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South Africa’s Weak Response to Labor Strikes

South Africa may be losing its reputation as the safest and most profitable Sub-Saharan country for investors. The recent mining strikes and Moody’s subsequent credit downgrade have damaged South Africa’s economic outlook and forced investors to look elsewhere in the region.

The government’s inability to respond effectively to the strikes reflects a deeper institutional problem within the ruling party, as the FT reports:

Crucial decisions keep getting deferred, allowing strikes to spread from mining into transport and now potentially to the public sector.

In the process, Mr Zuma has looked more like a chief executive answerable to the ruling ANC board, than a president. Given that the ANC is now such an awkward coalition—of newly gilded tycoons, liberals, racial nationalists, radical populists, leftists and unions—there is little cause to hope for a firm new strategy of reform.

Investors are being turned off by South Africa not just because of its poor economic outlook but because of its political instability. There is a growing sense that the ruling ANC has lost the discipline and cohesion it once had when it was a revolutionary movement. Corruption, factions, and other divisions have reduced the party’s ability to govern South Africa.

Yet there is still no other party or organization in South Africa that can compete with the ANC. The country remains a one-party dominant state precisely because of the ANC’s ability to create broad coalitions. But if that coalition is unable to effectively govern, the result will be expanding crises for South Africa as a whole.

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