What's behind the riots that shook South Africa?

A combination of the pandemic, harsh lockdowns and a troubled economic legacy has made the most industrialised nation in Africa a tinderbox. What will happen next?

What’s happened?

The worst unrest since the end of apartheid left at least 330 people dead last month and shone a spotlight on the corruption, racial tensions and vicious political rivalries that plague South Africa – as well as its exceptional, entrenched economic inequality. In a wave of rioting and looting, about 40,000 businesses were vandalised, with the damage estimated at around $3.4bn.

After a week of mounting chaos, order was restored when the government sent 25,000 troops to KwaZulu-Natal province around Durban (the largest port in sub-Saharan Africa) and Guateng province around Johannesburg (the country’s commercial hub). The two provinces contribute half of the GDP of Africa’s most industrialised nation and almost half its population.

South Africa has long been a tinderbox, with the economic devastation wrought by the pandemic and lockdowns (and alcohol ban) creating ideal conditions for a social conflagration. Even so the violence was unprecedented – and all the more depressing given its proximate cause.

And the proximate cause was what?

The jailing of former president Jacob Zuma for contempt of court in refusing to co-operate with a judicial inquiry into “state capture” during his presidency. Within hours, calls for an “uprising” by Zuma’s supporters were circulating on social media and a wave of looting had begun.

Significantly, the targets were not only shops, banks and local businesses, but also strategic targets crucial to South Africa’s food supplies, including warehouses, logistics centres, lorries and highways in KwaZulu-Natal, Zuma’s home state and powerbase. President Cyril Ramaphosa, who ousted Zuma as ANC leader, accused his rival’s allies of instigating and organising what he called an “attempted insurrection”.

Is Covid-19 a factor?

South Africa was already in recession when the pandemic hit and the government imposed one of the strictest lockdowns in the world. The economy contracted by 7% last year and unemployment hit a record level of 32.6% in the first quarter of 2021. Two-thirds of young people are unemployed and three in five live in poverty.

Covid-19 has certainly made things worse: over the past year, almost two-thirds of households reported running out of money to buy food and almost one in five experienced weekly hunger. Then, in May, the government ended Covid-19 relief payments, leaving six million people without cash. But while the pandemic helped tip the country into chaos, the causes are much longer-term. 

How had the economy been doing?

South Africa began the post-apartheid era facing a historic challenge: it had to overhaul an economy dominated by mining, grow sectors such as tourism and agriculture, while overcoming a legacy of colonial exploitation, racial oppression and global isolation. To start with, the ANC government (led by Nelson Mandela, then Thabo Mbeki) did okay, helped by the global boom in commodity prices.

Real per-capita income grew steadily (from around $5,500 in 1994 to almost $7,500 in 2007, figures rebased on 2010 terms). Between 1998 and 2008 GDP grew by a steady 3.5% a year, doubling the size of the black middle class. The government built millions of houses, invested in infrastructure and increased welfare payments to millions of the poorest.

There’s a but?

But since 2008 GDP per capita has been static and has now fallen back to the level of the mid-2000s. First, the global financial crisis of 2008 hit, destroying demand for the mineral deposits at the centre of South Africa’s economy and wiping out about half of the roughly two million new jobs that had been created in the previous four years.

Second, political leadership rotted as the ANC morphed under Mbeki then Zuma from liberation movement into the increasingly corrupt ruling party of a de-facto one-party state. According to Ramaphosa, some $34bn of state funds went “missing” under Zuma. By some accounts, the ANC’s fiefdoms are akin to the failed states of Central America – El Salvador, Guatemala, Honduras – where politics and organised crime are two sides of the same coin.

What about inequality?

In the aftermath of apartheid, the government left land and other assets largely in the hands of the predominantly white elite. This was the de-facto price of a peaceful transition to democracy and access to international funding. But it has left many black South Africans behind and feeling condemned to a continuing economic, social and educational apartheid.

The lack of investment in a meaningful education system for non-whites under apartheid is a lasting legacy. And rates of stunted growth in children – an indication of malnutrition – have remained stubbornly high since 1994, at about a quarter or more. “The effects are felt decades later, in poor school results, a life on the margins of the job market and long-term health problems,” says Joseph Cotterill in the Financial Times.

Is the inequality bad by global standards?

Yes. South Africa is one of the world’s most unequal countries – and it has got more unequal over the last 30 years. According to the World Inequality Database, the share of national income taken by the richest 10% has grown from less than 50% in the early 1990s to around 65% now. The share taken by the poorest half of the population has shrunk from over 10% then to around 5% now. In terms of overall household wealth, it’s even worse. Around 10% of South Africans own an estimated 90% of the wealth, with 80% owning nothing at all. Some black people, with political connections, have got rich, and inequality is rising among non-whites. But overall, according to government statistics (from 2019), 64% of black South Africans live in poverty, compared with 1% of whites. Zuma is back in court next week for trial on separate corruption charges. South Africans are braced for the verdict.

Recommended

Beware of scams on your business’s Facebook account
Small business

Beware of scams on your business’s Facebook account

Fraudsters could hack into your business’s Facebook account and use your money to advertise their products online.
6 Jul 2022
How to cut your car’s fuel bill as the price of petrol hits a record high
Personal finance

How to cut your car’s fuel bill as the price of petrol hits a record high

The cost of filling the typical car’s 55-litre tank with petrol is now around £105. Here, Saloni Sardana looks at ways to keep your refuelling costs d…
5 Jul 2022
Saga’s figures are heading in the right direction – so should you buy?
Share tips

Saga’s figures are heading in the right direction – so should you buy?

Saga the over-50s travel and financial services specialist, has been struggling for years. But now, with the pandemic behind, it it is planning for fu…
5 Jul 2022
Director dealings w/e 1 July: what company insiders are buying and selling
Stocks and shares

Director dealings w/e 1 July: what company insiders are buying and selling

Directors’ share dealings can often give investors an insight into the sentiment of company insiders. Here are some of the biggest deals by company di…
5 Jul 2022

Most Popular

Ray Dalio’s shrewd $10bn bet on the collapse of European stocks
European stockmarkets

Ray Dalio’s shrewd $10bn bet on the collapse of European stocks

Ray Dalio’s Bridgewater hedge fund is putting its money on a collapse in European stocks. It’s likely to pay off, says Matthew Lynn.
3 Jul 2022
Persimmon yields 12.3%, but can you trust the company to deliver?
Share tips

Persimmon yields 12.3%, but can you trust the company to deliver?

With a dividend yield of 12.3%, Persimmon looks like a highly attractive prospect for income investors. But that sort of yield can also indicate compa…
1 Jul 2022
The income investor’s dilemma
Income investing

The income investor’s dilemma

Pay attention to dividend growth as well as initial yield when picking income trusts, says Max King.
4 Jul 2022