On Mbeki: No man can step into the same river twice

In recent appearances with the Thabo Mbeki Foundation, and on his new Common Sense platform, Frans Cronje has floated a rather compelling narrative in service of national unity – that Thabo Mbeki’s presidency was an almost unequivocal success.

For the purpose of this discussion, Mbeki’s handling of the AIDS crisis and his “quiet diplomacy” toward Zimbabwe are irrelevant. It’s the economy that’s important. If bread-and-butter issues are literally your most important question, as it is for almost every South African, moral questions become marginal to most voters.

Cronje characterises the 15 years of Thabo Mbeki’s effective control (1994–2009, including Mandela’s figurehead presidency) as South Africa’s sole period of unequivocal post-apartheid success, driven by the Third Way macroeconomic framework of GEAR and disciplined fiscal management.

The statistics certainly are impressive. Real GDP growth averaged 3.6% annually from 1994–2003 and 5.1% from 2004–2008, against 1.6% under Zuma and 0.9% under Ramaphosa. Inflation-adjusted per-capita GDP (in constant 2015 rands) rose from R48,000 in 1994 to R72,000 in 2008, a 50% increase.

National debt declined from 49% of GDP in 1994 to 23% in 2008, leaving a budget surplus of 1.3% of GDP in 2007/08. Gross foreign reserves rose from $3 billion in 1994 to $35 billion in 2008. Tax revenue climbed from 24.5% to 29.5% of GDP, broadening the base from 1.7 million individual taxpayers to 5.9 million. FDI inflows averaged $4.5 billion annually from 2005–2008 and peaked at $9 billion in 2008.

This was felt in the job market. Formal-sector employment increased by 5 million, from 9.6 million in 1995 to 14.6 million in 2008, and non-agricultural formal employment expanded by 2.8 million between 2001 and 2008 alone. Labour-force participation rose from 48% to 58%. Some called this “jobless growth”, but that is because of a statistical artefact. The unemployment rate increased from 20% to 23% despite absolute job creation exceeding population growth, because the figure measures people actively seeking work, not those who have given up. On the expanded definition, we are approaching 50% of the working-age population today.

Mbeki really was Mr Delivery too. Households with electricity access rose from 58% in 1996 to 83% in 2009, piped water from 60% to 86%, and formal dwellings from 64% to 77%. Social-grant beneficiaries expanded from 2.4 million in 1994 to 12.4 million in 2008, reducing the lower-bound poverty headcount from 53% in 1996 to 47% in 2008. The black middle class grew from 1.7 million adults in 2004 to 4.2 million in 2008, while black per-capita income increased 38% in real terms from 1996 to 2008, versus 12% for whites.

Cronje contends these outcomes refute left-wing claims of “jobless growth” or neoliberal failure, demonstrating instead that market-oriented policy, fiscal prudence, and commodity leverage delivered the fastest income convergence and living-standards gains in democratic history. Subsequent ideological deviation after 2009 reversed all key ratios, with employment stagnating, debt-to-GDP tripling to 73%, and growth collapsing. The Mbeki interregnum, on the data, remains the unrepeated high-water mark.

Windfall

But there are some problems with this picture. Yes, it was a great time to be in South Africa. Racial tensions were at an all-time low, the future looked bright, the World Cup was around the corner, and poverty was being eliminated through welfare and service delivery.

But effectively, this boom was entirely the result of global market conditions.

Much of South Africa’s performance from 2003 to 2008 was due to a massive boom in emerging-market investment, as the Western financial system became irrationally exuberant. As bankers leveraged American housing markets, capital was also dumped into rapidly growing emerging markets, taking a punt on almost anything with a price tag.

That boom was pulled back after 2007, and bailout money briefly bounced into EU bonds and Africa. Africa offered high growth, the EU stability. When the EU bond market slumped in 2011, a large share of capital flowed back into Africa.

