South Africa's transition to a multi-racial free-market democracy was "a near-miracle for which the whole world must thank" Nelson Mandela, says The Economist. He ditched the communist economic dogma of the liberation movement, the ANC, before assuming power.
The ANC's embrace of largely market-friendly policies, buttressed by sound macroeconomic management, notably a clampdown on debt and inflation, ensured that South Africa today boasts sub-Saharan Africa's "biggest and most sophisticated economy".
In recent years the global commodity boom has provided an additional tailwind. The government has been able to expand access to basic amenities and welfare services. Now 84% of South Africans have access to electricity, up from 58% in 1996.
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Nonetheless, this has barely begun to address many of South Africa's problems. Indeed, 47% of South Africans remain below the national poverty line of $43 a month; in 1994, this was 45.6%.
Officially unemployment has risen to 25%; unofficially, it's around 40%. And the outlook is clouding over. "At best", says Jim Armitage in The Independent, today's South Africa is "underperforming... at worst, it's in a quagmire with little sign of improvement".
Compared to most emerging markets, its growth rate has been pedestrian in recent years, rarely exceeding 4%-5% not enough to make a dent in unemployment and recently falling to 2%. The country's low economic speed limit is due to several structural problems, notably a poor education system, which affects productivity and employment.
That in turn is undermined by an inflexible labour market, labour conflicts and huge pay rises. Power shortages and infrastructure bottlenecks are also obstacles. And all these issues are looking less likely to be tackled properly now that the ANC has become "a byword for weak leadership and cronyism", says the FT.
A shot in the foot
Unions have also used their close ties to the governing party to maintain their power bases and resist significant changes to the labour market.
South Africa has long been dominated by large firms and unions to the exclusion of the informal sector and the unemployed, says the University of Cape Town's Haroon Bhorat on Nytimes.com.
Now the insiders are becoming more powerful, leaving the outsiders the unemployed and small business people without connections ever more marginalised. All this hampers growth, in turn repelling potential investors and further reducing South Africa's potential.
South Africa is shooting itself in the foot just as external headwinds are mounting. China's growth model is shifting towards consumption and away from investment, which bodes ill for commodity producers such as South Africa.
South Africa also has a huge current account deficit, worth 6.8% of GDP. Economies with external deficits need to import foreign capital to cover the gap, and this capital is less likely to come to emerging markets when America is looking likely to tighten monetary policy, as is now the case.
If the political environment worsens, it may also be more reluctant to fuel the economy in good times. As such, South Africa's economy and stock market may be in for a bumpy ride over the next few years.
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