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Making South Africa Whole

Although COVID-19 has left the South African economy in dire straits, there is plenty that the government could do to manage the emergency and restore prospects for long-term growth. In fact, by focusing squarely on the fiscal trade-offs, the country's most pressing needs could be addressed with current resources. 

CAPE TOWN – No society can survive with 50% unemployment, yet that is exactly what South Africa may be facing by the end of this year. Joblessness alone, exacerbated by the COVID-19 pandemic, has forced the country into a state of economic emergency.

South Africa today is a “two-speed society” – one part modern, affluent, technologically advanced, highly skilled, mobile, and increasingly multiracial; the other jobless, marginalized, unskilled, young, mostly rural, and largely African. Under the shadow of the pandemic, it is easy to forget that between the end of apartheid (1994) and 2007, South Africa made giant strides. Economic growth averaged 3.6% per year, such that GDP doubled from $140 billion to $285 billion during this period. Inflation fell to an average of 6.3%, and government debt relative to GDP dropped to an enviable 28% in 2007. Between 1994 and 2014, the government’s budget grew ninefold.

During what might be called the “Mandela years,” when the country adhered to the enlightened example and policies of its first post-apartheid president, South Africa introduced a highly effective and successful social grant system that now reaches 18.3 million people. But starting around 2008, this steady progress was rudely interrupted by the “double whammy” of the global financial crisis and the accession to power of President Jacob Zuma and his cronies. Zuma’s central purpose was to pursue a cynical project of state capture that hollowed out public institutions and crippled many state-owned enterprises. As a result, average annual GDP growth fell by half over the 2008-19 period, and South Africa’s people grew poorer.

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