Bacchus MindEconomy Chronicle

How one of the most divisive election cycles in South Africa since the dawn of democracy in 1994 finally sparked the decision to start a blog.

Understandably, it’s a strange intersection point – how my own deeply personal internal concerns around the political (and socio-economic) future of the country I love so much finally pushed me to make the jump and start a blog I had, in fact, been mulling over for some time to start writing. It’s a confusing interplay – watching (with trepidation) the increasing complexities around South Africa’s already intricate political environment and the desire to lift my head away from the doldrums of my daily reality of Excel spreadsheets to write on topics I feel deeply passionate about – albeit if only for a brief moment. Perhaps in that sense, it’s not so strange.

With anything, context matters. While sitting in the usual peak-hour traffic about three weeks ago on my way back home (from my job in financial markets that I do, admittedly, love), I couldn’t help but feel the familiar level of anxiety creeping up my spine. I had spent a long, frustrating day in the office watching the latest results trickling in from South Africa’s recent elections – it was becoming increasingly clear that the ruling African National Congress (ANC) was about to take an absolute wallop. It was unprecedented territory – the ANC has dominated South Africa’s political landscape for over 30 years since the start of democracy in 1994. However, after years of corruption (here’s to you, state capture) and poor service delivery, the people of South Africa had clearly had enough. For the first time in South Africa’s democratic history, the ANC lost its majority in government – going from 57.6% in 2019 to 40.2% in 2024.

For myself, the anxiety was driven by more profound, more intuitive and personal concerns over the “Now what? What’s next?” questions running through my mind. The emergence of ex-president Jacob Zuma’s new M.K. party cut severely into the ANC’s traditional voter base in KwaZulu-Natal (KZN) and eroded support for the former ruling party in Gauteng and Mpumalanga. As a result, there is a need to form complex, multi-faceted national coalitions to govern SA for the next five years. Successful coalitions require something generally termed “mature politics” – not exactly something we traditionally see in the South African political context. If far more developed, mature Western democracies struggle to maintain governing coalitions, how on earth would South Africa get it right? Within the context of my work, I understood that there would be far greater ramifications (potentially both positive and negative) for the economy than most anticipated – I had, after all, been spending the last few days running various scenario analyses for our clients. However, from a personal context – the questions running through my mind were of a different nature. The proverbial fear of the unknown. The never-ending concern, or rather pressure that most young working professionals in South Africa feel – the loaded gun of emigration. Once again, context here is important.

South Africa has for many years struggled with the phenomenon known as the brain drain – the emigration of skilled and educated professionals. A complicated range of factors drives this exodus, such as the desire for better job opportunities and higher salaries, concerns around economic instability, high crime rates, political uncertainty, and the general desire for an improved quality of life. Within my own social circles, I have, over the years, lost a large chunk of close friends and family to the eternal quest for greener pastures. Some have been happier and more successful than others. What they all have in common, however, is a sense of homesickness that has never dissipated.

The South African diaspora is a very real and forlorn occurrence.

For my husband and I, the pressure feels particularly acute. We are both lucky to hold the position of dual citizenship to two different countries, both with significant familial safety nets on the other side. In that sense, a move abroad would be easier for us than most. As a result, we are constantly left to wonder if we are making a mistake by essentially not utilising this sense of opportunity that others have (and still) so desperately seek. The thing is, as the situation currently stands, we are happy in South Africa. We have jobs and careers that we enjoy here, as well as family and friends that we would find incredibly difficult to say goodbye to. Moreover, we love our lifestyle here. Yet, most importantly, we love this country and its crazy, diverse range of people. We both agree that any decision to emigrate on our part should be driven by a strong opportunity elsewhere- rather than a forced, reluctant decision because we feel like there is no future for us here. Makes sense?

So, when that all too familiar feeling of stress around the big “E” began to creep in once again, instead of feeling anxious, I began to feel angry.

A flashback of memory from my first year (or, more particularly, my first day) at university in 2013 hit me. I was sitting in a large crowd of fellow starry-eyed first years, listening to the dean of our department’s welcoming speech. The dean was particularly effusive about how we were the batch of first-year students the university had long been waiting for – the first of the so-called “born frees”. To explain a little more clearly, I was born in 1994 – a momentous year in South Africa’s political history. The start of the new era of democracy after the terrible decades of apartheid rule. I have never known anything but a democratic and free South Africa. Thus, given we were all largely around 18 at the time, my fellow first-year cohorts and I were the first of the “born frees” to attend university. The irony is not lost on me. How free have any of us really been? The political elite of this country have largely failed my generation. South Africa’s official unemployment rate currently sits at 32.9%. However, the unemployment problem remains particularly acute among the youth, where high levels of unemployment hinder their prospects and exacerbate social inequalities. The youth unemployment rate (i.e. job seekers between the ages of 15 and 24) currently sits at a staggering 59.7%. Add to this a failing education and health system, high crime and homelessness levels, and continuingly widening social inequalities (amongst many other structural economic issues) – the result is a very sad recipe indeed.

