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Author & Background
Gerrie Coetzee-Swart
Gerrie Coetzee-Swart holds a Masters (International Relations) (Cum Laude) degree from the University of Pretoria, South Africa. He is a former lecturer at the Department of Political Sciences, University of South Africa (UNISA) (2007-2008) and former lecturer at the Department of Political Science, Stellenbosch University (2009-2019). He is currently CEO & Director of Acuity Africa Consultancy – a political research and political risk consultancy firm based in Johannesburg, South Africa.
South Africa
A Country Riddled with Dangerous Risks
Of all the countries in the Southern African region, South Africa is arguably the country at greatest risk of suffering the most political and socio-economic risks concurrently in 2021. Indeed the country is already facing a large swath of political and socio-economic risks in multiple stages of emergence and onset, further exacerbated by the continuing carnage created by the COVID-19 pandemic, which has shown no signs of abating as 2021 commenced.
South Africa in particular is at the epicentre of a plethora of political risks at the start of 2021. The country is likely to be the worst hit in terms of the multiplicity of risks emerging, manifesting and becoming firmly entrenched at the start of 2021. These are however risk woes that have been with the country for a far longer period however. Their severity is however likely to be far worse as 2021 unfolds.
South Africa’s performance on a range of social, economic and governance measures deteriorated more in the past 12 years than any other nation not at war, according to Eunomix Business & Economics Ltd, a Johannesburg-based political-risk advisory company. The decline is likely to continue as the country wrestles with the consequences of nine years of worsening corruption and policy paralysis under former President Jacob Zuma (Bloomberg 2019).
The fragility of the economy may also limit the tenure of his successor Cyril Ramaphosa, who is already buckling under pressure from the pre-existing political and socio-economic risks facing the embattled country, exacerbated by the onset of the COVID-19 pandemic. In March 2020, as the country commenced lockdown due to the COVID-19 pandemic, South Africa was downgraded to ‘junk status’ by Moody’s Investors Service. The country lost its last investment-grade rating when Moody’s Investors Service cut it to Ba1, citing a weak economy and an unreliable power sector. When markets reopened in Asia, the effect was immediate. The rand fell to a record low, weakening beyond 18 per dollar for the first time, before paring losses.
An index of security, governance, prosperity and welfare indicators shows South Africa slumped to 88th out of 178 nations in 2018 from 31st in 2006, according to an analysis of the country’s prospects by Eunomix (Bloomberg 2019). South Africa’s decline in ranking is only been superseded by conflict-riven countries such as Mali, Ukraine and Venezuela.
President Ramaphosa, acutely aware of the impending danger to his Presidency issued an unprecedented letter to his party, the ANC, in August 2020 as the COVID-19 pandemic continued to rage. Most significantly the President’s letter in particular addressed the scourge of corruption that infected the ruling ANC.
Many analysts and observers fear that beyond 2020 South Africa is teetering on the precipice of becoming a full-blown failed state, which could have severe repercussions for domestic and regional stability. The spectre of South Africa becoming a fully-blown failed state poses severe risks for the country’s domestic stability and security- already precarious due to extremely high levels of crime, violence and political instability. In September 2020, Eunomix warned that South Africa could become a “failed state” politically and economically in the next 10 years if the country’s decline is not arrested immediately. A report by the country’s risk consultancy group forecasts severe economic and political decline unless the government adopts growth-friendly economic policies.
Bar a meaningful change of trajectory, South Africa is projected to become a failed state by 2030. Unless it decisively deals with the multiplicity of risks that is engulfing the country at present, state failure could well be accelerated to arrive as early as 2024- in time for the country’s national government elections, which could create a perfect storm.
Unprecedented Political Polarization Continues
The country is facing unprecedented political polarization within the ruling ANC ahead of the 2021 local government elections and the national government elections scheduled for 2024. Both elections have been cast in uncertainty due to the reigning political upheaval within the ruling party. Domestic political polarization is posing a massive national security threat to South Africa’s embattled democracy. Domestic political division in South Africa is arguably the greatest national security threat facing the country at present, which could lead to the onset of renewed political violence. In the South African context, given the country’s destabilizing Apartheid past, political polarization represents a potential “force multiplier” that worsens other threats and could potentially cripple the government’s ability to effectively combat them.
