OPINION: Embracing regional integration could be SA's way out of its financial pickle

The envisioned democratic utopia in South Africa has, since 1994, left numerous citizens feeling marginalised and excluded.

Despite Nelson Mandela’s promises, the reality for the majority of black South Africans has been one of persistent poverty, income inequality, and a racially stratified economy.

Economic growth has failed to meet expectations, with the nation’s economy stagnating for decades. Failing infrastructure and insufficient development efforts have led to high levels of unemployment, particularly among the youth, exacerbating existing inequalities. A large portion of the population relies on government social assistance, further highlighting the systemic challenges.

The COVID-19 pandemic only exacerbated these issues, with shutdowns worsening economic conditions and inflationary pressures burdening consumers and the working class.

Emigration, although showing recent declines, remains a contentious topic in South Africa’s political arena. Increasing political polarisation, the rise of right-wing populism, and adherence to free market principles have filled the void left by government inaction.

These problems stem from years of ineffective government policies aimed at addressing inequalities. Measures such as Black Economic Empowerment (BEE) and Affirmative Action have not adequately served their intended beneficiaries, instead primarily benefitting the politically connected and elite segments of society.

The state of despair in South Africa is palpable, with infrastructure and public services faltering, hindering the country’s economic progress. Eskom, the sole provider of electricity, has been plagued by rolling blackouts, attributed largely to corruption and incompetence at the highest levels of government.

These power outages have crippled the economy, reducing GDP growth to a mere 1.3%, with daily losses estimated at around R1.5 billion.

A potential solution to South Africa’s economic woes lies in regional integration. With many African nations lacking sufficient fiscal resources to finance infrastructure projects, the African Continental Free Trade Agreement (AfCFTA) presents an opportunity to boost trade and development across the continent.

South Africa, with its strong financial, engineering, construction, and manufacturing sectors, could play a pivotal role in leading this charge.

At a diplomatic level, addressing the challenges within organizations like the Economic Community of West African States (ECOWAS) is crucial to fostering unity and promoting intercontinental trade.

Countries like Turkey have already capitalised on trade opportunities in Africa, forging strong partnerships and significantly increasing trade volumes.

South Africa’s agricultural sector also holds promise for integration, but logistical hurdles and a lack of coherent industrial policies hinder progress.

The recent conflict between Russia and Ukraine highlighted the vulnerabilities of African countries reliant on external sources for essential commodities like grain and wheat.

Without a regional market to provide stability, many populations faced delays, blockades, and inflationary pressures. Furthermore, protectionist policies adopted by Western countries, such as the US, pose additional challenges by restricting access to technology and promoting domestic production.

The COVID-19 pandemic aggravated existing economic strains, leaving many countries burdened with insurmountable debts and diminishing global production inputs.

Inward-looking investment trends further impede Africa’s access to technology and essential resources, leading to inflation, and hindering integration efforts.

Efforts to combat inflation and promote renewable energy, such as the Inflation Reduction Act passed by the US, and similar measures by its allies, complicate matters for African nations by driving up import costs and limiting access to technology.

As global output declines, local businesses operating in Africa struggle to compete and innovate, further stifling growth and development.

South Africa and other African nations must prioritise integration efforts, improve infrastructure, and address financial challenges to overcome inflation and access barriers hindering progress and development.

The South African Reserve Bank has already said in its bulletin that the trade in Rand continues to move offshore. Average turnover in South Africa decreased by 4.5% to $13 billion in the fourth quarter. Countries like Turkey and Mexico have been dominating their currency trade in the different stock markets, whereas the South African ZAR continues to decline.

Preferential trade discourse must be intersectional and top of mind in South Africa.

The movement of people and goods through a country’s border is a significant marker of sovereignty and socio-economic philosophy. It is an expression of what a country deems welcome, and an avenue through which neighbouring countries draw closer to each other, or entrench divisions.

In South Africa, public discourse primarily concerns itself with the movement of people. More directly, public discourse on cross-border movement is hypersensitive regarding the movement of black and foreign nationals.

It is reasonable to conclude that the framing of these discussions is often misplaced and informed by xenophobic outlooks, and it is well recorded that, in some quarters, these xenophobic sentiments are weaponised when it’s convenient.

Similarly, they are a means of quelling economic discontent, and as a means of scoring cheap political points. The most recent iteration of this layered discussion has concerned itself with the impact of digital nomads on the housing market in the Western Cape Region.

At its core, the interest regarding the movement of people and goods is tied to the notion that a country ought to orchestrate itself in a way that allows for shared prosperity among the inhabitants of its borders.

On the other hand, public discourse that concerns itself with the movement of goods is not as heavily monitored or emotive. Yet, it holds as significant an impact on South Africa’s prosperity as the people who are allowed through the borders.

The growing prominence of preferential trade presents an important juncture in South Africa’s development as a significant role player in Africa’s economic progression.

It also presents an important opportunity to question who benefits from a broader consumer base.

The AfCFTA is the largest free trade area in the world and has the potential to benefit 55 countries and 1.3 billion people.

A significant marker of this change in the trade environment was on 31 January, when South Africa shipped its first consignment of goods to neighbouring African countries under the AfCFTA.

Such tangible changes in the trade environment ought to be carefully monitored, to avoid the broadening of monopolies and increased market access that further entrenches economic inequalities that are also gendered and racialised.