South Africans replacing government services

Renowned political economist Frans Cronje said that as state infrastructure fails, entrepreneurs build private solutions to mitigate the impact.

He shared his views on this privatising trend during a presentation at a State of the Nation event.

“Wherever the state retreats or starts to fail, what you see happening at a greater and greater scale is macro-level private entry to mitigate the consequences,” he said.

He cited the example of Transnet and the railways’ collapse, which led to a significant increase in road freight, thereby filling the gap.

Although road freight is far more expensive and did not fully solve the problem, it mitigated the immediate consequences.

Another example is Eskom’s decline, where South African households and businesses had to endure hours of load-shedding daily.

“The quantum of megawatts of solar power installed on rooftops follows exactly the trend line of Eskom’s power plants’ breakdown rate,” Cronje said.

He said this trend of private enterprises solving the state’s failures makes South Africa unique as a postcolonial emerging market.

“Moments of real trouble and great crisis don’t force the evacuation of the bulk of the capital base and the entrepreneurs,” he said.

He added that many South Africans live in enclaves, also called citadels, within the country. This keeps people in the country rather than leaving.

This, along with the country’s centrist values, an electoral system that works, a moderate ruling party, and a prudent fiscal system, gives Cronje hope.

Although he said it is uncertain whether the country will fail or excel, there is a case to be made that it can take off.

“With the hand of cards we’ve been dealt, it’s actually quite easy to play to great success,” he said.

South Africans’ use of government services has declined

PwC’s South African Economic Outlook 2024 report showed that citizens’ use of government services has declined across the board from 2019 to 2023.

It explained that the state is unable to deliver the quantity and quality of services it once could, which forced citizens to use private companies.

These private services, which the state used to provide but is now failing at, include security, education, and healthcare.

One of these issues is the deterioration of public services as the state’s capacity has withered away due to corruption and incompetence.

PwC said the country’s public sector is overwhelmed and unable to deliver the quantity and quality of services it previously could.

The degradation or failure of key state institutions, from hospitals to the police and education, has severe implications for the economy and well-being of South Africans.

In response, South Africans are turning away from government-run institutions and are simply not engaging with the public sector.

The main gripe from South African companies and households is that they are forced to pay for government services which they do not use.

Investec Corporate and Investment Banking’s head of infrastructure, Bukiwe Pantshi, said many businesses and citizens resist payment for services they don’t receive.

This resistance, she said, was a predictable response to the state’s unreliable or poor-quality services.

In addition, expecting continued payment for dysfunctional services undermines trust and weakens the government’s revenue base.

She said the crisis has become an “intensely personal and economic issue, shaping how households live and how companies operate”.

Pantshi said there was a lack of accountability for municipalities that are failing in their constitutional duty to provide basic services.

The solution to this, she said, lies in collaboration among the government, businesses, and South African citizens.

However, this collaboration cannot proceed until the appropriate accountability measures are in place. Without accountability, South Africa risks perpetuating failure.