For the 20 years after the end of apartheid in 1994, South Africa coasted on goodwill and modest economic growth. For decades, it had been Africa’s most wealthy and developed country, and with the shackles of the despised apartheid regime lifted, South Africa seemed destined for great things. The past decade, however, has given way to an economy deteriorating under the weight of crushing regulation and violent protests triggered by increasingly bleak future prospects.
Early in South Africa’s transition during the 1990s, Nelson Mandela’s African National Congress (ANC) defied the odds and, through a negotiated settlement with the ruling white-minority National Party, steered South Africa to democracy with relative peace and stability. Pundits had long predicted a civil war in South Africa, as recent history for other nations in transition would have suggested. Colonial Rhodesia went through a brutal civil war in its transition to democratic Zimbabwe, and South Africa’s history of loathsome apartheid policies seemed to position the country for a similar or perhaps worse fate. Fortunately, this was not to be. Under the leadership of Nelson Mandela’s ANC, the country turned from pariah status into a liberal democracy built on the rule of law and constitutional equal rights for all.
This transition to democracy, along with the violence that had preceded it, initially damaged the country’s economy. By the beginning of the new century, however, some stability had formed and the economy grew at an average of 4.5 percent per year between 2002 and 2008. There were crises to overcome — including poverty, poor education, housing, corruption, crime, and the spread of AIDS — but South Africa seemed to be making a significant impact in these areas. The fact that it hosted the FIFA Soccer World Cup, one of the world’s largest sporting events, in 2010 also suggested that South Africa had achieved a new level of prosperity and success and was ready to move onward and upward toward a fully developed economy.
During the first half of the 2010s, however, South Africa had lost its shine. The Economist sounded warning bells for international readers in 2012, writing that “South Africa is sliding downhill while much of the rest of the continent is clawing its way up.” Other African nations had begun rising out of poverty, with development and growth flourishing, but South Africa was no longer on its upward climb. Booming giant Nigeria had usurped the prized position of “Africa’s Biggest Economy.” South Africa couldn’t compete with the 170 million strong West African juggernaut, and was content with its consolation status of being “Africa’s Most Sophisticated Economy,” in recognition of its developed infrastructure and political stability.
Even South Africa’s economic sophistication has come under question during the past few years, though. State electricity provider Eskom has been at the center of a severe and ongoing crisis, with power outages that disrupt schools, businesses, and private homes now a daily occurrence for the nation. The deliberate, controlled power outages are a desperate tactic from Eskom, because it cannot meet the demand for power and fears a nationwide grid collapse unless it rations electricity. South Africa’s illusion of stability was shattered in the wake of xenophobic attacks across the country that began in 2004 and had received worldwide attention and condemnation by 2015. This brutality showed that South Africa could still suffer from the types of violent protesting and insecurity that plague other African nations. The fact that these riots occurred in busy areas of major cities also highlighted South Africa’s inability to protect citizens and foreign residents in the country.
Although South Africa has seen the growth of an affluent black middle class since the end of apartheid, unemployment hovers stubbornly between 20 and 40 percent, depending on which measure is used. Young people have little chance of finding employment or any type of financial security. This has led to growing and understandable anger at the current economic system. Radical policies are increasingly seen as solutions to unemployment and poverty, and calls for a transformation of the economy are accompanied by violent protests. The status quo is not sustainable.
What is needed to avert the coming social crisis and set South Africa back on the road to prosperity? The central fact is that the market has not exploited South Africa’s poor. It is their exclusion from markets as a result of bad policy that is at the root of the current crisis. Ultimately, it is entrepreneurs who will make the difference. Entrepreneurs are the creators of innovative solutions for problems, the creators of wealth, the creators of jobs and the engine that drives the economy. However, excessive regulations, outdated policies, and state monopolies inherited from the apartheid regime hamper their efforts in South Africa.
Ineng, a non-profit association that promotes public policies to enable entrepreneurship, was formed with the primary aim of running the “Entrepreneurs in Public Policy” (EPP) program. EPP is intended as a non-partisan, independent platform for entrepreneurs to speak out against unjust laws and regulations that hold them back from achieving success, and from creating the wealth and jobs that South Africa so desperately needs. The policy prerequisites that enable entrepreneurship also enable all business, as shown in the Heritage Foundation and Wall Street Journal’s Index of Economic Freedom. Entrepreneurs in South Africa enjoy a broad cultural credibility that larger businesses do not, so their voices are especially crucial in transcending the political and ideological spectrum while addressing the key issues at stake in a free society.
In a short space of time, Ineng’s EPP program has brought together a variety of entrepreneurs and members of civil society with the common goal of supporting entrepreneurship in South Africa. These have included young leaders from the World Economic Forum, innovative businesspeople recognized by Forbes magazine, and grassroots entrepreneurs who have built major companies from scratch. EPP’s next event will take place at South Africa’s Parliament, inviting small business owners and thought leaders to meet directly with members of Parliament who are focused on small business development.
With entrepreneurs speaking out for their freedom to do business, supported by the rule of law and the Constitution, South Africa’s future trajectory can be shifted — not only through innovation and entrepreneurial trade, but by influencing public opinion and policy in the first place, thereby creating the enabling environment that allows the institutions of a free society to flourish and the people to once again prosper.
Written by Michael Howe-Ely.
Michael is head of marketing at Ineng.