How can South Africa gain more stability going forward?

In light of the planned Study Trip to South Africa in 2022, Global Bridges hosted a video conference on September 16, 2021, about the latest political and economic developments in South Africa. The guest speakers were Dr. Rüdiger Lotz, Deputy German Ambassador to South Africa and Mr. Matthias Boddenberg, Managing Director of the German Chamber of Commerce and Industry for Southern Africa. The conference was moderated by Dr. Matthias von Bismarck-Osten, Member of the Advisory Board of GreenTec Capital Partners.

Dr. Claudia Winterstein, Deputy Executive Chairwoman of Global Bridges, welcomed the guests, explained the importance of the topic, and introduced the speakers as well as the moderator. Dr. Winterstein pointed to the high income inequality and unemployment rates in South Africa which have led to severe, sometimes violent, social unrest in recent months. The ubiquity of crime and corruption and their negative impact on the country’s economic potential were also highlighted. At the same time, she stressed that South Africa is the second strongest economic power on the African continent, surpassed only by Nigeria, and that the country has developed a rapidly growing technology-based start-up scene in recent years. In 2018, German companies not only invested 5.3 billion euros in South Africa, but the country was also Germany’s most important trading partner on the continent, with a trade volume exceeding 17 billion euros.

The moderator of the conference, Dr. von Bismarck-Osten, welcomed the participants and highlighted the violent protests and incidents of looting in Durban and other cities at the beginning of July. As reasons for the unrest, he cited the arrest of former South African President Jacob Zuma as well as the Coronavirus pandemic and its impact on the local economy. According to some columnists, South Africa currently finds itself at a turning point and it is unclear whether the government will undertake the necessary reforms or whether the country will fall into a downward spiral of declining foreign direct investment, higher unemployment, rising government spending, and increasing social inequity. As the most acute problems, Dr. von Bismarck-Osten highlighted the dysfunctionality of the ruling African National Congress (ANC), the pervasive corruption in public institutions (up to the point of ‘state capture’), high unemployment rates and poverty, as well as the current education malaise, which was said to block social mobility in South African society.

Dr. Lotz addressed the question of how South Africa might gain more stability in the future, reiterating that the country was indeed at a crossroads. He pointed to the arrest of Jacob Zuma as one of the main catalysts for the social unrest in recent months. Zuma’s party, the ANC, is consumed by a domestic, intra-party struggle with one of the two factions being led by current President Cyril Ramaphosa. This power struggle, Dr. Lotz noted, was crucial to the recent loss of jobs and the increasing deterioration of the economic situation. Since the 1980s/90s, the ANC split ideologically and thus changed fundamentally. He also pointed to the ever-increasing propensity to violence in connection with the prevailing social injustice, as well as to the rampant hopelessness resulting from the Corona pandemic. The lack of comprehensive health care, in general, and the relatively low availability of COVID vaccinations, in particular, was said to have exacerbated the problem. Such high potential for frustration manifests itself in high crime and murder rates, which is exacerbated by the security forces failing to intervene effectively.

Dr. Lotz considered the free media reporting on the violent protests, the functioning judicial system, as well as the non-interference of security forces in the political confrontation as beacons of hope for the country. In addition, he pointed out the achievements since the end of the apartheid regime, emphasizing not only the predominantly peaceful transition of power from racist social structures to black majority rule, but also the preservation of a diversified economy and South Africa’s stable fiscal policy. Now, he said, was the time to implement structural reforms as quickly and effectively as possible. This not only involves the fight against corruption and attracting foreign direct investment, but also implementing fundamental changes in the education system. The envoy showed concern that the declining standard of public education is causing a decrease in the level of economic participation of young people, and impeding the development of a well-educated middle class in South Africa. Through such structural reforms, the country could develop into an ‘entry gate,’ allowing foreign companies to access the pan-African market through the African Continental Free Trade Area (AfCFTA).

However, currently, the ANC’s lacking reform capacity, as well as the absence of political alternatives are blocking such fundamental changes. Dr. Lotz expressed the fear that South African society will continue to fracture, leading to a situation where functioning enclaves of wealthy citizens use services traditionally provided by the state – such as education, health or security – from private contractors. Nevertheless, the country was said to offer enormous opportunities for the future.

