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SOUTHERN AFRICA



South Africa

Sekondi Accra

The 2010 FIFA World Cup was a success for South Africa, showcasing an impressive an impressive capacity to exhibit one of the world's grandest events with competence and verve. FIFA earned it largest profit ever from a World Cup, but for South Africans the affair was expensive. The cities that hosted the matches are now trying to recoup the massive debt they incurred building new infrastructure and are determined to pursue with zeal in 2011.

Transnet transportation workers secured an 11% wage increase during the World Cup, as the government did not want a strike to ruin the event. Workers at energy parastatal Eskom enjoyed similar leverage and negotiated a 9% deal. Other public sector workers who went on strike in August 2010 ended up with 7.5%, 1.1% less than they wanted but still higher than the rate of inflation. Many public sector workers are unhappy with the settlement and accuse their leaders of selling out.

Aside from the money, the ostentatiousness of the politically connected elite is inciting worker anger. The difference in wages between senior managers and other workers in the public sector has increased sharply in management's favor in recent years. This is certain to be a point of contention in the political debates of 2011.

Closely connected to this is the issue of black economic empowerment (BEE), which has distributed huge benefits in a highly unequal and untransparent manner. The South African Communist Party (SACP) now attacks BEE for distracting government attention away from the potential developmental benefits that it reckons the state could secure from private capital. Recent mining deals have significantly enriched at least two members of President Jacob Zuma's family, giving rise to a new term - Zuma economic empowerment or ('ZEE'). The president has called the criticism scurrilous, but it comes from, among others, the Congress of South African Trade Unions (Cosatu) and the African National Congress Youth League (ANCYL). They were once his closest allies and Zuma will need them if he hopes to secure a second term.

Local elections are due to held between March and June 2011. whatever the current disagreements between the ANC and its alliance partners, talk about the SACP going it alone or Cosatu creating a new party is unlikely to affect the three campaiging as a block, at least in the near future. It will be the usual victories for the African National Congress (ANC) in most provinces, though its control over Gauteng may weaken to the advantage of the opposition Democratic Alliance (DA). The DA, led by Western Cape Premier Helen Zille, will further consolidate its hold on the Western Cape, helped by the adsorption of Patricia de Lille's Independent Democrats.

Popular perception that the ruling elite is materialistic and uncaring has not translated into growing support for other opposition parties such as the breakaway Congress of the People (COPE), which has beeb damaged by disagreements between founders Mosiuoa Lekota and Mbhazima Shilowa over leadership of the party and the allocation of funds. The new party did not gain any political ground against the ANC in the National Assembly throughout 2010. If it fails to resoleve its leadership crisis before the local elections, it will be annihilated, to the ANC's joy, particularly in the Eastern Cape where COPE has posted its best scores.

President Zuma will try to keep the succession debate within the ANC to an absolute minimum. A cabinet reshuffle in late October 2010, ostensibly to improve service delivery, appeared more political than consequential. The president seems eager for a second term and intends, like Thabo Mbeki before him, to use the ANC tradition of deployment rather than campaigning to enhance his chances. And yet, just as the strategy did not work for Mbeki, it seems unlikely to do so for Zuma either. Many in the ANC particularly in the ANCYL, are determined to raise the succession issue, intending at the very least to secure ex-ANCYL president Fikile Mbalula, now sports minister, as the party's secretary general in 2012.

Media freedom will remain a sensative issue throughout 2011, as the government and the ANC decide on how to follow through on the resolution made at the ANC's 2007 Polokwane conference to create a media appeals tribunal. The move is supported by many in the ANC, including the president, who consider themselves to have been unfairly treated in the media and who are untroubled at the prospects for the country's democratic reputation if party appointees are permitted to use a tribunal to silence and punish the press. The proposed tribunal and a draft protection of information bill, which would drastically curtail media access to government documents, have galvanized the country's liberal intelligensia against those in power. Although it is taking a hardline stance, the government seems likely to compromise on some of the issues in 2011.

The economy is recovering slowly, with analysts forecasting that real GDP growth will rise from 3% in 2010 to 3.5% in 2011. This will provide some relief, but the growth rate seems unlikely to have much positive impact on unemployment which remains high at between 25% and 45%, depending on how it is calculated. In October 2010, the government adopted a growth plan intended to provide 5 million jobs in a decade but it was unclear these were to be created.

Consumer demand is rising and has already started to increase manufacturing. The strong rand keeps manufacturing costs down but exports more expensive. Hiring is up in the sector, but not dramatically so, and certainly not enough to absorb new workers into the job market.

Agricultural production in 2010 was extraordinary, despite much negativity, and there is a good prospects of abundant harvests in 2011, too. The impact of agricultural growth will almost certainly be compounded by firmer international grain prices. Higher prices will make it difficult for South Africa's neighbors to purchase much of its crop, but China will probably absorb the excess. This will work well for South African farmers but could create political tensions in the region, which may necessitate the stockpiling of some surplus crops for regional consumption, possibly via the Southern Africa Development Community.

Average inflation may trend slightly upwards in 2011 to over 5%, but will be contained by the continued strength of the rand against major currencies. Low global interest rates make South Africa's base lending rate of 6% stand out and encourage the inflow of money. The Reserve Bank may reduce lending rates by 1% in 2011 but will be cautious of going further for fear of increasing South African's penchant for credit. A rate reduction may decrease the rand's value against major currencies, but probably not by much, and the currency is likely to finish 2011 at much the same exchange rates as when the year began.

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The Republic of South Africa maintains an embassy in the United States at 3051 Massachusetts Avenue NW, Washington, DC 20008; tel. (202) 232-4400.
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