Governance of Africa's Resources Programme
This paper explores potential explanations for South Africa’s economic underperformance since 1994. Despite the country’s substantial subsoil mineral wealth endowment, the development promise typically associated with such wealth has not been realised. The democratic dividend has produced some level of macroeconomic stability, but large fault lines have emerged, especially since the 2008 financial crisis. The paper examines whether ‘Dutch disease’ explanations can account for weak manufacturing performance, but finds that they are inadequate. Given mining’s continued importance to the economy, the paper explores whether mineral resources could be better leveraged for inclusive development. It concludes that more coherent institutional choices are required if this is to come to fruition. Currently, the mineral rights regime, traditional leadership legislation and industrial policy are not sufficiently integrated to give effect to the ambitions of the National Development Plan as they pertain to the potential contribution of mining to the economy. Mineral rents could provide the impetus for upstream technology and product development, but the mining industry first has to generate growth. Beyond mining, economically inefficient visa regulations, electricity shortages and a general lack of policy clarity all contribute to South Africa’s weak economic performance. Addressing these factors would attract the growth-inducing investment required for sustained and inclusive economic growth.
Author: Ross Harvey