A Massive Political Legitimacy Deficit Ahead of the 2021 & 2024 elections
The ruling ANC is currently facing a severe deficit of political legitimacy, which is exacerbating crises in several critical domestic realms. This legitimacy gap is likely to be sustained and likely to widen in 2021. South Africa is at present experiencing a considerable breakdown (some would argue a full-on meltdown) of the already strained harmonious relationship between the state and population. What is being witnessed is a very real lack of political legitimacy for the incumbent government by an increasingly aggrieved and increasingly expanding segment of South African society. The ruling party is undeniably suffering a protracted legitimacy crisis that could cost it significant votes in the 2021 and 2024 electoral contests (that is if the 2021 poll is not deferred, delayed or disrupted due to the continuing COVID-19 crisis).
South Africa’s current highly dysfunctional political order is a prime breeding ground for the emergence and stubborn entrenchment of highly complex political risks in the country. The country is further threatened by the politicization of socio-economic crises within the context of the ongoing intra-elite struggles within the ANC at present. The country at present appears to be in a state of near-permanent crisis.
A Multiplicity of Interwoven and Interconnected Risks
As pointed out earlier, South Africa is facing a multiplicity of interconnected and interwoven risks.
In fact the Institute of Risk Management South Africa identified a staggering 20 overall country risks in 2019 in the fifth edition of its South Africa Risks report. These included:
- Structurally high unemployment
- Growing income disparity and inequality
- Failure of governance in the public sector
- Unmanageable fraud and corruption
- Inadequate and/or sub-standard education and skills development
- Energy price shock
- Labour unrest and strike action
- National political uncertainty/ instability
- Cyber-attacks (ransom, algorithm shutdown of the internet of things)
- Macro-economic developments
- Skills shortage, including the ability to attract and retain top talent
- Lack of leadership
- Breakdown of critical infrastructure and networks (e.g. transport, information, roads)
- Government policy, legislative and regulatory changes and uncertainty
- Failure of State, a State of crisis or a State collapse
- Global political uncertainty/disruption
- Capital availability/credit risk
- Insufficient supply of electricity
- Failure of governance – private
- Business interruptions (e.g. production, supply chain)
Additionally, the Institute of Risk Management South Africa identified 12 top risks for 2020 in the sixth edition of its South Africa Risks 2020 report. They were:
- Sparseness of unified ethical and visionary leadership
- Continuing private and public governance failures
- Failure to root out deeply entrenched corruption
- Changes in legislation and regulations
- Ill-conceived National Health Insurance (NHI) policy and/or sub-optimal implementation
- Ill-conceived land reform policy and/or sub-optimal implementation
- Failure to develop, attract and/or retain talent
- Extreme weather events, natural disasters, and climate change
- Insufficient electricity and/or energy
- Disruptive technologies
- Cyber-attacks, data fraud, and data theft
- Failure, delay and/or sub-optimal implementation of economic reform initiatives
Major Domestic Risks Facing the Country in 2021
The top country-specific risk South Africa is likely to be confronted with is a high-level of national political uncertainty and instability (exacerbated by current global political uncertainty and instability), failure of governance by virtually all spheres of the state, and the threat of the onset of large-scale political unrest and violence in 2021. This proverbial risk trifecta is likely to have adverse consequences for the country’s ability to engage in urgent economic reforms to stem the tide of even larger scale job losses in 2021.
This is likely to be compounded by the failure of the ANC to successfully root out deeply entrenched corruption, the continuation of woes produced by insufficient electricity supply and load-shedding, delayed implementation of economic reform initiatives due to the impact of COVID-19, and potentially explosive repercussions posed by the ongoing debate surrounding radical economic transformation and the imminent adoption of the highly controversial Expropriation Bill in 2021. The country is also likely to face the spectre of early succession talks within the embattled ANC, following President Cyril Ramaphosa’s explosive anti-corruption letter published in August 2020, which effectively read the riot act to corrupt party and government officials.
Immeasurable Damage to the country’s brand and reputation
Overall the reputational damage the country is presently facing is likely to deter potential investors even further. As noted by risk industry experts reputation risk is often termed as the ‘risk of risks’ both for countries and for organisations. This is exacerbated by social media and other technologies that enable people to share information and opinions widely and swiftly. Reputation risks are one of the most challenging risks to identify, assess and to protect against. This has led to a situation where in many risk registers reputation risks are omitted or hidden as much as possible so as not to show up and having to confront risk analysts and risk managers’ inability to manage this risk in a structured and sophisticated way.
