DEBT, DEMOCRACY AND REPRESENTATION IN SOUTH AFRICA

Abstract

Contrary to most newly independent colonies which borrowed extensively in order to fuel economic growth and development, the post‐apartheid South African government pursued a different path. With the advent of democracy in 1994 they chose to stabilize the economy and reduce public debt via the adoption of an austere fiscal programme. We argue that the choice was made in order to gain greater policy independence from creditors and portray an image of sound fiscal management to potential international investors. The consequences of the decision were, however, quite the opposite. The South African government’s austere and prudent response to debt made its bonds more attractive. It has therefore become more, not less, dependent on the constraints of creditors, albeit international creditors, and so more subject to investor scrutiny and sentiment. And, yet, as a result of the fact that in South Africa the interests of domestic creditors do not enjoy formal, political representation, South Africa still lacks creditworthiness and remains a relatively risky place in which to invest.