The Baseline: Economic growth analysed
Updated: 21 hours ago
The baseline is zero. There has been a history that informs the decision paradigm; so positive, and some negative (that is, some adding value, and some destroying value). That is how we arrived at the baseline of zero.
We choose this point to identify the baseline, because it represents a break in history that is so severe, of such significance, that it represents a breach in history, a new start. However, some value drivers are dragged from the past into the future; some of which maybe be good and some bad.
What I am talking about, is the singular point in the South African history when the Apartheid system was demolished, and replaced with the Democratic Dispensation. The drivers I am referring to, is the country’s economy.
At this post I am not even going to argue the merit or demerit of the argument in itself. I am going to argue that, in April 1994, the former Apartheid government, in the form of the National Party, surrendered state power; and, with it, all the mechanisms of state, to the ANC. That was the moment Point Zero kicked in; inherently in it, are all the good and bad. This was the baseline zero.
From this point on forward, developed and progress implied improvement, and failure manifest in retraction and decline.
From now on forward it was entirely under the control of the new, post-Apartheid government’s to determine progress towards a developed economy. Yes, Apartheid’s ills may have put institutional brakes on the pace of improvement, but a component government should have facilitated positive improvement from the threshold zero, even if it has been slow growth caused by the negative impetus caused by the Apartheid government.
Germany and Japan had to build their economies after total destruction during the Second World War. Singapore had to do it from an infrastructure and fiscal base-line much worse than that inherited in 1994 from the Apartheid regime. So did South Korea.
The former National Party surrendered an infrastructure base to the new government that includes an extensive road network in a good condition, a massive rail network in excellent condition, a national electricity grid that produced 20% more than the demand (which include, at the time, a meaningful industrial base) and municipalities providing local services, in many areas, on par with the best in the world.
In 1995, South Africa had the 27th largest economy in the world, in the year 2000, it was the 30th largest, in 2008 the 32nd largest and in 2026 the 41st largest. The World Bank attributed this backward sliding to stagnant economic growth. This happened under the full control of the ANC.
In 1995, South Africa had the 27th largest economy in the world, in the year 2000, it was the 30th largest, in 2008 the 32nd largest and in 2026 the 41st largest. The World Bank attributed this backward sliding to stagnant economic growth. This happened under the full control of the ANC.
Over the period 1961 to 1994, the country’s economy grows by a median of 3,8% per annum. Over the 32-year period 1963 to 1993, the total accumulative economic growth was 97,8%. Over the period 1994 to 2025, the median annual growth rates were 2,55%, and the combined total economic growth over the 32-year period 1994 to 2025, 73,1%. From 2008 to 2025, the median annual economic growth was only 1,3%.
Over the period 1980 to 2025, the median annual unemployment rate was 22,2%, Over the period 1961 to 1993, the median annual unemployment rate was 14,8%, over the period 1994 to 2025, 23,3% and from 2008 to 2025, 25,8%.
South Africa's economic freedom has experienced a long-term decline since peaking around 2000, shifting from a moderately free economy to one classified as "mostly unfree". In the 2025 Economic Freedom of the World report, SA ranked 83rd out of 165 countries, with significant challenges in government size, labor flexibility, and legal system, although it maintains strong access to sound money.
South Africa's productivity growth has remained subdued and volatile for over two decades, characterized by modest labour productivity gains and declining multifactor productivity. This sluggish performance, including recent dips in 2025/2026, is driven by poor infrastructure, skills shortages, and low investment, hindering overall economic expansion.
South Africa’s score on the Global Government Effectiveness Index has reduce from 60,664% in 2012, to 40,57% in 2023. In reality, the country’s government is not only ineffective, but it is following a trend where government effectiveness is constantly deteriorating.
In 1979, the value of the Rand to the Dollar was 0,84. Since 1983, the international economic isolation of the country led to an exchange rate of Rand 1,12 to the Dollar. In 1994, in spite of a preceding decade of severe economic punishment of the South African state, The exchange rate was 3,42 to the Dollar. In 2025, it was 16,43 to the Dollar; after a period of 30 years completely under control of the ANC.
I can imagine that the immediate response will be that there are numerous factors in the international financial markets impacting on the value of the Rand. However, there is also no doubt that the underlying economic strength of a country's economy plays an important role. Nevertheless, I will accept the argument, and look at other indicators which influence the strength of an economy, the value of its currency, and its capacity to generate economic growth.
The value of the country’s currency is important to assess the strength of its economy, in comparative terms.
My argument is therefore that South Africa’s economic growth was weaker during the governance term of the ANC than during the base-line economic development it inherited. It has functioned and performed below the base-line. More than that; in terms of trends, the economy is on a downward spiral.
A country with the best rail - and road infrastructure was handed over to the new government. Eskom, the national energy provider, produced more electricity than needed by the country, including provision of energy to neighboring countries. Effective municipal administrations supported economic growth.
The post-1994 government had everything in its favor. It was the darling of the world. Development aid streamed in.
Yes, there were enormous development gaps to fill, and the need were, by far, the greatest in previously disadvantaged areas and communities. However, this argument does not take away anything from the base-line. That is, a government that performed well, would have addressed the gaps, without undermining the existing capacity to grow and expand.
Major developmental gaps included the racial discrepancies in the economy and society, caused by years of colonialism and apartheid. This included a lack of access to water and quality sanitation services, electricity connections and economic opportunities. To their credit, the post-1994 government did invest in comprehensive programs, and managed to provide basic services to communities previously excluded from it because of racial policies.
However, this expansion in access was accompanied by eroding of the existing institutional memory base, the country's scarce intellectual capital base, and the destruction of the country's infrastructure and industrial base.
Initially, economic policies followed a logic, capitalist path. However, from the start, the socialist ideology was very firmly established in the midst of the larger ANC alliance. Cosatu and the SACP were always sabotaging the mildly capitalist policies of the then government, including enormous internal resistance to the GEAR policy. By the later half of the 2000s, the leftwing ideologists gained dominance in the ANC, and the party returned to its socialist roots. More-and-more economic policies were introduced, which stripped the country of inventors and off scarce critical resources.
The Age of Transformation almost immediately started. In theory, this means pursuing the National Democratic Revolution. In practice, this turned into racial demarcation of the economy, and the pursued of unworkable economic policies, based on the socialist ideology. Also, the stealing and looting started very soon after the political transfer of power.
More than that, transformation policies loaded the private, - but especially the public sector with incompetent cadres, hired because of their ideological loyalty, and not their expertise. Innovation in the economy was fundamentally oppressed through the proclamation of business unfriendly rules and regulations. The only business model that gained acceptance, was business that run through the state, given government the opportunity to monopolize economic opportunities, and distribute it to cadres and tenderpreneurs.
Through the post-1994 period, so-called transformation policies were proclaimed and intensified. Every time these policies were introduced or reviewed, economic growth in the country suffered. It has been a major reason for the economic underperformance of the country, if not the main reason. Of these policies, the following were the main destructive ones: The Preferential Policy Procurement Framework Act, the Employment Equity Act, the Black Economic Empowerment Act and the Minerals and Petroleum Act.
Since 2008, these policies were gradually intensified, and then specifically the racial targets and the implementation frameworks linked to it. Since then, economic growth was, for practical purposes, non-existing.
The ANC and its leftist partners have destroyed the country's economy since it took over the levers of the state; because of its socialist and anti-Western ideological policy framework, and because of their racist so-called transformation policies.
Image source: 123RF
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