Economy
South Africa's Ongoing Power Struggle: South African Struggle To Recover Its Dilapidated Economy And How Can They Seek India's Assistance?
South African President "Cyril Ramaposa" declared the country in a "State of Disaster" following the country's severe power crisis, which has lasted since last year.
President Ramaposa declared a state of disaster during his speech to the national address to the MPs in Cape Town on February 9, 2023.
The power crisis in South Africa is not relatively new, and it did not occur overnight. This has been going on for the last 15 years due to the government's adamant refusal to upgrade the existing grid and aging power plants.
Last year, the South American population experienced 200 hours of load shedding, while the South African population is experiencing the same load shedding every single day this year.
Eskom is the only power generation company in South Africa and this organization is under neck-deep debt of $26 billion or 465 rands. The reason behind this condition of this state entity is rampant corruption, loot, and poorly maintained infrastructure.
This organization is one of the most corrupt in the country, but the government is not trying to get rid of it because it provides jobs in two industries: electricity and coal, and it is the main source of red tape for the nation's political leaders.
South Africa used to be the most corrupt-free nation on the African continent, but its ranking has fallen in recent years due to an increase in political corruption and mismanagement in public sectors. However, its raking has recently improved slightly as governments crack down on political corruption scandals. The country's ranking was 72 in 2021, but it improved by two places to 70 in 2022.
Former President Jacob Juma's corruption scandals rock the country's political structure as well as its economy. The agencies discovered mismanagement of public funds during his tenure, and he was sentenced to prison for his sinful looting of the country's wealth.
The present President, Cyril Ramaposa, is not a pious person too. Recently, an investigation has been initiated against him by the standing committee on the matter of public accounts.
As a result, South Africa has been in bad hands for the last 8 to 10 years, which is why corruption is deeply ingrained in South African politics. Politicians are looting the country's wealth indiscriminately, which resulted in this severe crisis after the South African economy's return from the painful events of Covid pandemic.
This is having a negative impact on the country's economy; GDP growth is decreasing year after year, and the figure is getting even worse in this time of power crisis. In 2018, the country's growth rate was only 1.52%, then 0.3% in 2019, then negative 6.34% in 2020 due to covid, then 4.91% in 2020, and 3.5% in 2022, while other developing economies grew significantly.
How is the power crisis affecting South Africa's economy?
Power is everything in today's modern age, and a society without proper electricity means the country is still living in the medieval era.
Without electricity, people can not have anything. It will destroy every business of the nation and it will add more and more unemployed youth population in the already dilapidated society that will create more resentment against the government and this is the reason protests are a common day phenomenon in the life of South Africa's population.
South Africa's unemployment rate is now 35%, according to the International Monetary Fund, and it is rising by the day. Power has an impact on the country's healthcare as well: according to the Lacent Healthcare and Quality Index, South Africa's healthcare is ranked 119th out of 195 countries. With an increase in the number of sick people, South Africa is becoming a disease-ridden country. HIV used to be a common disease in South African society, and it has been largely controlled, but unemployment may push the number up.
The rate of poverty is also increasing at an exponential rate due to job losses. 40% of South African are still living under the poverty line. The issue of poverty has largely been attributed to the high rate of unemployment of the population of the country.
Due to the increasing unemployment rate, the South African population is living under the insecurity of corruption and different kinds of crimes; the most commons are rape, carjacking, stealing, and murder.
Racism is also on the rise in South African society, which was once divided the nation on the basis of skin color. The great mass leader, Nelson Mandela, emerged out of the anti-apartheid movement and it is brewing these days because of unemployment. Xenophobic attacks killing over 300 blacks in the state in the past few years. Racism is increasing inequality and dividing South African society into black and white, rich and poor.
Solutions to make the South African economy strong again:
When Africa's most industrialized and resource-rich country faces a power crisis, it must reconsider its policy.
The first step is to change the country's laws governing the economy and law and order. To improve its economy, it must enact stricter legislation. People will feel pain at first, but it will improve the country's wealth as well as the citizens' lifestyles.
The second they have to do is, immediately privatize the State-owned Eskom power generation and distribution company to improve the country's current account deficit, the balance of payment crisis, and per capita income of the country.
Following that, they must work towards the nation's technological advancement by implementing appropriate infrastructure for entrepreneurs and FDI investment in the country.
South Africa is the world's largest reservoir of diamonds and other precious metals, which is why they have to utilize their resources properly and efficiently to increase state revenue.
Lastly, they have to promote skill development to reduce the unemployment rate and additionally they have to improve their healthcare infrastructure.
How India Can Help South Africa?
South Africa has to move quickly and eradicate the corruption from the country's political infrastructure. Due to the rampant corruption, South Africa's two huge coal power plants, Kasile and Medupi are still not running at full efficiency. These two power plants were approved in the 2000s, but they have been beset by delays, cost overruns, and technical failure.
South Africa is still developing and it is part of BRICS, one of the most powerful organizations in the world, which is why they need to seek help from other partners of BRICS.
Among the BRICS members, the Indian economy is growing at an exceptional rate and only India can help them in this volatile geopolitical environment.
The historical relationship between India and South Africa dates back to the time of Mahatma Gandhi, who practiced law in South Africa and fought for the people of South Africa until he left the country in 1915.
India is one of the most technologically advanced nations on earth and it is also harnessing green energy from different sources; India is the 3rd largest producer of green energy in the world.
If South Africa is willing to abandon conventional coal, India may be able to assist them in producing green energy efficiently, thereby resolving the country's current account deficit for the foreseeable future. South Africa must promote lithium-ion power vehicles to compensate for the country's balance of payment crisis, and India is the master of this technology. Since its inception, Indian companies have been producing these vehicles.
South Africa should link its currency with Indian currency, which is already in 35 countries, this will also resolve its forex reserve crisis, at least for the time being.
South Africa has to take the action right now otherwise, their economy will go bankrupt like the economies of Sri Lanka and Pakistan.
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