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Africa, Politics, Security

South Africa Faces a Downward Spiral

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This article has been republished with permission from our partner, Stratfor. The original version was first published in Stratfor’s WORLDVIEW and can be found here.

Highlights

  • Beset by infighting, the ruling African National Congress is incapable of effectively tackling the country’s worsening economic and social situation.
  • Those problems will drive more highly skilled individuals to emigrate, robbing the country of productive workers and tax revenue in the years ahead.
  • Deepening economic malaise and internal fissures will accelerate the erosion of the ANC’s once-dominant electoral position, possibly opening the door to more extreme parties, with serious policy implications.
  • As South Africa struggles to get its house in order, its influence over the rest of southern Africa will wane.

“We are sorry for what happened,” South African President Cyril Ramaphosa told a group of workers earlier this month in Durban. “Our image, our standing and our integrity [were] negatively affected.” Ramaphosa offered the heartfelt mea culpa following yet another wave of xenophobic riots across South Africa, yet presidential apologies are unlikely to stanch more violence directed against foreigners there — or cure the deeper malaise that drives the unrest. That’s because successive governments in Pretoria have failed to foster essential economic growth in South Africa, which posted an eye-popping unemployment rate of 29 percent earlier this year. Every week, thousands of its citizens are forced into unemployment or underemployment in the extensive black market.

The Big Picture

Years of economic and social woes have taken a toll on South Africa. As the country grapples with yet more indications of weak or negative growth, sky-high unemployment, massive crime rates and coming political change, its ability to remain a continental economic powerhouse will be under threat.

See 2019 Fourth-Quarter Forecast

See Sub-Saharan Africa section of the 2019 Fourth-Quarter Forecast

See Old Leaders in a New Africa

And it’s not just joblessness that is eating away at the rainbow nation; a host of other factors are driving home the severity of the country’s crisis: rising government debt, crumbling infrastructure, collapsing education standards, rampant crime and violence, currency volatility, investment outflows, and more. Together, it’s given rise to the sentiment that South Africa is increasingly a country of “haves” and “have nots,” tearing at the country’s social fabric, resulting in mass alienation and disenchantment with the political system. And with the ruling African National Congress (ANC) seemingly unable to get its own house — let alone South Africa’s — in order, the continent’s powerhouse will go through plenty more trials and tribulations before it sees any glimmer of hope.

A Battle Over Spoils

In spite of ever-worsening economic and social problems, the ANC government is incapable of implementing drastic and fundamental reforms to jump-start growth, offering instead “pie in the sky” policy rhetoric that has failed to translate into reality. At the heart of the problem is the ANC itself: The party is riven by massive internal factionalism. In the years immediately after apartheid, ideological differences may have driven the party’s divisions. But since then, the ANC has become mired in corruption and mismanagement, with the effects becoming evermore pronounced in recent years. In effect, the main battle brewing inside the ANC today centers on access to money and resources; policy differences, ultimately, are largely irrelevant. South Africa’s economic boost during the global commodity supercycle driven largely by Chinese demand in the late 2000s obscured this internal conflict and its negative impacts until the good economic times ended in 2014. Since then, bleaker prospects have challenged Ramaphosa and his allies’ efforts to turn around the party and government through anti-corruption efforts, in part because he must contend with other powerful factions — most notably those aligned with his predecessor, Jacob Zuma — that benefit from his administration’s failure to root out graft at all levels of government.

This has serious policy implications. Given Ramaphosa’s flimsy coalition against other ANC factions, the president cannot robustly push “controversial” economic reforms which, in the South African context, entails market-based reforms that demand increased efficiency. For starters, these limitations have hindered Ramaphosa’s goals of overhauling the country’s embattled public utility company, Eskom. After nearly scuttling the South African economy last summer amid blackouts that it instituted to protect the unstable electrical grid, Eskom has already sucked up billions of dollars (necessitating ever-mounting debt) in 2019 to keep the lights on. Unsurprisingly, there is little sign of an improvement in store.

