South Africa

Government losing control of South Africa

The government is losing control of South Africa, with declining quality of services and institutions resulting in increased political instability and violence. 

This was revealed by financial services firm PwC in its South Africa Economic Outlook for March, which focused on the country’s stagnant productivity. 

The firm said quality institutions enhance governance and business confidence, resulting in increased investment and, thus, economic growth. 

Since 2018, South Africa’s political institutions have declined in quality, with their performance deteriorating across four of the six Worldwide Governance Indicators (WGIs). 

Institutional quality captures how institutions enhance incentives, governance, and protection of property rights. This fosters business confidence, entrepreneurship, and innovation, PwC said. 

The firm said the government’s poor financial health continues to reduce the quantity and quality of public service delivery. 

In its South African Economic Outlook 2024, released earlier this year, PwC outlined the major challenges facing businesses in the country. 

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 that 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 latest Governance, Public Safety and Justice Survey published by Stats SA found that the share of adults using public hospitals in the 12 months declined 6.3% from 19.9% in 2019/2020 to 13.6% in 2022/2023. 

This decline can be seen across all public sector services, including relatively well-run public institutions such as SARS. 

The declining quantity and quality of government services has created a downward spiral, with South Africans losing trust in public institutions and thus engaging with them less and less. 

The World Bank tracks six WGIs – 

  • Voice and accountability
  • Political stability and lack of violence
  • Government effectiveness
  • Regulatory quality
  • Rule of law
  • Control of corruption.

Under the current administration of President Ramaphosa, South Africa has seen improved assessments for voice and accountability as well as the rule of law. 

Conversely, the country has seen deteriorated assessments for the other four aspects of institutional quality. 

Two of these aspects – violence and corruption – divert state resources from other important spending priorities. 

  • Political stability and lack of violence: A long-term upward trend in protest risk was exacerbated by the July 2021 unrest in KwaZulu-Natal. The event showed the social risks embedded in our society and the vulnerabilities to stability created by unemployment, poverty and inequality.
  • Control of corruption: South Africa’s position on Transparency International’s Corruption Perceptions Index (CPI) – reflecting perceptions on the pervasiveness of corruption in the public sector – deteriorated from 73rd ranking in 2018 to 83rd out of 180 territories in 2023. 

Political instability, weak government effectiveness, regulatory burden and corruption all reduce the efficiency of public sector institutions and the support that these provide to labour and firm productivity, PwC said. 

As noted above, well-performing institutions support productivity. Conversely, underperforming government institutions discourage business activity and innovation that could productively employ more people.

South Africa’s declining institutional quality can be seen in the chart below, courtesy of PwC. 

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