will stay on its disappointing, not-terrible-but-not-great, mundane path.
But just because not much will change doesn’t mean we should be oblivious to the things that will and try to understand their consequences. One thing that will certainly change is that SA will join the world in one important respect: the trend in developing countries towards fragmentation.
The economics research group Capital Economics last week released an interesting report about SA, in which this subject is a feature. The result of the elections is of course uncertain, but one thing the polls do show very definitively is that the number of significant political parties will increase. From being a “one-horse race with some interest from the also-rans”, SA is about to join an international trend towards a much more fragmented system.
Capital Economics compares SA with 14 other middle- to high-income democracies and quasi-democracies around the world, noting that according to its definition of “effective number of parties”, SA is likely to move from around the middle of the group towards the high end. Only Brazil, Colombia and Thailand have more parties by this measure.
That assessment is influenced by the sudden emergence of the MK party, which has been the outstanding consequence of this election, and the likelihood that the ANC will slip below 50% of the total vote.
So, what are the consequences of an increase in fragmentation? Unsurprisingly, they are not good. The two countries internationally which exemplify this tendency are Brazil, which has always been pretty fragmented, and Chile which has become more fragmented recently.
Capital Economics concludes that a higher degree of political-party fragmentation has tended to be associated with larger structural budget deficits. In addition, it notes that research from the IMF suggests that fragmented party systems result in worse fiscal dynamics.
This conclusion is bolstered by SA’s own experience with fragmentation, which has been very visible in city governments, although it must be said, the experience has been uneven. Ekurhuleni had a stable coalition government from 2016 to 2021. But after 2021 the coalition disintegrated and there has been a gradual deterioration in the delivery of public services. In this respect, Ekurhuleni has joined other unstable, fragmented city governments, like Johannesburg, which have also seen public services decline.
Why is it that more fragmentation often leads to worse fiscal dynamics? According to the report, one explanation is that it is likely to become harder to pass difficult or unpopular policy measures. “In the political science jargon, there will be more ‘veto players’; parties that can veto policies by threatening to withdraw from the governing coalition.”
What that means in SA is that although there is a good chance that GDP growth will pick up, it will remain constrained between 1% to 1.5%. It also means that SA’s public debt ratio will continue to rise because more fragmentation means a decreased ability to maintain the fiscal balance. And that’s assuming the ANC wants to achieve this goal, since its decision to support the NHI and a basic income grant indicates that such a commitment is loose.
Just how bad this performance is can be graphically illustrated by looking at a comparison of SA’s growth rates with those of other emerging market economies around the world, in which SA comes … you guessed it … last.
It’s incredible to recall, but GDP growth during the Ramaphosa presidency has been just 0.3%. Even the Zuma presidency saw larger growth rates, averaging 1.9%, though that was miles off the 4%-6% recorded during the 2000s and early 2010s. Of course, Ramaphosa had to deal with the Covid-19 crisis, but so did all the other emerging market economies around the world listed below.
The result has been higher levels of unemployment, with an unemployment rate above 30% for all of the past 25 quarters. When Statistician-General Risenga Maluleke released the results of the General Household Survey for 2023, he noted that social grant beneficiaries had climbed from 13% in 2002 to almost 40% in 2023. He also noted that more people had access to water and sanitation, housing, electricity and media than before. But in answer to the question, “Are you happier than you were 10 years ago?”, only 24.4% of households answered that they were happier, while 40.4% said they were less happy.
This all goes to show that government handouts are not an automatic generator of support; they are a blandishment at best. Band-Aids don’t solve problems; they just stop things from getting worse. Healing requires more than that. DM