Economic SnapshotDespite the gravity of the situation, several of the country’s powerful unions have vowed to turn on Ramaphosa if he seeks to turn around Eskom by either privatizing the utility or laying redundant workers off. (According to the International Monetary Fund, Eskom’s workforce is bloated by a whopping 66 percent.) Should Ramaphosa opt not to alienate the powerful labor leaders who paved his path to the top of the ANC in 2017, he will have few policy options with which to deal with Eskom. In the end, one thing is certain: Failing to fix the company risks plunging South Africa’s economy into more crisis. As one Eskom board member recently warned, the current electrical grid cannot handle even a relatively minor uptick in economic activity without experiencing a system meltdown.

Over the Cliff

The long-term implications of years of ANC-led mismanagement loom large. For one, recent data proffered by an emigration services company, Sable International, strongly suggests that an exodus of South African individuals with a high net worth, as well as highly skilled workers, is underway. This, naturally, will have consequences as South Africa continues to rely more heavily on its shrinking tax base for government revenue. In addition, the flight of highly skilled workers will affect key sectors in global demand, like healthcare and high-tech, robbing the country of the more productive segments of its society. Most troubling for the government, data shows that the vast majority of these individuals do not return to the country once they emigrate.

Pretoria’s inability to make the tough policy choices to alter course will ultimately result in the country’s economy continuing to take on water. With weak or negative growth projected for the next several years, unemployment will remain high, resulting in yet more misery, high crime and violence. And in addition to Eskom’s woes, the country’s water systems, public transportation, waste management and other critical infrastructure will further deteriorate, pushing the costs and consequences onto its citizens. This, in turn, will encourage more highly skilled workers to leave the country for greener — and safer — pastures. South Africa’s political elites will find this downward spiral difficult to break, paving the way for the country to lose its ability to influence its much smaller neighbors. And as the author R.W. Johnson has pointed out, unlike the case of Zimbabwe — which sent millions of economic migrants over the border to South Africa when its economy collapsed — South Africans trying to escape economic misery have nowhere else in the region to go.

By the time the country’s leaders receive a stronger popular mandate to remedy its dire situation, South Africa will be in a far deeper hole with far fewer human resources to help dig it out.

This constraint on mass emigration will create an increasing number of disaffected voters who will erode the ANC’s once-dominant electoral position. Amid the economic stagnation and political infighting, younger voters who have few memories of the ANC’s struggle against apartheid — and, thus, little loyalty to the party — will look for other options come election day. Quite when the ANC will lose its political predominance is an open question, but South Africa’s poor economic trajectory and the ANC’s internal squabbling mean that a sea change will come sooner than later.

Ultimately, the impact of the ANC’s eventual reckoning will depend greatly on which political parties step in to fill the political void. For example, a weakened ANC that loses its majority will likely have to join an alliance with another major political party — an act that in itself that will likely accelerate the ANC’s breakup as dormant ideological debates erupt and battles over resources lead to a final splintering. Accordingly, does the future ANC opt to align itself with the far-left Economic Freedom Fighters? If so, the impact would be huge. To begin with, such a partnership would cause a sharp left turn in the country’s policies, resulting in the accelerated transfers of wealth to the impoverished black majority (at a huge cost to market efficiency). Policies like these would spook foreign investors, increase the brain drain, cause capital flight and send South Africa-based corporations scattering to other major African hubs. Relatedly, it would turn Pretoria’s focus away from the rest of the continent, thereby speeding up South Africa’s decline as a regional economic and political power (with no country in the region likely to assume its place).

An uneasy future alliance with the center-right Democratic Alliance could push the ANC into adopting more market-based policies. However, this scenario would be no panacea, as it could only occur if it receives serious political backing from voters who have otherwise favored populism over market efficiency. (What’s more, it would also likely usher in the ANC’s fragmentation into splinter parties, greatly upending the political system.) Popular support for tougher market reforms is only likely to come after more years of economic and social woes. By the time the country’s leaders receive a stronger popular mandate to remedy its dire situation, South Africa will be in a far deeper hole with far fewer human resources to help dig it out.