Another damaging ratings agency downgrade could irreparably damage South Africa’s political and economic future. The possibility of economic recession and increasing unemployment also poses a substantial risk to South Africa entering 2021. These risks pose a clear and present danger to the country’s national security and stability. The country is also threatened by the possibility that it could soon possess one of the most unequal societies on the continent, and indeed in the world. Mitigating and managing the dire reputational deficit South Africa is currently facing is key to stave off and stem the tide of investor retreat in 2021. This will require an activist response from the South African Government Communication and Information Systems (GCIS) in conjunction with brand and public relations specialists to radically improve South Africa’s dented reputation at home and abroad.
The Lingering After-shock Effects of State Capture as Ultimate Risk Multiplier Continues
Of gravest concern is that State Capture may have caused irreparable damage to South Africa’s political, social, economic, ethical and moral cohesion and fabric, which could potentially take decades to roll back. As noted in the 2017 report ‘Betrayal of The Promise: How South Africa is Being Stolen’:
Until recently, the decomposition of South African state institutions has been blamed on corruption, but we must now recognise that the problem goes well beyond this. Corruption normally refers to a condition where public officials pursue private ends using public means. While corruption is widespread at all levels and is undermining development, state capture is a far greater, systemic threat. It is akin to a silent coup and must, therefore, be understood as a political project that is given a cover of legitimacy by the vision of radical economic transformation.[1]
Unless the Ramaphosa Administration fully purges all government departments and state agencies, including party political structures of figures implicated in gross corruption, the country is unlikely to genuinely recover its reputation as a country with which to conduct ethical and transparent business dealings with. South Africa will only decisively deal with this scourge if a high-level anti-corruption and ethical governance czar is appointed to undertake a massive investigation and complete overhaul of the state in all its facets. This should be one the ultimate findings of the Commission of Inquiry into State Capture still underway. This special envoy should be free from any and all ties with government and other entities related to the state and should be accorded extra-constitutional powers (devoid of state or government interference into its functioning) to decisively eradicate corruption at all levels of the South African state. These radical measures are likely to be the only way in which South Africa will truly eradicate the scourge and pandemic of corruption that has metastasized to dangerously unmanageable levels over the past 26 years.
South Africa at present is a restive nation, no longer the erstwhile rainbow nation that was heralded and revered at the dawn of democracy in 1994. This worst-case scenario is likely to gain greater traction amidst the multiplicity of crises and woes the country has to attempt to address in 2021. Indeed 2021 could well be a reckoning, a critical juncture to determine whether South Africa will triumph or whether it will fall off its already fragile, teetering precipice.
If South Africa’s multiple crises are not addressed by government and continue to spiral out of control the possibility of a popular uprising by disillusioned citizens and radical opposition parties (such as the Economic Freedom Fighters) should not be ruled out either. This could plunge the erstwhile bastion of democratic stability into a perpetual state of emergency, which was a constant feature of South Africa under Apartheid rule.
Radical Economic Transformation and Proposed Expropriation Bill Significantly Heightens Risk
Continuous rumblings about ‘radical economic transformation’ and en-mass expropriation of land and property also continue to place the country and international investors on edge. The country has slowly, but surely shifted into the high risk category. The imminent adoption of the proposed Expropriation Bill [B23-2020] in 2021 is likely to be an explosive event on South Africa’s political calendar. The purpose of the Expropriation Bill is to provide a common framework in line with the Constitution to guide the processes and procedures for expropriation of property by organs of state and to provide for instances where expropriation with nil compensation may be just and equitable. South Africa is facing a catch-22 situation in this regard. South Africa can no longer ignore the land question. The country faces a dark and ominous future if the vast majority of citizens remain lock in endemic poverty and landlessness. Failure to address land reform could be a potential powder keg for enhanced political upheaval in 2021, unless decisively addressed by government. Irrespective, the country’s economy is likely to suffer considerable knock-on effects as part of the government’s programme of radical economic transformation.
High levels of crime continue to be of concern in the country in spite of the constitutional provisions that South African citizens should be protected from all forms of violence, whether from public or private origin.
In an eyebrow-raising speech in early January 2021, ANC Deputy Secretary-General Jessie Duarte warned that South Africa without the ruling party cannot be imagined and that it could lead to a civil war. The Deputy Secretary-General did however not specific what exactly could cause the civil war if the ruling party was kicked out of power (Mavuso 2021). This ominous warning does however not portend well for a country that is already teetering on a political and socio-economic precipice.
Corruption has already threatened to further pummel the country’s already severely tarnished brand and reputation. The corruption quagmire has extended into the COVID-19 pandemic with reports being uncovered of massive PPE (personal protective equipment) procurement scandals. The dubious Covid-19 personal protective equipment procurement scandal – the bedrock of a leadership purge in the police’s Crime Intelligence Division – saw more than R1.1m channelled from a shadowy police slush fund to companies controlled by former SAPS police officers.
