/ 27 December 2023

Is there merit to Mbeki nostalgia?

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Former ANC president Thabo Mbeki. Photo: Nicolene Olckers/Gallo Images

Fifteen years after the ANC recalled him as South Africa’s president, Thabo Mbeki has emerged as the country’s most popular politician, according to a recent poll by the Social Research Foundation. 

His popularity is probably a reflection of the failures of his successors and nostalgia for the six-year mini-boom when the economy grew rapidly and created millions of jobs. 

After he resigned, there were “nine wasted years” under Jacob Zuma, according to President Cyril Ramaphosa’s supporters.  

But many South Africans would agree that the “six wasted years” under Ramaphosa’s presidency have been worse than the “nine wasted years” under his predecessor. 

For example, there was zero load-shedding during seven of the nine years under Zuma, according to the Council for Scientific and Industrial Research. The unprecedented collapse of Eskom’s plants started in 2018, not 2007. This year, Eskom shed more energy than during the 16 years from 2007 to last year combined. 

The period under Ramaphosa’s presidency accounts for 95.1% of all the energy that was shed since 2007. The Zuma presidency accounted for 3.4%. The National Society of Black Engineers says there is no evidence that the power utility ran its plants too hard during the Zuma presidency. 

The ideal threshold for the energy utilisation factor, a measure of how hard plants are run, is 80%. 

The society says Eskom can exceed this threshold if there is a planned maintenance ratio of 10%.  There was only one year — 2013 —when Eskom ran its plants too hard and did not meet the maintenance ratio. By 2018, the energy utilisation factor had declined sharply to a healthy 71.6%. 

One of the great pan-Africanists of our time, Mbeki is remembered for his iconic “I am an African” speech in 1996. He played a key role in the establishment of the New Partnership for Africa’s Development (Nepad) in Lusaka, Zambia, in 2001 and the African Union in Durban in 2002. 

The partnership provided a vision and plan for Africa’s development. There was a growth surge — dubbed “Africa Rising” — until the global financial crisis of 2008. According to a report by McKinsey, the global consulting firm, Africa’s GDP grew by 5.1% a year from 2000 to 2010, which was  twice the pace set in the 1990s. 

After Mbeki’s exit, there was a decline in GDP growth rates in South Africa and the rest of the continent. South Africa had a “lost decade” from 2010 to 2019, during which GDP per capita did not grow. 

Africa’s annual GDP growth rate declined to 3.3% from 2010 to 2019 due to falling commodity prices, renewed political instability in some regions and poor performance within the largest economies, including South Africa, Nigeria and Angola, which dragged down the continent’s average.

Excluding these countries, some regions, especially East Africa, have maintained rapid GDP growth rates. 

South Africa’s economy has performed dismally over the past 29 years. Next year it will be “30 wasted years”.

The ruling ANC has not got its head around how to grow the economy and create jobs. The 23 years of miserable GDP growth have cancelled the effect of the six mini-boom years under Mbeki’s leadership. 

GDP per capita, an imperfect measure of average living standards, grew by only 22% from 1994 to last year. 

Performance has correlated with macroeconomic policies and not the six political administrations since 1994. For example, the trend GDP growth rate collapsed from 2014. Public investment collapsed from 2015. The differences between the fifth and sixth administrations relate to degrees of neoliberal policies — soft under Zuma and on steroids during Ramaphosa’s presidency.

There are two ways to evaluate Mbeki’s performance. From 1994 to 1999, president Nelson Mandela delegated many tasks to him, including economic policy. 

Seen this way, he was effectively prime minister from 1994 to 1999 and president from 1999 to 2008. Alternatively, one can only look at the period when he was president. 

There have been three phases in terms of the economic policy and performance. From 1996 to 2002, there was the slash-and-burn Growth, Employment and Redistribution (Gear) policy, a neoliberal plan to achieve macroeconomic stability – to reduce debt and inflation.