Amid its political leaders’ inability to pursue the tough policy choices needed to address the country’s growing socio-economic crisis, South Africa is sinking. The result, for the time being, will be the increase of internal strife and policy uncertainty, the erosion of the country’s economic base, and the loss of its regional hegemony. The only question, then, is just how stern South Africa’s reckoning will be.

Stephen RakowskiStephen Rakowski is a Sub-Saharan Africa Analyst at Stratfor, where he monitors political, security and economic trends unfolding across the continent. Mr. Rakowski holds a master’s in government with a focus on diplomacy and conflict studies from the Interdisciplinary Center Herzliya in Israel. He also holds a bachelor’s in international relations from Franklin University Switzerland in Lugano, Switzerland. In addition to his studies, Mr. Rakowski has traveled and lived throughout Madagascar, Morocco and Kyrgyzstan.

Latin America, Politics

Sandra Torres: Under the Electoral Weather

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On Monday, 2 September 2019, Guatemalan police executed a warrant for the arrest of Ms. Sandra Torres on charges of illicit and unreported campaign financing. Her arrest came just a few days after losing the immunity granted to presidential candidates in Guatemala. The presence of the press on the daytime raid amplified the spectacle of the former first-lady’s arrest at her lavish home in Zone 15 of Guatemala City. The announcement that she would be put in pretrial confinement in the Mariscal Zavala detention center to prevent her from fleeing the country was, unlike her arrest, a surprise. Zavala Prison is located on a military base and has become the home of dozens of powerful former officials, judges and politicians convicted of corruption and abuse of power, including ex-President Otto Pérez Molina. Ms. Torres will certainly be in infamous company as she prepares for the trial she calls a political maneuver.

The Symptoms

Sandra Torres has had a unique political career to say the least. She was Guatemala’s first lady during the term of her then husband, President Álvaro Colom from 2008 to 2012. She attempted to succeed her husband by running for his office in 2011, but was disqualified by the courts in accordance a constitutional provision barring immediate family members of the President or Vice President from running for those positions. Later that year she divorced Colom in order to be eligible for the office and tried again in 2015; a race she lost to current President Jimmy Morales. It was during these earlier campaigns that she built a reputation as a champion for rural and indigenous Guatemalans, a base that served her well during the 2019 election. Again she came in second but only after she forced a runoff against the eventual winner, Alejandro Giammattei.

Official certification of Giammattei’s electoral victory marked the end of Torres’s immunity and just days later, a judge issued the warrant for her arrest. Some see Torres’s detention last Monday as a bold strike against a common flaw in Guatemalan politics: the secret financing of candidates by anonymous donors. In the case of Ms. Torres, she stands accused of accepting more than USD $3.6 million of illicit funding associated with her 2015 campaign. The history of those charges however, could be their undoing.

The investigation that resulted in charges against Sandra Torres and four of her colleagues was a joint effort of the Guatemalan Special Prosecutor’s Office Against Impunity (FECI), an anti-corruption agency intended to work with the International Commission Against Impunity in Guatemala (CICIG); a United Nations body given a mandate by the Guatemalan legislature in May 2007 to investigate and prosecute “illegal and clandestine security bodies that commit crimes against fundamental human rights.” During its twelve-year mandate, CICIG made great strides in prosecuting organized criminals and violations of rights. Its investigators prosecuted 96 cases involving everything from murder of journalists to environmental fraud and pollution. The vast majority of these cases, including the one against Ms. Torres, were referred through FECI for prosecution by the Public Ministry.

Seen as effective and good for Guatemala, CICIG’s mandate was renewed five times until the office made the fatal mistake of investigating President Morales himself. He subsequently blocked further renewals leaving CICIG’s mandate to expire last Tuesday, the day after Ms. Torres’s arrest. Perhaps recognizing its mandate was nearing an end, CICIG filed the case against Torres in April 2019 after she had already began her campaign. Extraordinarily, the complaint noted that as a candidate for President, she was already immune from prosecution. Now that CICIG’s mandate has indeed expired, FECI is left to prosecute an already sensitive case without a co-plaintiff.