In April 2024, the IMF said that SA has a GDP of US$373bn (R7trn-plus), making it the biggest economy in Africa (the IMF projects that SA will retain this position until 2027). According to the IMF, Nigeria’s GDP is estimated at US$253bn, behind Algeria (US$267bn) and Egypt (US$348bn). Still, despite being Africa’s biggest economy, South Africa cannot seem to rid itself of the deep-rooted structural inequalities holding back growth and development due to the rampant corruption that has plagued the country over the past 15 years or so. SA’s economic performance has been one of the weakest in sub-Saharan Africa (SSA), with the IMF lowering its 2024 forecast for real GDP growth to 0.9% (from 1.0% in January) in April. Moreover, the average SA consumer is becoming poorer – with the latest IMF data indicating that SA’s GDP per capita is now below the average for emerging economies – and at about the same level as in 2005. According to IMF data, SA’s GDP per capita dropped from US$6,680 in 2022 to US$6,190 in 2023 – far below the record-high of US$8,800 recorded in 2012. Additionally, the 2023 domestic GDP per capita is below the US$6,450 average for emerging markets (EMs). Notably, this is the same level of GDP per capita as in 2005. Simply put, SA’s expanding population growth, the weakness of the rand and the minimal economic growth means that the country’s population has been getting poorer in real terms. Moreover, in the domestic economy, material job creation has only occurred when GDP growth approaches 3% p.a. Thus, the economy is simply not growing at an adequate rate to sustainably boost long-term employment prospects for South Africans.

Granted, I am far more privileged than most in South Africa. I am the beneficiary of a private school and university education, with the ever-loving and constant support of my family and (now) spouse. This alone shoots me right to the top percentile of the South African population. I have never felt the cruel hand of poverty and hopelessness that is the daily reality for many South Africans. So, what right do I have to be angry, upset, confused even? But even within my admittedly narrow context, I’ve come to realise my own level of anger is warranted. I am justified in my feelings. Why should I be sitting in peak hour traffic, close to tears, wondering if I need to ask my husband (yet again) if he thinks it’s time to leave the country we both so desperately love? Why am I lying awake at night worrying about our future? In the days that followed that peak-traffic epiphany, I had many conversations with friends (admittedly a glass or two of wine, my favourite modus operandi) who reflected all the same fears and concerns as us – and still do to an extent. As the weeks have unfolded, the political environment here in South Africa continues its ever-dynamic march forward.

The outcome of the NPE has seen two weeks of non-stop negotiations to form complex, multi-faceted national coalitions to govern SA for the next five years. On 17 June, the formation of a Government of National Unity (GNU) was announced. To surpass the 50% vote and form a government, the ANC has been forced to partner with other parties in a “marriage of convenience”, which has the exciting potential to finally impact the country’s economic policies for the better. Time will tell. Thus far, however, local financial markets have rallied around the optimism generated by the market-friendly outcome, which is the formation of the GNU. The rand has strengthened below R18/$ for the first time since August 2023, stocks have surged, and bond yields have declined amid strong demand for local bonds. Long may it last, but the keenly anticipated announcement of the cabinet will be pivotal in determining sentiment going forward, at least in the near term. At the time of writing, we are still awaiting the announcement.

So, the question is, where to from here? Well, to start, the acceptance of the election results on the part of the former ruling party and the peaceful transfer of power within two weeks is commendable. While it may be taken for granted, many places (such as the US in 2020 – hi there, Trump) do not experience this smooth transition. From a more economic perspective, this coalition brings promising news for the country. It strengthens a centrist approach, promoting rational economic policies. Concurrently, the coalition ensures that transformation efforts will continue, with growth and increased inclusion progressing together. The election outcome and coalition are steering South African politics toward the centre. The Radical Economic Transformation (RET) faction will be positioned to the left (or far right, depending on perspective), libertarians to the right, and a pragmatic centre will advocate for social-democratic policies. This marks the most significant political realignment since 1994. Interestingly, the Bureau for Economic Research at Stellenbosch (BER), in a recent report, concluded South Africa could move from a 1.5% growth economy to a 3.5% economy without the need for any new, fancy economic and fiscal policies. We just need the effective and efficient implementation of existing policy frameworks. With the economy growing at c.1.5%, slower than the population growth, we are effectively becoming poorer. If the economy grows at 3.5%, it will outpace population growth by nearly double. This was the case during the first 20 years of democracy. Some food for thought.

My personal hope is simple in its complexity. To our political elite, I ask this: Please don’t make me feel like I am forced to emigrate in the near future. Make this the country where I can stay and start the family that I dream of one day. Make this country a place where we all can have a better, more stable, and guaranteed future—no matter colour, creed, or background.