Has South Africa’s political settlement provided a constructive platform for successfully addressing the country’s deep-seated economic challenges in an inclusive way? This paper argues that the country’s stark inequality is a major cause of the increased pressure on maintaining its political settlement. It re-examines the foundations of South Africa’s democracy in an attempt to understand the obstacles the country faces in moving towards a truly sustainable democracy, and offers reflections on how these obstacles might be addressed.
This paper provides a broad overview of South Africa’s evolving political settlement and presents data on both growth and distribution. The political settlement analysis is anchored in a comparative assessment of evolving patterns of income distribution across countries and over time. The paper has five sections: section 1 situates South Africa’s political settlement within the comparative analytical typology of the ESID research programme; section 2 reviews key literature; and sections 3-5 go beyond conventional discourse and seek to anchor the analysis of South Africa’s political settlement in a comparative assessment of the country’s evolving patterns of income distribution across countries and over time.
Findings
- Growth has been moderate since the end of Apartheid – with gradual acceleration until the 2007/8 global financial crisis, but a lack of momentum since then.
- Between 1996 and 2011 South Africa:
- reduced absolute poverty from 28% to 11%
- improved access to electricity from 58% to 85%
- increased the number of social grants from 2.4 million to 15 million
- During the same period, gains from the poorest 40% were achieved without much alteration of their difficult underlying realities.
- The pace of change at higher levels of income has been slow, and the majority of the white population continues to maintain its far-reaching economic privilege.
- The rate at which opportunities for entering the economic elite have opened up has lagged the pace of political change.
- Relative to other middle-income countries, South Africa has an unusually small fraction of the population that gains directly from sustained economic growth, driven by the expansion of the formal economy.
Recommendations
The paper offers some options for bridging the gap between the immediate challenges of governance and the long-run vision laid out in the National Development Plan:
- Short-term tactics: limit the erosion of the relatively high-performing, impersonal institutions which are South Africa’s crucial developmental asset.
- Medium-term strategy: accelerate economic growth in a way that supports the sustainable creation of the missing middle range of jobs, and mobilise the use additional resources in ways that encourage sustainable employment creation.
Policy focus should be on a range of initiatives aimed at accelerating economic growth in a way that supports job creation, including:
- accelerating job creation and private investment through the provision of a nurturing environment for job creation by both new and existing firms and, strengthening confidence in the stability of the rules of the game over time;
- systematically reviewing the incentive regime for private investments to eliminate any continuing bias in favour of capital-intensive investments;
- sustaining and strengthening public sector capability for investment.
