South Africa is an interesting anthropological and cultural subject of study. The country's economy was in excellent shape when the white minority rule transitioned to black majority governance.
For this reason, I have occasionally written (in Finnish) about the events in the country. And today, I will do so based on an Al Jazeera article about the situation in the country.
According to the "Pravda" of the Arab world, South Africa has had uninterrupted electricity distribution for 57 consecutive days, which is the longest continuous period in over two years. This is significant because, last year, power outages caused losses of up to 51 million dollars per day due to the closure of factories, offices, and shops, according to the country's central bank.
However, electricity problems are not the only challenge in this country of 62 million people. Decades of neglect in infrastructure maintenance and investment have also led to the deterioration of transportation networks and water supply. This may result in the African National Congress (ANC), which has been in power since 1994 – the end of apartheid – losing its parliamentary majority in next week's elections, according to opinion polls.
South Africa has a large public electricity producer, Eskom, which mainly operates outdated and poorly maintained coal power plants. These plants have also suffered from coal and copper thefts as well as corruption. As a result, President Cyril Ramaphosa had to declare a state of emergency last February, with power outages stretching up to 12 hours a day.
Since then, private investments in wind and nuclear power have emerged in South Africa, resulting in the private sector now producing about a third of South Africa's electricity. This partly explains the recent reduction in power outages.
Power outages have also prevented water treatment plants from using their pumps, leaving people without potable water. Additionally, according to Johannesburg's water utility, nearly half of all pipeline water is lost to leaks. This means 70 million liters of drinking water are wasted every day. The reason is the high age of municipal distribution systems: in Johannesburg, for example, they were designed between the World Wars.
Water utilities are also vulnerable to vandalism. Thieves take everything from metal parts to pumps and sell them onwards. And there is no such maintenance culture for infrastructure in South Africa as in Western countries. Even if there were, water utilities struggle to generate revenue because people cannot afford to pay.
South Africa's water situation might be helped by transitioning to a private water distribution system, similar to electricity. The same applies to South Africa's state-supported railway company, which has also been plagued by poor management and corruption allegations.
Last year, the dilapidated railways caused economic losses equivalent to up to 6 percent of the gross domestic product in 2023, according to the country's Ministry of Finance. And that's not all, as the public railway company recently warned that it cannot service its debt of 130 billion rand (7.2 billion dollars) without direct state aid. Therefore, President Ramaphosa has also hinted at the possibility of privatizing the rail transport sector.
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Next week, South Africa will hold elections in a situation where the infrastructure is failing, and in addition, a third of the entire population and nearly half of all young people are unemployed, 56 percent of the entire population lives in poverty, and economic growth is non-existent (with a forecast of 0.9 percent growth for this year). At the same time, crime rates and corruption scandals are daily occurrences.
Last year, the country's debt-to-GDP ratio grew to 74 percent (in Finland, it's 75.8 percent!), and the current government has to use more than a fifth of its tax revenues to pay interest on the debt. This diverts money from other sectors – such as education, healthcare, and infrastructure.
Therefore, unemployment in the country needs to be reduced to increase revenues. Consequently, the next government – regardless of its composition – should focus on stimulating the economy and creating jobs. This could be achieved by offering incentives for private infrastructure investments, which would positively reflect on the country's export industry and other businesses.
It remains to be seen whether South Africa can rise from the decline it has been on for the last decade and a half under the ANC-led centralized economy. Or will its fate be to sink into a typical backwater of black Africa, where nothing works except corruption and crime?
Previous thoughts on the same topic:
Should forbidden questions be answered or not?
Corruption in Nigeria may affect Europe
They want to wipe out from Finland what is good for Africa
