South Africa’s supposed “bright” future

Introduction

 South Africa as a young and vibrant emerging democracy has made significant inroads into obstacles represented by its historical background. Few countries are privileged enough to have such a background and yet such a future.

With such an interesting history it is no wonder that there is so much speculation regarding its future. Some of the speculation might perhaps bode true however when considering current occurrences. However not all of the speculation is negative and some see South Africa in a very positive light in 10 years’ time.

South Africa since 1994

Since 1994 South Africa has made enormous inroads into dealing with its past. Economic conditions including general income levels and access to basic public services improved quite substantially. A really important change that was introduced is the acceptance of one of the most innovative democratic constitutions in the world today. In general South Africa has become an increasingly peaceful and prosperous country since the dismissal of Apartheid.

A South African success story

The South African economy has developed from one ignored by most of the major economic powerhouses to being one of them. This importance has been confirmed by the inclusion of South Africa into the BRICS trading block. Another boost of economic confidence came from the inclusion of South Africa in Citi’s World Government Bond Index. Since the end of apartheid South Africa has become one of the most sought after developing investment destinations as investors see the country and its prospects in an ever brighter positive light. Hosting significant events such as the rugby-, cricket- and soccer world cups have increased South Africa’s global presence even further.

It can’t be all moonlight and roses can it?

In order to identify negative events that occurred after 1994 one needn’t look very far. Only recently the Marikana wage dilemma sent some cold shivers down the spines of those who still carry the psychological scars of the Apartheid era as if it happened yesterday. This event illustrated the frailness of this young economy and the still high levels of foreign investment capital sensitivity. This fact has been emphasized even further by a recent sovereign debt quality downgrade by both Standard & Poor’s  (BBB) and Moody’s (Baa1). Both of these ratings are indicating debt instruments approaching junk-status. Political unrest and nationalisation talks have left a bitter taste in the mouths of most optimistic South African citizens. These mostly unnecessary actions are blown out of proportion in order to gain political favour in a relatively unstable political environment.

A roadmap for the future

During August of 2012 an extensive framework has been handed over to the presidency and is awaiting acceptance. This roadmap is known as the National Development Plan (NDP) and aims to eliminate national household poverty levels and redistribute income (which is currently at unwanted high levels, as indicated by the GINI-coefficient) by 2030. This plan is intended to remove uncertainties inherent to such a young democracy and in turn increase investor confidence. Furthermore the goal of this plan is to remove uncertainties including but not limited to those discussed above, from the South African investment case and hopefully turn South Africa into the investor destination of choice in the years to come

Conclusion

In a relatively young democracy a lot of unexpected kinks can be expected in everyday occurrences and policy measures. These result in a higher degree of uncertainty and greater fear amongst foreign investment capital.

South Africa is no different. Although this country has made huge leaps in light of social- and economic development, the ghosts of a forgiven but not forgotten past still linger in occasional events. As long as these remain present, South Africa will have a difficult time in trying to develop into a sustainable economy with solid long term prospects.

A fixed plan has however been drawn up which has received praise from some of the leading business minds in the world. Executing this plan however is another case and until it has been formally accepted and implemented, it remains to be seen whether South African leaders do indeed serve the people of this country or if they’re only in it for riches and fame! Should this plan realise chances are that South Africa will become one of the greatest success stories of all time.

H. Harris

TheAvengersEcon

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