Electoral Illness

The health of Guatemala’s electoral system hangs in the balance. Prior to the end of its mandate, CICIG seemed to have worn out its welcome with some of the country’s power brokers. Though President Morales and President-elect Giammattei have stayed relatively silent on the arrest of their former opponent, neither was supportive of CICIG’s mandate and are unlikely to view Torres’s arrest as good news for the status quo. Their willingness and ability to influence the outcome of her trial however will depend on their calculations of the political costs involved.

Morales will likely leave it to Giammattei who will have to balance the popularity of both CICIG and Ms. Torres among rural and indigenous Guatemalans, against the temptation to let her take the fall. Doing so could expose anonymous donors that are so influential they still remain anonymous despite all the legal attention the case has brought to their donations. Though the rural poor have some impact on security and electoral success, Giammattei managed to win the Presidency largely without their support in the first place. Campaign donors on the other hand, are likely to be in command of Guatemala’s rapidly developing economy. A defensive move by either constituency could cause a great deal of trouble for the new administration which will have to tread very carefully to find a workable cure for Guatemala’s electoral illness.

Lino Miani, CEO Navisio Global LLC

Lino Miani is a retired US Army Special Forces officer, author of The Sulu Arms Market, and CEO of Navisio Global LLC which now has a presence in Guatemala City.

Latin America, Politics

El Salvador’s Combative New President Faces A Perilous Balancing Act

This article has been republished with permission from our partner, Stratfor. The original version was first published in Stratfor’s WORLDVIEW and can be found here.

With a style and pedigree different from that of his modern predecessors, El Salvador’s new president came out swinging against the status quo almost as soon as his inauguration ended on June 1. Nayib Bukele’s supporters see his willingness to break with politics as usual as a sign that El Salvador may finally shake off the lingering vestiges of its 1980-1992 civil war. Until now, every Salvadoran president has been associated with one of the main protagonists in that brutal conflict, the leftist Farabundo Marti National Liberation Front (FMLN) or the conservative Nationalist Republican Alliance (ARENA). Part of Bukele’s appeal is that he represents a break with the past, but change will come at a price in one of the world’s most violent countries. Unbalancing power dynamics too quickly in El Salvador could provoke a violent and destabilizing response.

A Hard Place

El Salvador is a tough place to govern. It is one of the most densely populated countries in the world, and most of its people are poor. The country’s gross domestic product per capita is a paltry $3,900, and fully 29 percent of Salvadorans survive on half that amount. The economy is rooted in resource extraction, which is vulnerable to climate change and environmental degradation. It is also heavily dependent on remittances from overseas, which account for 21.3 percent of GDP. Years of expensive infrastructure development and high levels of corruption have left El Salvador with a debt-to-GDP ratio that averages around $2,550 per person — a high number that will have serious consequences if it remains unchecked.

Though the economics of governance in El Salvador seem daunting, violence is perhaps a more urgent problem. El Salvador has one of the highest murder rates in the world: 50.3 homicides per 100,000 residents in 2018. The country is home to some of the world’s most notorious gangs. When organizations like Mara Salvatrucha (MS-13) and Barrio 18 fight over territory, the resultant violence interrupts development and corrupts politics at every level. Inadequate funding and limited resources hamper the ability of El Salvador’s National Civil Police (PNC) to respond effectively to the threat. Though the PNC has respectable investigating arms, it lacks the confidence of the population. The justice system is in even worse shape. Judges and prosecutors who manage to avoid corruption are often intimidated. The prison system is underfunded and overcrowded, with some facilities operating at 320 percent capacity. Inmates in overcrowded prisons eventually establish their own order, turning what is meant to be a physical manifestation of state power into a secure communications and operations base for the gangs.

Breaking Rocks

Bukele will find it difficult to achieve prosperity for El Salvador while breaking with political tradition. Though he won the presidency with a resounding majority, FMLN and ARENA still dominate the Legislative Assembly, holding a combined 60 of the 84 seats. Bukele will need to act in a cooperative manner, yet so far he shows little inclination to do so. Little more than a week into his presidency, he accused the FMLN of funding gangs to destabilize his government. He followed that explosive statement with another, threatening to “attack the criminality” of the FMLN’s senior officials. Though observers of Salvadoran politics say this is not a new phenomenon, acknowledging it in such a public way is not something a Salvadoran president has done before.

