In April 1994, almost 30 years ago, Nelson Mandela was elected as the first black president of South Africa. The hopes at the time went beyond developing a representative political process, and included the idea that policies of inclusive growth would raise the standard of living for those who had been excluded. How is that economic promise working out? A research group at Harvard’s Growth Lab spent two years researching the issues, and has now published its discouraging findings in a report titled “Growth Through Inclusion in South Africa” (November 15, 2023). The authors are Ricardo Hausmann, Tim O’Brien, Andrés Fortunato, Alexia Lochmann, Kishan Shah, Lucila Venturi, Sheyla Enciso-Valdivia (LSE), Ekaterina Vashkinskaya (LSE), Ketan Ahuja, Bailey Klinger, Federico Sturzenegger, and Marcelo Tokman.
The report states that for the first decade or so after 1994, South Africa’s economy performed reasonably well; since then, not so much. The report includes graphs showing annual growth rates for South Africa compared with the rest of sub-Saharan Africa and the upper-middle income countries of the world. It also shows South Africa’s real per capita GDP since 1994, demonstrating reasonably rapid growth for the first decade, and no growth since then. In fact, the growth shown in the figure has only been keeping pace with population growth since 2004 or so. As the report states, income per capita has been falling for over a decade, unemployment is high, and poverty levels have risen. Many cities are failing to connect people to productive opportunities, and rural areas remain extremely poor. The report suggests that collapsing state capacity and spatial exclusion are the main causes of South Africa’s economic failure.
The report provides a detailed analysis of these issues, while also offering an agenda for change. It suggests that South Africa could potentially benefit from a shift to carbon-free and low-carbon electricity production, as well as rebuilding its comparative advantage in cheap electricity. However, overall, South Africa’s economy is on a disheartening path, with issues that are hard to address and a government and political system that hasn’t been up to the task in recent decades.
