South Africa, highly considered an economic powerhouse, is in a deep-seated crisis. The energy deficit has crippled industrial operations, and supplies for domestic use have largely been reduced. Unemployment is rising, and the cost of living becomes unbearable across the country. As a result of the crisis, social discontent has engulfed every corner of South Africa.
Reports monitored here say South Africa’s President Cyril Ramaphosa and his cabinet on May 7 held an extensive meeting with key business leaders as concern over the country’s energy crisis, logistic constraints, and close ties with Russia grow. Attendees discussed collaborating to obtain inclusive growth, inspire confidence in the economy and create jobs, the Presidency said in an official Twitter post.
Five years after Ramaphosa ushered in a wave of business optimism that he’d revive the economy crippled by industrial-scale corruption under his predecessor, executives are running out of patience with the president, who is seeking reelection next year.
Economic stagnation stoked by record daily power cuts, rampant crime, disintegrating infrastructure and foreign policy missteps is leading investors to the exits. Yields on the benchmark 10-year generic government bond have risen 129 basis points this year to 12.1%, foreign buyers have been net sellers of the nation’s stocks, and the rand has plunged 11%.
Executives including Daniel Mminele, Nedbank Group Ltd.’s chairman, and MTN Group Ltd.’s Chief Executive Officer Ralph Mupita have called for urgency in resolving domestic hindrances to economic growth and warned the country is at risk of becoming a so-called failed state. Others, such as FirstRand Ltd. Chief Executive Officer Alan Pullinger, have criticized the country’s relationship with Russia. The government’s indifference to the war in Ukraine and its friendship with Russia is “foolhardy in the extreme,” he said.
Early March, reports also warned that South Africa’s banking industry faces a “profound geopolitical risk” from the government’s close ties with Russia. South Africa has drawn criticism from some of its biggest trading partners, including the United States and the European Union, over military exercises it conducted with Russia and China. Those countries have also censured Ramaphosa’s administration over its abstention from United Nations resolutions condemning Russia’s war with Ukraine.
“Countries are noticing our government’s left-leaning enthusiasm for China and Russia vehemently opposed” to the war in Ukraine, FirstRand Ltd. Chief Executive Officer Alan Pullinger said at an investor briefing in Johannesburg. The government’s indifference to the war and its friendship with Russia is “foolhardy in the extreme,” he said.
South Africa’s banking industry is dependent on access to international markets, global clearing and settlement, Pullinger said. The country risks consequences because of its stance on Russia, he said. “Our collective access is a privilege; it is not a right and can be revoked easily,” Pullinger said. “FirstRand does not share our government’s enthusiasm for Russia.”
With an estimated population of 58 million, South Africa is the southernmost country in Africa. It is bounded to the south by 2,798 kilometres of coastline that stretches along the South Atlantic and Indian Oceans; to the north by the neighbouring countries of Namibia, Botswana, and Zimbabwe; and to the east and northeast by Mozambique and Eswatini.