Overview

Over the past three decades, following the end of apartheid, South Africa has been marked by persistently high levels of violence. This violence comes in the form of confrontations between citizens and law enforcement during protests, political and economic disputes, and alarmingly high rates of violent crime. The internationally acclaimed rainbow nation, recognized for its multi-generational quest for racial equality, stands as a striking example of economic disparity, where profound poverty coexists with immense affluence. The South African state is founded upon arguably the world's most progressive and contemporary constitution, yet it grapples with deeply rooted corruption, ineffective governance, and tribal divisions.

A robust rule of law facilitates trust and confidence between citizens and their government. South African citizens exhibit a deep-seated distrust toward both the African National Congress (ANC) and the police force. At all levels of administration, there is a significant presence of organised crime and corruption which exists alongside a culture of impunity, which has contributed to lawlessness and the erosion of state institutions. As crime rates have surged, the ineptitude of law enforcement has sparked a wave of vigilantism across the country.

State Capture and Corruption

Jacob Zuma's presidency (2009-2018) was characterised by widespread corruption, substantially damaging political and institutional domains. Even before he was elected South Africa's fourth President, Zuma faced corruption and fraud charges, foreshadowing the corruption scandals that would define his time in office. Although corruption reached its zenith during the state capture period under Zuma's presidency, its corrosive influence remains pervasive and far-reaching. Rampant corruption undermines the criminal justice system, obstructs economic opportunities, disrupts social cohesion, impedes public services, and damages political integrity; thereby driving down living standards, weakening democracy, fostering organised crime, dissuading foreign investment, and exacerbating brain drain.

During Zuma's presidency, state capture was made possible by his administration and party’s meddling with the criminal justice system. He strategically disposed of leaders of key criminal justice institutions, such as the South African Police Service, the Directorate for Priority Crime Investigation, the Independent Police Investigative Directorate, and the National Prosecuting Authority, appointing leaders more likely to be pliable. Concurrently, he removed those who might initiate investigations or prosecutions against him or his associates. Notably, Zuma was keen to protect and hide his corrupt dealings with the Gupta family, a prominent Indian business group. This manoeuvre systematically hollowed out state institutions and fostered an environment in which corruption flourished. The enduring consequences of Zuma's manipulation of the criminal justice system are palpable today as organised crime continues to surge throughout the country.

Corruption has inflicted a profound economic toll on South Africa. A predatory business environment has discouraged local startups and diminished the country's appeal to foreign investors. This decline in foreign investment became evident during Jacob Zuma's tenure; in 2017 Zuma removed highly respected Finance Minister, Pravin Gordhan, and instilled Malusi Gigaba, a loyalist, in his place. This move played a pivotal role in S&P Global's decision to downgrade South Africa's credit rating to junk status, with the agency explicitly stating that the removal of Gordhan - alongside other executive changes - undermined the country's fiscal health and growth prospects. In 2017, KPMG sacked its South African leadership due to its involvement with the Gupta family, who influenced mining, media, and technology assets. This led to KPMG losing twenty audit clients in that year, exemplifying the extensive repercussions of corruption and fraudulent activities, and highlighting the compliance and reputational risks of working with South African companies.

Various investigations, including the Zondo Commission, exposed irregular business dealings between the Gupta family and the South African government during Zuma's tenure. These dealings raised concerns about undue influence and corruption in allocating government contracts. One such case included the ten-year contract awarded to the Gupta family-owned company, Tegeta, to supply coal to the Majuba power station. Although such contracts were not inherently irregular, it came to light that Eskom paid more than double the rate to Tegeta than it paid to other coal suppliers, which has greatly contributed to loadshedding and subsequent power outages across the country. The investigation revealed that only the awardee benefitted from this arrangement. Interference in Eskom's operations was part of a broader pattern of state capture in state-owned enterprises under Zuma.

