"The present economic boom represents one of the longest sustained increases in income in about 40 years." No, that's not the utterance of a delusional cheap-cigarette hawker, but rather a government statement proclaiming a five percent growth economic rate and the emergence of a strong black middle class in 2005.

As hard as it may be to believe, Trevor Manuel and his merry band of financial handymen were enjoying a champagne year, along with Clint Eastwood, same-sex couples and Liverpool FC, at the pinnacle of 13 years of steady progress. Consumers were on the crest of a four percent inflation, single-digit interest wave and a litre of petrol cost just over four rand.

Sadly, like the maverick Schabir Schaik, a fall from grace was on the cards. Somewhere along the line, muscle cars morphed into scooters, Tito 'Tough love' Mboweni got heavy-handed and the price of eggs, well, just wasn't the price of eggs. How did things go so wrong, so quickly? There was another 2005 incident passing relatively quietly under the headline radar yet destined to have a far-reaching impact on SA's precocious economy.

In late November of that year, the Western Cape's Koeberg nuclear station was hit by a series of shutdowns that interrupted the power supply to much of the province. It was an ominous portent that heralded nationwide panic and economic shell-shock. Razia Khan, Standard Chartered's chief Africa analyst, said the crisis will have a "shock impact" on economic growth and warned that the annual rate could fall as low as two percent "depending on how long-lasting the crisis is".

"This is a supply-side shock that will affect not just mining, but manufacturing, retailing and other services — there is no economic sector that is immune so the economy will be negatively impacted for sure," she told AFP. "Growth has been strong, driven by consumption, but the energy crisis is significant enough to make a difference."

The power crisis has sent the mining sector, the country's economic engine room, into fits and starts. The recent spate of mining deaths that threatens to bring the entire industry to a standstill has not eased concerns.

"The era of cheap electricity is over"

"The era of cheap electricity is over," said President Thabo Mbeki in his State of the Nation address earlier this year.

He could just as well have called a halt to quick foreign investment, curtailed the entire construction sector, and announced a substantial rise in inflation.

Post-liberation investment has seen impressive growth figures dominate the last decade, but also hide major structural frailties that are becoming more and more apparent as initial euphoria tails off.

"If we scratch below the surface, our economic well-being is far more fragile than at first appears," writes former DA leader Tony Leon in a weekly newsletter. "[It is] all too reliant on a favourable interest-rate environment and a relatively strong currency. Expansion has been in the financial and retail, rather than manufacturing sectors."

Leon bemoaned the 'woeful' state of the country's education system, calling for radical intervention to address a skills shortage that had reached critical levels and mop up poverty. "Due to mismanagement, as well as wrong-headed and confusing policy changes, nearly two million economically active South Africans have had no schooling, and over seven million are functionally illiterate." Perennial villain, the current account deficit, and chronic joblessness are also cited as factors with the capacity to permanently retard the economy.

More recently, waves of xenophobic violence that left more than sixty dead have added weight on SA's economic shoulders. Never the most popular powerhouse on the continent, the country's image has taken a battering the negative effects of which are already being felt in the tourism sector.

Southern African Tourism Services Association Chief Executive Michael Tatalias said the violence could not have come at a worse time. "Our industry is already in a difficult trading environment, battling the effects of high fuel prices... [and] the negative global effects of the credit crunch on international travellers," he said in a statement.

The lack of strong political leadership during the incidents highlighted a power vacuum and a climate of post-Polokwane political uncertainty that many analysts see as anathema to growth prospects in the long-term.

The South African economy itself does not operate in a vacuum. Like many others of its ilk, the local market has been exposed to the global slowdown brought on primarily by unscrupulous credit providers and the sub-prime crisis and an unprecedented fuel-food contagion.

Litany of setbacks

That litany of setbacks would put even the most optimistic economist on a course of Prozac. Self-medication may be pre-empting things however, as there are reasons to hope for a return to halcyon market days. The hulking economic fillip that is the 2010 World Cup is beckoning on the horizon as fixed investment projects and infrastructure upgrades come online, and entrepreneurs large and small are rubbing their hands in anticipation. Unlikely power crisis saviours have emerged in the form of Mozambique and France, and a major overhaul of the power supply chain is underway.

Supply and demand fundamentals dictate that the oil price bubble cannot expand indefinitely and there are signs that investors are beginning to look up instead of hanging their heads, ignoring the last vestiges of the sub-prime crisis. A mammoth agricultural season is putting paid to fears of food security, and while food and energy prices may remain high in the medium term, the world is waking up to the need to balance frenetic consumption in emerging markets with a corresponding increase in production. Although admittedly biased towards resources, the JSE has broken record after record and even the embattled rand has displayed a measure of resiliency.

Perhaps most telling is political analyst Steven Friedman's endorsement of the forthcoming Zuma administration – he argues that "There is more debate, more accountability, more fluidity (among the new ANC leadership)" that in no way alienates investors and big business. An economy in tatters, yes, but not without the promise of rehabilitation and new strength as the cogs turn and adapt to straitened circumstance.


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