If, in the dying days of apartheid, there was a single moment that said white rule was doomed, it came on July 31st 1985, when Chase Manhattan Bank stopped lending to South Africa. Days earlier a report by Citibank noted that the country’s finances were in “chaos”. Other international banks soon followed Chase in cutting off loans. Pressure from protesters to impose economic sanctions may have played some role, but the decisions were largely commercial. International banks were starting to worry that South Africa would not be able to pay its debts. Within weeks the currency was collapsing and the government had frozen its markets, declaring a moratorium on private-debt repayments. Apartheid may have limped along for five years before the government freed Nelson Mandela and started talks over a transition to democracy. But it was on that day in July that apartheid South Africa lost its economic sovereignty and was forced down a path of change.

Historians may see 2018 as an equally significant year for South Africa and for the party that has governed it since the end of white rule in 1994, the African National Congress (ANC).

When the ANC first took power it inherited a country on the brink of economic collapse. Investment had stalled, inflation was stubbornly high and the costs of servicing apartheid’s debts was consuming a growing share of the government’s revenue. Yet, for its first decade in government, it was an able custodian of the economy. It controlled spending to cut the fiscal deficit, paying down debt as a share of GDP from a high of about 50% to less than 28% on the eve of the global financial crisis in 2008.

The financial crisis coincided with the ascent of Jacob Zuma as head of the ANC and, in 2009, president of the country. Since then sound fiscal policies have been replaced by profligacy, mismanagement and looting of state resources. In less than a decade government debt has shot back up to 53% of GDP. That figure may not seem high compared with countries such as Britain, where government debt stands at almost 90% of GDP. But South Africa’s higher interest rates mean that it spends a greater share of its GDP servicing that debt. And since the economy slumped into recession early in 2017, followed by a slow recovery, it has been unable to grow its way out of a slowly grinding debt-trap in which the government has to keep borrowing in order to pay interest on its existing obligations. In 2017 it expected to pay more than 160bn rand ($12.5bn) in debt servicing, or more than 3.5% of GDP. This is squeezing out spending in other areas. Interest payments cost the government twice as much as it spent on higher education, for instance.

Yet instead of pulling back spending on non-essential areas to focus on important ones, the government has simply allowed its debt to keep ballooning. In early 2018 when Malusi Gigaba, the finance minister, releases his budget, he will probably admit that the government’s deficit had swollen to almost 5% of GDP in 2017, despite assurances that he would keep it at about 3%. Bail-outs of troubled state-owned companies such as South African Airways (SAA) and Eskom, the electricity utility, which are drowning in red ink, may well push the number higher. But it will be Mr Gigaba’s spending forecasts for 2018 that will be most closely watched by South Africa’s creditors for signs that the government is further loosening its purse strings ahead of national elections in 2019.

Zuma and bust?

That vote will be the first in which the ANC runs a risk of losing its parliamentary majority, which would force it to enter a coalition to form a government. Polling data are scant, and what there are suggest that the chance of the ANC losing its majority is slim, but not vanishingly so. It may well lose control of Gauteng, an economically important province that is home to Johannesburg and Pretoria (it has already lost the Western Cape).

Much will depend on who is chosen as the party’s presidential candidate at a conference scheduled for late December 2017. Many analysts reckon that the ANC will get a smaller share of the vote if it puts forward Nkosazan Dlamini-Zuma, a former chairman of the African Union and ex-wife to Mr Zuma, than it will with Cyril Ramaphosa, the reformist and business-friendly deputy president. Many think that Mrs Dlamini-Zuma would run a government much like Mr Zuma’s, under which corruption has proliferated.

No matter which candidate is chosen, the ANC government will be tempted to pass a spendthrift budget in February in the hopes of winning votes. That could help tip South Africa over the edge of a fiscal cliff every bit as momentous as the one it tumbled over in 1985.

Worrying echoes can already be heard, some from the same institutions whose credit committees unwittingly helped to end apartheid. In mid-2017 Citi (the successor to Citibank) refused to roll over its loans to SAA, forcing the government into an urgent bail-out. If more banks start pulling loans from state-owned companies, that will trigger a run on the currency and a spike in interest rates. The government will find itself compelled to step in, driving up its debt-to-GDP ratio by as much as ten percentage points. That in turn could force South Africa to turn to the IMF for a bail-out, which would not be granted without strict conditions attached.

Unless South Africa changes economic course in early 2018, it will be remembered as the year that the ANC, Africa’s oldest liberation movement, lost South Africa its economic freedom.