Loadshedding

One of the most pressing legacies of Zuma's presidency is loadshedding, resulting from years of mismanagement and state capture, which subjected South African citizens to a staggering 5,894 hours of power outages in 2023 alone. This crisis has taken a massive toll on the South African economy, costing as much as $46 million daily. Former Eskom CEO Andre De Ruyter has explained the challenges he encountered when endeavouring to reform Eskom, implying that high-ranking politicians were involved in pervasive corruption within the company, although he refrained from disclosing their identities. Furthermore, a correlation exists between load shedding and crime, with crime rates, especially in residential areas, surging during power outages. Loadshedding has also exacerbated inequality, leading to heightened tensions and increased social divisions.

State capture has led to a significant decrease in the ability of South African power stations to deliver sufficient electricity to the population. As money was syphoned out of Eskom’s coffers by corrupt officials, their lack of investment in maintenance and alternative energy sources rendered them unable to meet service obligations. Further, Eskom's power stations have been subjected to acts of sabotage and theft. Crime syndicates strategically target Eskom, where procurement teams pay excessive amounts for unnecessary contracts; syndicats orchestrate these acts to ensure their companies secure lucrative maintenance and supply contracts. The absence of substantial support from key bodies, such as the Ministry of Minerals and Energy, the South African Police, and the National Prosecuting Authority (NPA), has further hindered reform efforts as internal investigations remain unactioned.

Vigilantism

South African citizens have increasingly taken the law into their own hands; vigilante groups have filled the void left by a severe shortage of police officers in the country. This trend was exemplified in 2021 when South Africans took to the streets to protest against the 15-month imprisonment of Zuma. Responding to criminal activities, looting, arson, and damage to public property, residents in affected areas assumed law enforcement roles. These protests resulted in an estimated economic loss of over 50 billion rand. Vigilantism has become a prevailing trend in townships, evolving from local vigilante groups meting out their form of justice against criminals within their communities to a widespread practice of mob justice and extrajudicial killings across South African townships. 

The erosion of public trust in the police force, undermined by corruption and mismanagement, has created a detrimental cycle in which inhabitants of the most security-deprived townships are compelled to fend for themselves. Despite the shortage of police officers throughout South Africa, a disproportionate number of officers are stationed in affluent, predominantly white neighbourhoods. Grassroots initiatives, exemplified by organisations like Operation Wanya Tsotsi, have emerged to address this void. Despite the government's firm stance against vigilantism, overburdened law enforcement officers and local government officials often disregard vigilante actions, tacitly endorsing their activities.

Extortion Rackets 

Extortion rackets present a significant threat to investment in South Africa, as they aim to coerce companies into surrendering a portion of their profits (typically around 30 percent). The previous CEO of Eskom has alleged South African Police (SAP) involvement in extortion rackets, leveraging their assistance for compensation. Uncertainty exacerbated by extortion discourages investment and impedes development in South Africa.

It's estimated that extortion rackets have disrupted 183 infrastructure and construction projects, resulting in financial losses of up to 63 billion rand. The increased risks associated with contracting operations are likely to continue to discourage companies from conducting business in South Africa. In turn, lower levels of foreign and domestic investment contribute to elevated unemployment rates, worsening inequality, and slow growth.

As highlighted in Cyril Ramaphosa's 2022 State of the Nation address, the unreliability of electricity supply, inefficiencies in railways and ports, limitations in broadband spectrum, and declining water quality collectively deter companies from investing, hindering the economy.

Implications for 2024 Elections 

Leading up to the watershed 2024 elections, it appears increasingly improbable that the ANC will retain its power in its current form. Voter apathy and a diminishing majority in the latest local government elections have encouraged further factionalism within the ANC. Internally, contenders are engaged in fierce battles for political positions spanning various municipalities. The 2021 local government elections in South Africa bore witness to a landscape marred by political violence, assassinations, and chronic instability. Opposition political parties are leveraging such political violence to portray South Africa as a lawless mafia state that has been facilitated and promoted by the ANC government. As the 2024 elections draw nearer, opposition groups are likely to continue to push this narrative and in-fighting within the ANC is anticipated to persist. Although a solid performance by the opposition might signal an increase in the ease of doing business in South Africa, risks around political uncertainty are sustained in the short to medium term. 