Mr. Matthias Boddenberg thanked Dr. Lotz for his realistic depiction of the situation in South Africa. He also pointed out that the ANC should not be confused with a political party in the classical sense, but rather be regarded as a diverse alliance of ecclesiastical, feminist and communist factions, bearing huge potential for conflict. The inner-party struggle between the Ramaphosa and Mabuza factions has manifested itself in a kleptocracy, as well as the inability of government officials to keep high unemployment rates and dysfunctional state enterprises in check. In particular, youth unemployment, which stands at around 60 percent, was said to be a direct result of the public education system’s failure to meet the needs of either the economy or the state. It is for this reason that Mr. Boddenberg emphasised the importance of practical vocational training in spite of the fact that, historically, this type of education had fallen into disrepute as racist after the end of apartheid. In the course of the riots, it became apparent that local disruptions in infrastructure, such as the closure of the highway and port in Durban, have enormous economic repercussions within South Africa’s neighbouring countries.

Dr. von Bismarck-Osten characterised South Africa as an ‘anchor of stability’ for the entire African continent, as many countries orient themselves towards – and yearn for – the prosperity, functioning state institutions, infrastructure and freedom of press of South Africa. The moderator then opened the Q&A session.

The first question was addressed to Mr. Boddenberg as a long-time resident of South Africa and aimed at his personal perception of the changes since the end of apartheid. He explained that the country had moved from an “apartheid of colour” to an “apartheid of money.” Yet, in spite of the positive changes highlighted earlier, underlying racism was still apparent in South Africa, which was said to be difficult to eradicate from people’s minds.

The second question was on tourism and its potential for economic development in South Africa. Mr. Boddenberg noted that since there is no culture of long-term apprenticeships, but instead a culture of short-term vocational courses, most training offers in the tourism sector do not last longer than one year. The envoy Dr. Lotz highlighted the importance of the tourism sector, stressing that 5 per cent of South Africa’s population was employed in tourism and that some 400,000 Germans had visited the country prior to the outbreak of the pandemic.

The subsequent question revolved around how one could encourage German companies to invest in South Africa. Mr. Boddenberg explained that, particularly against the background of the Corona pandemic, many companies were looking for alternatives to the Asian market in order to hedge against the risk of production losses. South Africa was said to be an ideal gateway to the markets of southern and sub-Saharan Africa.

Subsequently, the discussion turned to the social division within the country. When asked how to better overcome these socio-economic differences, Dr. Lotz explained that missing educational opportunities are not necessarily related to the absence of (monetary) resources, but rather to poorly motivated teachers in the public school system. Mr. Boddenberg added that the comparatively low salary of teachers makes the profession unattractive and leads to corruption within the educational system. Furthermore, he pointed out a psychological component, namely that vocational training has a bad reputation in South Africa, as the ANC considers practical training inferior to university education. He emphasised that young people should be trained and prepared for both contemporary and future market needs, with a focus on those sectors that are of particular demand to companies.

When asked about the future of South Africa, Mr. Boddenberg expressed his hope that the country would further expand on the prevailing combination of established businesses and creative industry. According to him, the level of South Africa’s start-up scene is comparable to that of Israel. He also showed himself to be encouraged by the fact that the younger generation is no longer affected by old prejudices, but instead characterised by a general spirit of optimism.

The discussion then turned to the topic of HIV/AIDS. Although the disease has recently been pushed into the background by the Corona pandemic, AIDS is still an acute problem in South Africa, according to Dr. Lotz. The government made great efforts over the past two decades and has now introduced the world’s most comprehensive free-of-charge programme for the treatment of people infected with HIV. However, AIDS is only one of three diseases, along with tuberculosis and malaria, that claim the most lives, especially in the rural areas of the country.

Dr. von Bismarck-Osten concluded by thanking the speakers and the participants. He described the July riots as a “wake-up call,” which not only underlines the fragility of the political leadership, but also represents a turning point for South Africa’s future development. In conclusion, he expressed his hope that the country would soon implement the necessary structural reforms, particularly within the educational domain. Failure to do so would have negative consequences for the entire African continent. Dr. Winterstein also thanked the speakers and the moderator for the interesting discussion and expressed her anticipation for the Study Trip to South Africa and Tanzania in 2022.