The Legislative Assembly is not the only institution uncomfortable with Bukele’s new approach. Leading families and their associates, so accustomed to wielding influence in El Salvador, have found themselves on the receiving end of termination notices delivered via Twitter. The social media-savvy Bukele used Twitter to announce the firing of 30 relatives and associates of former President Salvador Sanchez Ceren of the FMLN. They are already pushing back, calling the firings an abuse of power and preparing lawsuits that could cause leadership crises in the agencies involved.

More dramatically perhaps, Bukele’s first order of business as president was to order the army — again via Twitter — to remove the name of Col. Domingo Monterrosa from its 3rd Infantry Brigade barracks in San Miguel. Monterrosa was the commander of the forces responsible for the infamous El Mozote massacre during El Salvador’s civil war. That incident claimed the lives of nearly 1,000 villagers accused by the army of sympathizing with FMLN guerillas. The massacre played a central role in the negotiations that ended El Salvador’s civil war because the army insisted on amnesty as a condition for peace. Since then, the army has honored Monterrosa as a hero. Though the army acquiesced to Bukele’s demand, it is unclear what the president’s relationship with the military will be going forward.

Striking the Balance

Without a legislative majority or support from the oligarchy or the army, Bukele will need all the friends he can get if he is to maintain stability in El Salvador. His critics in ARENA and particularly in the FMLN, a party he once belonged to, know how to attack him. They’ve highlighted some of his expensive failures as mayor of San Salvador and pointed out that despite his attacks on cronyism and corruption, Bukele appointed dozens of relatives and associates to take the place of those he’s fired. Though he commands the support of a growing majority of Salvadoran voters, he could quickly lose their adoration if FMLN pays the gangs to destabilize the country as he claims.

Bukele will need all the friends he can get if he is to maintain stability in El Salvador.

Bukele’s combative approach to entrenched interests in El Salvador may win him the support of the voters but it leaves him with few allies in his quest to change his country’s reputation for violence and backwardness. Though he’s burning bridges at home, the right foreign backers may allow him to attract enough investment and maintain enough security to address his serious fiscal and political concerns, but this is far from assured. Recognizing this, he is rearranging some of El Salvador’s traditional alignments in ways that will appeal to U.S. President Donald Trump and his administration. For example, Bukele declined to invite the leaders of Nicaragua, Cuba, Honduras and Venezuela to his inauguration, telling President Nicolas Maduro to “say goodbye” to Venezuela’s alliance with El Salvador. Nevertheless, the Trump administration’s focus on Central American migrants makes the United States a challenging partner.

However, the United States is not the only superpower with interests in the region. China also wields significant economic influence over El Salvador’s foreign policy. After some early suggestions he may reestablish relations with Taiwan, Bukele reaffirmed his country’s “complete” and “established” relations with China on June 27 and said his government would look “wherever we have to look” to develop El Salvador. While it is unclear what caused him to seemingly change his stance, the best Bukele can hope for in these circumstances is to provoke a developmental bidding war between China and the United States — a balance few leaders have been able to manage.

Ultimately, Bukele has a choice to make. The climate in San Salvador is not conducive to establishing populist dominance over his rivals and unless he finds a way to cooperate with his country’s other power brokers, El Salvador is on course for gridlock and pain. If Bukele fails, he may find it difficult to contain a violent reaction against him and his supporters, a consequence that could cause a deterioration in security in the wider region. The extent to which he can manage the balancing act between the will of the people, the vested interests of his still powerful rivals and the desires of global stakeholders to move El Salvador forward may ultimately be the central feature of his presidency.

Lino Miani is a retired US Army Special Forces officer, author of The Sulu Arms Market, and CEO of Navisio Global LLC. He is a regular contributor to Stratfor’s Worldview.