The influence that a country’s political climate has on its economic performance, and vice versa, is an ever-changing dynamic. At times, an economy is able to ride out domestic political tensions. In other instances, the politics of the moment can have a disproportionately strong influence on a country’s economic fortunes, or misfortunes.
In a recent article published by Project Syndicate, PIMCO CEO Mohamed El-Eria argues that close and defining linkages between politics and economics are likely to persist in 2013. In some territories, politics will be the main driver, while in others the economics of the moment will drive the politics.
El-Eria offers three scenarios for how politics and economics could interact nationally and globally during 2013 and beyond. The first is where good economics and effective politics provide the basis for a growing and more cooperative global economy. The second is where bad economics interact with dysfunctional politics to ruin the day. His last scenario is one where the world muddles through, with no clear results or direction.
It could be argued that, during 2012, South Africa straddled the second and third scenarios outlined.
The toxic internal politics of the African National Congress (ANC) in the run-up to its December elective conference, together with economic policy uncertainty, weak leadership, ineffective service delivery, corruption and, most significantly, the brutality that unfolded near Lonmin’s Marikana operation in August, cast a pall on the year. Yet the economy ‘muddled’ through, mostly on the positive inertia provided by South Africa’s increasingly fatigued private sector.
That said, the politics of 2012 will no doubt exact a toll eventually, with South Africa’s image as a stable and enticing investment destination, as well as the gateway to the rest of Africa, having been severely damaged.
Those negative mega political themes more than over- shadowed some real progress in the areas of renewable energy, infrastructure coordination and some welcome (albeit too few) pushbacks against gratuitous instances of corruption.
With Mangaung finally behind us, it’s surely time to build on these limited stories of success and focus on ensuring a sensible combination of ‘good economics and effective politics’.
That combination is also outlined, admittedly imperfectly, within the National Development Plan 2030.
The task now is to take that long-term vision and begin integrating it into the fabric of every government department. Whether the new ANC leadership team has the political wherewithal and patriotic desire to do so will determine whether or not South Africa can begin to undo some of the damage that the politics of 2012 did to the economy of 2013 and beyond.