Vladimir Putin is more a symptom than a cause. Russia and South Africa were both reconstituted in the twilight of the Cold War and, like most of today’s stagnating resource-endowed nations, both soon drifted toward indulging anti-Western, anti-development biases.

South Africa’s and Russia’s economic trajectories are dreadful for similar reasons. Commodity exporting and patronage politics reinforce each other while spewing incompetence from armies to electricity providers and beyond. A key difference is a declining Russia’s potential to lash out with awful consequences.

If South Africa and Russia weren’t significant commodity exporters, the interests of political elites and ordinary citizens would be much more closely aligned. Both countries’ rulers have been conditioned to rely on tax proceeds and foreign exchange from exporting raw material – while becoming inured to their citizens’ hardships. This helps to explain their indifference toward our massive youth unemployment crisis and the horrendous volume of casualties Russia is suffering in Ukraine.

Sanctions against Russian energy imports will soon be the subject of fresh debates. Conversely, the ANC has shown no interest in reconsidering the self-sanctioning resulting from its localisation policies. Notwithstanding their potential to breed instability, such policies seem likely to remain until 2029.

Whereas efforts to restrict Russia’s access to military technology and components are becoming increasingly effective, sanctions against Russian energy imports risk undermining support for Ukraine as temperatures soon start dropping across Europe. While exorbitant energy prices will inflict harsh economic and political costs, actual shortages would be more politically combustible still.

The need to shut down some industrial operations further highlights how seeking to squeeze Russian revenues is cost prohibitive for many European interests – while benefiting the Chinese and other Putin supporters. Importantly, Ukraine’s recent battlefield gains also lessen the need to use energy sanctions to pressure Putin’s regime.

Ratcheted down

Such sanctions could be ratcheted down long before, or long after, the fighting stops. When considering how best to unwind them, global leaders would be wise to consider our path from apartheid-era sanctions to the ANC’s current localisation policies. Ideally, a troubled country would achieve a robust constitutional democracy while thoroughly integrating into global supply chains by workers adding value through developing skills.

South Africa did a better job than Russia on the first count but both have failed at the second. The inward bias inherent to the ANC’s redistribution-focused policies has had the effect of retaining residual effects of the apartheid-era sanctions. Notwithstanding exceptions, such as the politically distorted automotive manufacturing sector, few South African companies hire workers to add value to exports.

As the pace of technological change continues to increase, the portion of a country’s young adults who add value to exports is probably the best indicator of its long-term prospects. That we score horrifically in this regard is interwoven with our unsustainable-yet-entrenched youth unemployment crisis being the country’s most formidable threat. Russia’s invasion of Ukraine is provoking similar effects through its young adults fleeing or becoming combat casualties.

The ruling regimes in Russia and South Africa are both beholden to rampant patronage networks. This is common among the many poorly performing countries which rely on exporting commodities. They adopt policies and practices which benefit cronies while precluding the prioritisation of competitiveness and global integration.

Dozens of countries, mostly Asian, have pummelled poverty in recent decades through integrating into global supply chains by adding value. The countries making the least progress have tended to be commodity exporters with largely rural populations and patronage-beholden governments.

Historical grievances

Neither Gorbachev nor Mandela was succeeded by an economic development visionary such as Lee Kuan Yew or Deng Xiaopeng. Opportunistic leaders of resource-endowed nations prefer to exploit historical grievances while blaming Western imperialism for their nations’ woes. They enact inward focused policies which benefit supporters at the expense of generally lower growth. South Africa has been careening down this path and Russia is now accelerating in a similar direction.

Proceeds from our commodity exports are to fund subsistence grants for the majority of young “born free” adults who are unlikely to ever be meaningfully employed. The ANC can then seek electoral benefits by claiming opposition parties would curtail such payments. Such patronage-minded thinking risks large-scale social unrest yet, unlike with a perpetually weak Russian economy, the contagion threats, regionally and beyond, would be modest.

European governments, most particularly Germany, sought to woo Russia toward becoming a globally integrated, peace-loving nation through establishing deep trade ties. Instead, they became besotted with its cheap energy to the point that Putin was emboldened. Germany’s decades of change-through-trade policies toward Russia were not misguided so much as they were overindulged while Europe’s traditionally lacklustre commitment to military deterrence steadily eroded. 

The deeper lesson is that integrating into global supply chains through commodity exporting doesn’t build relationships among nations, companies and people. It does little to diffuse knowledge and advance economic development. Conversely, competing to add value within global supply chains has proven to be this era’s high-volume accelerator for poorer nations to achieve broad prosperity.

Globally networked workers

The winning and laggard nations of the last fifty years cluster among value-added exporters and commodity exporters, respectively. The young adults that have been leaving South Africa, and bolting out of Russia, disproportionately include high-skilled and globally networked workers.

In the coming months, cunning dealmakers with access to Putin and Western leaders, such as Gerhard Shroeder or Roman Abramovich, will be testing prospective peace plans.

Western leaders should be mindful of how sanctioning South Africa served to encourage the inward focus and patronage biases of the new government they had greeted with such enthusiastic expectations.