In the long-term the country is likely to face several proverbial ‘dormant risks’ that could undermine political and socio-economic security overall.
In late January 2021 the country was rocked to its very core after allegations of massive corruption within the State Security Agency (SSA) was revealed at the Zondo Commission of enquiry into State Capture. The State Security Agency governs South Africa’s intelligence services.
At the commission, on the second day of hearings related to the findings of the High-Level Review Panel into the SSA, transgressions of immense magnitude and criminality were touched on. The commission heard of startling amounts carted out of the SSA headquarters in Pretoria, particularly in December 2017. Most significantly, R9-billion in fixed assets were not to be found and that R125-million could not be accounted for in the 2017/18 financial year.[2]
Dr Sydney Mufamadi, chair of the High-Level Review Panel said that evidence had been provided that Zuma’s minister of state security, David Mahlobo (appointed in 2016), had signed receipts for around R80-million in cash, doled out between 2015 and 2017, collected from the SSA, and allegedly destined for Zuma’s use either personally or politically.[3]
Proceedings began on Tuesday with a statement by advocate Dumisa Ntsebeza, appearing on behalf of the Minister of State Security, Ayanda Dlodlo, who said the minister was apprehensive that evidence to be heard might compromise “national security.” Commission evidence leader Paul Pretorius countered that current SSA Acting Director-General, Loyiso Jafta, in consultation with the commission, had given assurances that the “legitimate interests of state security will be protected”.[4]
Jafta said there was no doubt that “there are moneys that left the agency for the purposes of funding political activity principally within the ANC, and intended to drill into the credibility of those who were not in the faction within the ANC”. Projects intended to “enhance the political fortunes of the ANC” were also embarked on by the SSA during election periods.[5] Jafta said over and above this there was clear evidence of executive overreach and that “manifestly unlawful or illegal instructions” had been carried out by the SSA. National security, said Jafta, had been compromised by the notion of state security and a coagulation of power around Zuma.
The latest revelations do not bode well for SA’s reputational risk that has already suffered severe blows since the commencement of the State Capture enquiry. Additionally the country’s intelligence services have been severely compromised which poses a major national security risk to the country as a whole. The political manipulation of the country’s security services could severely affect the country’s stability overall. Political infighting could also pose dangerous political risks in the run-up to the country’s 2021 and 2024 elections. It is apparent to see that South Africa is no longer a country of acceptable political risk, which could deter investors from engaging in much-needed business deals in the country in 2021. South Africa is at severe risk of political, socio-economic and security collapse.
Sources/References:
Bloomberg.2019. South Africa’s decline is the worst of nations not at war, 17 April, Businesstech, https://businesstech.co.za/news/business/311880/south-africas-decline-is-the-worst-of-nations-not-at-war/ [Date Accessed: 22 September 2020].
Mavuso, S.2021. SA without ANC could result in civil war, says Duarte, IOL News, 4 January, http://www.iol.co.za [Date Accessed 17 January 2021].
State Capacity Research Project.2017. Betrayal of The Promise: How South Africa is Being Stolen, May. Centre for Complex Systems in Transition, Stellenbosch University, Public Affairs Research Institute, University of the Witwatersrand, Development Policy Research Unit, University of Cape Town, & SARChi Chair: African Diplomacy & Foreign Policy, University of Johannesburg.
The Institute of Risk Management South Africa.2019. IRMSA Risk Report: South Africa Risks 2019, Fifth Edition. South Africa: IRMSA.
The Institute of Risk Management South Africa.2020. IRMSA Risk Report: South Africa Risks 2020, Sixth Edition. South Africa: IRMSA.
[1] State Capacity Research Project.2017. Betrayal of The Promise: How South Africa is Being Stolen, May. Centre for Complex Systems in Transition, Stellenbosch University, Public Affairs Research Institute, University of the Witwatersrand, Development Policy Research Unit, University of Cape Town, & SARChi Chair: African Diplomacy & Foreign Policy, University of Johannesburg.
[2] Marianne Thamm, 2021, Secret billions poured into State Security Agency to sustain and protect ‘Zuma regime’, claims Acting DG Loyiso Jafta, 26 January, https://www.dailymaverick.co.za/article/2021-01-26-secret-billions-poured-into-state-security-agency-to-sustain-and-protect-zuma-regime-claims-acting-dg-loyiso-jafta/ [Date Accessed: 30 January 2021].
[3] Ibid.
[4] Ibid.
[5] Ibid.