When comparing global capital flows to South Africa’s GDP growth, the patterns are identical. South Africa’s growth was heavily driven by international trends, and it fared worse than the global average. It was not treated like a typical Sub-Saharan economy. In fact, capital flows for Sub-Saharan Africa were inverted during this period.

The observed patterns more closely match those of emerging markets and developing economies.

The most depressing comparison comes when South Africa is set against other emerging markets during this period. South Africa’s FDI intensity was effectively identical to broad emerging-market indices that included it, and noticeably below the BRIC basket that investors actively overweighted.

For comparison, the N-11 includes Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, the Philippines, South Korea, Turkey, and Vietnam. In 1994, Vietnam was the poorest of these at $200 GDP per capita. Bangladesh was at $240. Vietnam is now over $4,500 per capita, while South Africa went from $3,000 to $6,000. Nigeria, the worst performer on that list, still more than tripled GDP per capita despite doubling its population.

A transient high

Moeletsi Mbeki has long poked holes in his brother’s cloth-of-gold reputation. While acknowledging fiscal prudence such as debt-to-GDP falling to 23% by 2008, he argues the era’s policies sowed enduring inequality and stagnation, prioritising elite enrichment over broad-based development.

Formal job growth favoured services over manufacturing, which halved under GEAR, destroying textiles and artisan training through college closures. The boom was propelled by privatisation and unsustainable private debt, not innovation or industrialisation.

Gross Fixed Capital Formation rose from roughly 18% of GDP in 1996 to about 20% by 2006. But much of this investment went into malls, office parks, and suburban housing rather than factories. Manufacturing stagnated, unemployment remained high, and labour productivity fell as wages outpaced output.

Much recorded investment merely replaced decaying apartheid-era infrastructure. Corrupt public-private partnerships inflated figures, while net investment after depreciation was often close to zero. Mining investment depleted natural capital, sometimes producing negative genuine savings.

Property churn from white and business flight destroyed capital in inner cities while rebuilding occurred elsewhere. This socially wasteful churn appeared as healthy investment in national accounts.

How much this accounts for is uncertain, but it cannot be negligible.

Cancer is slow

Every single bad thing about modern South Africa can be traced to systems established by Thabo Mbeki.

BEE deterred foreign investment by mandating equity transfers to politically connected partners, branding South Africa a high-risk destination. Employment equity hollowed out skills and politicised workplaces.

The civil service was purged, state capacity gutted, and cadre deployment formalised in 1997, prioritising loyalty over merit. This destroyed institutional independence and laid the groundwork for state capture.

Mbeki’s government blocked Eskom from building new power plants despite warnings, triggering load-shedding from 2008 onward. The delay turned a manageable shortfall into a structural crisis costing billions annually and crippling the economy.

He used intelligence agencies to target critics, centralised power in the presidency, politicised the civil service, and brokered the corrupt Arms Deal. Oversight was neutered, justice institutions weakened, and figures like Jackie Selebi elevated.

Mbeki inherited one of the world’s most capable bureaucracies and instead hollowed it out to enrich a politically connected elite.

BEE corrupted both black partners and white businesses, entrenching a culture of complacency and rent-seeking.

The Rural Protection Plan was dismantled, leading to surging rural crime, while crime statistics were suppressed.

The Arms Deal and its cover-up fractured the ANC and crippled the justice system. It paved the way for Zuma, whom Mbeki could not credibly oppose.

Education and healthcare were left broken, placing a dead weight on millions.

Easy come, easy go

In the final analysis, Zuma was no better and no worse. Both destroyed institutional integrity. But Zuma at least attempted infrastructure development, while Mbeki deliberately hobbled it to court transatlantic capital.

Mbeki’s growth was evanescent. When the investment dried up, everything else followed. The vessel into which that capital flowed no longer exists, and the world itself has slowed and aged.

Returning to fiscal discipline alone cannot revive what was dismantled.

So why praise Mbeki? He was good at accounting and public speaking. That, it seems, is that.