Locked in a low-growth trap, South Africa's fiscal and macroeconomic situation is unsustainable, not only economically but also politically. To salvage the country's democratic project, the government must offer a credible, comprehensive economic reform strategy.
South Africa is at a crossroads. To save its democratic project, it needs to put itself on a path to inclusive, dynamic growth, creating a virtuous cycle that delivers on Nelson Mandela’s promise of “a better life for all.”
For the past decade, the country has been locked in a low-growth trap, with falling per capita income, rising inequality, and skyrocketing unemployment, which is now at a record-high 34%. In a world beset by economic vulnerabilities, South Africa still manages to stand out for its poor performance and racially skewed outcomes – a tragic legacy of centuries of colonialism and apartheid.
The combination of low growth, high unemployment, large deficits and debt ratios, and a lack of effective structural reforms has created an unstable disequilibrium. After being skillfully managed by Mandela and then by Thabo Mbeki, the country was torn asunder by Jacob Zuma’s decade-long reign of state capture and corruption. Zuma’s successor, Cyril Ramaphosa, is now trying to turn things around, but the challenge is enormous.
The economy could go one of two ways. In one direction, weak growth leads to a fiscal crisis, further reducing incomes and employment, and inviting more civil unrest like that in July, when riots and looting swept the country.
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