There is increasing dissatisfaction with the governing ANC; state involvement in criminality remains the most pervasive force in driving organised crime. Many South African political parties have a  transactional or sectarian nature, appealing to identity politics that serve to divide- the lack of viable political alternatives has increased voter apathy since 1994. 

The ANC will likely win a significant portion of the vote in the 2024 elections, even though their support dipped below 50% in local government elections for the first time. As they are unlikely to obtain a majority, they will probably be forced to enter into a coalition government with one of the two major opposition parties, the Democratic Alliance (DA) or the Economic Freedom Fighters (EFF), although neither of these two parties are benefiting the most from the decline in ANC support. Instead, smaller parties such as ActionSA, Good, and the Patriotic Alliance have received increased support. Power struggles between municipal administrations and the national ANC government likely contributed to the lack of support for the larger and more established parties. The lack of a cohesive relationship between local and federal police structures has been attributed to power struggles between the DA, which rules Johannesburg, Pretoria, Cape Town, and the ANC. As a result, the allocation of national police resources has remained skewed towards ANC strongholds. 

Implications for Stakeholders

Energy Sector -  The energy sector - particularly renewable energy - has the potential to attract significant foreign investment. The government has been actively pursuing renewable energy projects, but issues like corruption, mismanagement in state-owned enterprises, and power supply challenges have caused investor concerns. The lack of a stable energy supply particularly affects various industries and undermines South Africa's investment appeal, although moving towards wind and solar energy would likely make the electricity supply more reliable. Despite the obvious positive impacts of a transition to renewable energy, the vested interests of high-level politicians in the coal industry have impeded efforts to build new infrastructure to further this aim, sustaining levels of uncertainty for renewables companies interested in operating or expanding operations in South Africa. 

The move towards renewable energy would be better for the economy. The European Union’s Carbon Border Adjustment Mechanism (CBAM) is designed to place a carbon price on imported goods based on their carbon content. It aims to prevent the relocation of high-emission industries to regions with weaker environmental regulations while incentivising global partners to implement greener practices. CBAM threatens South Africa’s exports and market share in several sectors. Reducing dependence on fossil fuels would help mitigate the adverse effects of CBAM, making South African exports more competitive in European markets. Increased costs from CBAM could deter manufacturing companies from initiating or expanding operations in South Africa.

Mining Sector -  South Africa is rich in mineral resources and has historically attracted substantial foreign investment in the mining sector, which significantly contributes to South Africa’s GDP and employs approximately 1.5 million people.  However, uncertainty in mining regulations, disputes over ownership, and labour unrest have deterred investors. A debate over the country’s Mining Charter requirements has created uncertainty for mining companies and hindered investment. Criminality is pervasive within the mining sector. Tens of thousands of illegal miners work for criminal outfits, costing the sector up to seven billion rand a year. De Ruyter has highlighted the dangers associated with coal mining towns in which violent cartels rule the surrounding areas and extort citizens as well as mining companies. In this climate of fear, mining companies are often obliged to hire private security to protect their assets and employees, highlighting the security risks associated with mining operations in South Africa which are exacerbated by inadequate policing. 

Conclusion/Recommendations

The government must champion transparency, accountability, and citizen participation, fostering nationwide resilience against corruption and organised crime. Rebuilding public trust and combating rampant corruption is a non-linear process. However, the government can demonstrate its commitment to reform by promoting transparency, instituting oversight mechanisms, and ensuring accountability. Crime rates are likely to decline as trust is gradually restored in state institutions. Institutions such as the Independent Police Investigative Directorate (IPID) should be reinforced to ensure that the judicial system functions autonomously and is devoid of power abuses. Organised crime syndicates would find it progressively less attractive to operate within the country, and the legal system would be empowered to investigate and apprehend their members, even if influential figures within the government are implicated in the process. By highlighting their dedication to the rule of law and minimising state interference, the government would instil a greater sense of security among South Africans and incentivize investment.