One of the biggest mysteries of the post-apartheid period is why the priorities of the ANC government were to reduce debt and inflation when there was no macroeconomic instability in the first place. 

If it was not for the imaginary debt crisis, the government could have increased investment and equalised the education and health systems. There was no apartheid debt crisis. 

In 1996, the debt-to-GDP ratio was 50%. The foreign debt-to GDP ratio was 1.9%. In 1996, the average inflation rate was 7%. During this period, government final consumption spending increased by 2.1% a year. 

There was a first public sector investment strike. From 1998 to 2001, public investment (by general government and state-owned enterprises) collapsed by 25% and returned to 1998 levels in 2004. The government refused to give Eskom permission to invest in new capacity. 

In 2007, Mbeki apologised: “Eskom was right and we were wrong.”

During the Gear period, the average annual interest rate was an insane 17.7%. The economy grew by 2.9% a year and the number of unemployed people soared to eight million during the first quarter of 2003 from 4.6 million in 1996. The unemployment rate rose to 40.6% from 33%. 

When we celebrate the mini-boom that followed — it was only one by South African standards — we must not airbrush history and forget the devastating effects of Gear. 

When the government stopped suffocating the economy after the end of Gear, it grew rapidly and created jobs. 

From 2003 to 2008, government final consumption spending increased by 5% a year and public investment soared by 14% a year. Interest rates declined by 650 basis points to 7% in April 2005 from 13.5% in June 2003. Consumption spending increased and there was a property boom.  

Gross fixed capital formation, a measure of investment, increased to 21.6% of GDP in 2008 from 14% in 2002. GDP grew by 4.5% a year, and the economy created 3.1 million jobs from the first quarter of 2003 to the fourth quarter of 2008. The unemployment rate declined to 28.7% from 40.6%. Contrary to an urban legend, there was no jobless growth. 

There was a boom on the JSE and most of the value in black economic empowerment transactions was created during this period. 

From 1999 to 2008, GDP grew by a respectable 4% a year. By comparison, GDP grew by 2.7% a year from 1994 to 1998 under Mandela, 1.9% a year from 2009 to 2017 under Zuma and 0.5% a year from 2018 to last year under Ramaphosa, whose excuse is the Covid-19 pandemic. 

But the economy was collapsing before the pandemic and the recovery has been one of the weakest in the world. If one excludes two years of lockdowns, there was GDP growth of 1.6% in 2018, 0.3% in 2019, 1.9% last year and an expected 0.5% this year, an annual average of 1.1%.

During the third period, from 2009 to last year, government final consumption spending increased by 1.5% a year, lower than during the much shorter Gear period. There was a second public sector investment strike. Public investment collapsed by 38% from 2015 to last year and gross fixed capital formation fell to 14% of GDP. The economy grew by 1.5% a year and GDP per capita did not grow. 

The number of unemployed people increased by 5.8 million to 11.7 million during the third quarter of this year from 5.9 million during the fourth quarter of 2008. The unemployment rate soared to 41.2% from 28.7%. 

Many of us have bad memories of Mbeki’s Aids policies, which resulted in 330 000 excess deaths, according to a Harvard University report. 

The policies on Zimbabwe implemented by Mbeki and his successors were a failure and the collapse of that country’s economy, which should never have been allowed, has been the number-one driver of international migration in the region. 

Despite such blemishes on his legacy, and the costly mistakes of Gear and Eskom, Mbeki’s solid, but not spectacular, economic record was far better than that of all the country’s other presidents since 1994.  

He reminds many South Africans — from the BEE brigade to the emerging black middle class and the millions who were getting jobs — of a time when their economic prospects looked brighter. 

But South Africa’s shocking economic performance over the next 15 years dashed the nation’s hopes and dreams for a better life. The future is bleak unless we change the failed economic policies.

Duma Gqubule is a financial journalist and analyst and advises on economic development and transformation.