BNC#6: Frans Cronje – Don’t despair, big opportunities to surface post-Election’24

In his keynote address at the BizNews Conference in Hermanus, SRF Chairman Dr Frans Cronje shed light on South Africa’s evolving political landscape, emphasising the need for strategic analysis over simplistic labels like “positive” or “negative.” Cronje delved into the country’s economic trajectory, challenges faced by Eskom, and shifts in political power dynamics, including the upcoming election’s potential outcomes. Despite gloomy outlooks, Cronje highlighted South Africa’s resilience, with private sector interventions, moderate public opinion, and the advantages of geostrategic positioning offering avenues for growth and stability. Cronje’s keynote address encapsulated his insights on navigating South Africa’s complexities while remaining cautiously optimistic about its future.

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An edited transcript of the keynote address delivered by Dr Frans Cronje at BNC#6 in Hermanus ___STEADY_PAYWALL___

Alec mentioned we were negative. In all those years of warning the country about potential troubles, we emphasised that terms like negative and positive don’t apply to high-quality strategic analysis. Let’s dispense with those notions for today. What truly matters is our ability to anticipate events by analyzing hard trends, and data, and understanding policymakers’ perspectives. Over the past 15 years, we foresaw Eskom’s challenges and understood the implications for growth, stability, and protest levels under Mr. Ramaphosa’s leadership reluctance to reform.

The methodology I share today echoes what Bill Johnson discussed earlier. We are witnessing a normal transformation that will likely define life in our country for generations. Historically, powerful political actors dominated, setting rules and shaping outcomes. This era is ending, and we hope it never returns through populism or authoritarian rule.

Let’s delve into some numbers. From 1994 to around 2007, our economic growth was notable, job creation doubled, social welfare grants increased, and living standards improved significantly. However, this trajectory shifted after the global financial crisis and internal political changes, leading to stagnation, rising unemployment, and declining living standards.

The myth that the ANC could govern perpetually has been debunked. Poor governance leads to swift negative political consequences, as seen in the changes over the past two decades. In 2004, the ANC and its allies held around 80% of the votes, but the landscape has shifted dramatically since then.

In the upcoming election, the ANC and its allies won’t reach 60%, while the DA and its allies will touch 40%. This shift from 80% to 60% versus 40% is a rapid political change. Urban areas show even faster shifts, with the DA surpassing the ANC in numbers. Rural areas, though still strongly ANC-supportive due to historical ties, are gradually shifting as newer generations prioritize present challenges over past experiences. The mortality rate also impacts this shift, potentially reducing ANC support to 30% or even 20% in the near future.

This evolving political landscape demonstrates the system’s effectiveness in responding to governance challenges. Rather than relying on external forces, our political system naturally prompts reform movements when needed, offering a degree of stability uncommon in post-colonial emerging markets. Avoiding violent upheavals, we’re fortunate to have a functional albeit chaotic political environment.

Additionally, as the state’s role recedes, private sector contributions, especially in energy production, are stepping up to mitigate challenges like Eskom’s struggles. While not a complete solution, private sector involvement helps fill gaps and lessen economic impacts.

Looking at South Africa’s transportation trends, we see a divergence between railway freight decline and private road transport increase, though not a long-term solution, it does mitigate challenges. An important aspect of a modern state is the monopoly on force, which has shifted significantly over the years. In 1994, there was roughly one policeman per 360 people and a similar ratio for security guards. Now, it’s closer to one policeman per 430 people, but one private security officer per 110 people.

This shift indicates a partial surrender of the state’s monopoly on force, which can lead to various outcomes. State failures often invite private sector interventions, albeit on a smaller scale. In potential post-election chaos, private actors may find opportunities amidst political disagreements.

Additionally, public opinion in South Africa is generally moderate, contrary to sensationalized media narratives. A large majority supports policies like scrapping racial criteria in procurement, reforming labour regulations for job creation, and devolving authority to lower levels of government. There’s also growing acceptance among ANC and DA voters for collaboration, indicating a pragmatic approach to governance.

In summary, South Africa’s political system functions, private sector interventions fill gaps, and public opinion remains pragmatic and sensible, steering clear of radicalization seen in other conflict zones.

If the ANC faces defeat, the temptation to print money to create inflation and exploit resulting desperation could arise. This tactic could lead to populism and circumvention of constitutional norms to cling to power. However, despite some fiscal adjustments, the government has not resorted to drastic measures like massive printing. There’s immense corporate cash in South African banks, approaching 1.5 trillion rand, indicating a capital base for economic recovery without significant tax hikes.

Furthermore, South Africa’s geostrategic position holds potential leverage. The country’s location in the South Atlantic Ocean becomes crucial amidst global power dynamics, especially regarding Chinese naval expansion. Utilizing this strategic advantage and tapping into existing resources can contribute to rebuilding efforts.

Additionally, South Africa benefits from enclave structures and a skilled middle class that hasn’t entirely left. Technology and offshore investment options provide a buffer against complete economic collapse, allowing for potential wealth repatriation.

In conclusion, while challenges exist, the country’s position is more resilient than commonly portrayed. The notion of an imminent collapse is unlikely, and the current situation, while complex, presents opportunities for strategic economic and political manoeuvres.

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*The above transcript has been condensed and paraphrased for brevity and clarity, and may not capture the full context or nuances of the original speech delivered by Frans Cronje at the Biznews conference, BNC#6.