25
Sep
Throughout the long Cold War one of the West’s principal concerns was the anti-apartheid struggle in South Africa. On the one hand it was feared that the main liberation movement, the African National Congress, had fallen under Communist control. This considerably complicated the West’s support for the anti-apartheid cause because the last thing the West wanted was a Soviet-aligned regime in Pretoria sitting atop the world’s largest single biggest source of mineral wealth.
On the other hand the possibility loomed of a race war which could have dire effects on race relations throughout the world.
These twin dangers seemed to be averted with the fall of the Berlin Wall, F.W. De Klerk‘s sudden abandonment of apartheid in 1990 and the conclusion of a peaceful settlement that saw Nelson Mandela lead the ANC to victory in democratic elections four years later. The South African story, it appeared, would have a happy ending after all.
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In 2015 the view looks very different. Mandela and his policies of racial reconciliation are gone. His successors now take their inspiration from Castro, Chavez, Xi Jinping and Putin. Communists make up two-fifths of the South African cabinet. The ANC now takes the line that both Tiananmen Square and the Ukraine crisis are the products of American imperialism. President Jacob Zuma hails Marxism-Leninism as “the science” that guides the government, while the two SACP (Communist) economics and trade ministers argue openly that South Africa must “de-link” itself from world capitalism and to that end have been tearing up the investment protection treaties South Africa had signed with the West.
Hardly by coincidence, the South African economy has crashed back from the heady days of the commodity price boom.
Unemployment is over 40 percent and rising. Manufacturing has shrunk by half since the ANC came to power. Agriculture is hobbled by all manner of restrictive legislation and now by a severe El Niño drought. In the last quarter, GDP fell by 1.3 percent and the likelihood is that this is the beginning of a lasting recession. Meanwhile the gold and platinum mines are laying off labor as the commodity collapse bites and government debt is mounting fast, pushed both by large trade and budget deficits and by huge losses among all the state-owned industries.
The government’s neglect of the power supply industry has resulted in damaging electricity shortages. And in general the economy is showing strain after 20 years of all-out affirmative action employment policies and crony capitalism. Many of the large mining companies have left South Africa and local business is so disheartened that there is a virtual investment strike.
South Africa seems headed for a major economic and political crunch. The ANC leadership has put its trust in its BRICS alliance and in particular in China, so the assumption here is gladly made that if economic problems continue to spin out of control, the new BRICS bank or at the very least China will bail South Africa out. This is a dubious assumption. Most of the other BRICS countries are themselves in deep trouble and the Chinese have no record of giving large-scale aid for merely philanthropic reasons.
At present South Africa’s bonds are rated two notches over junk, but the likelihood is fast increasing that they will be downgraded to junk within two years. Should this happen, the one-third of South Africa’s bonds that are held by foreigners will get dumped and many local institutions will also sell.
The result would be a massive flight of capital, a stock market crash and still higher unemployment. This could produce a debt crisis and the need for an IMF bailout, which would come with tought conditions that would almost certainly bring about a regime change in the country. Accordingly, the ANC and SACP leaderships will resist a recourse to the IMF for all they are worth. Already some of them are arguing for a sweeping state take-over of major industries. Given the dire financial record of state-owned entities here, this would only worsen the crisis.
Most of South Africa’s debt is rand-denominated, so a further credit downgrade might result not so much in a foreign debt crisis as a huge fall in the value of the rand. This is, indeed, already happening: the rand was around 3.60 to the dollar when the ANC took power and is now at 13.50. The currency weakness exerts huge pressure on the government and one cannot rule out a return to apartheid-era expedients such as tighter exchange controls and government coercion to force local institutions to buy the state’s bonds.
Even without a foreign debt crisis it is possible that South Africa’s economic problems could reach a pitch where the government simply loses control as civil discontent rises. Venezuela is there now and South Africa is headed in the same direction. In both cases a desperate regime could well resort to ballot-rigging as its only way to cling to power.
The peaceful settlement achieved by De Klerk and Mandela has unraveled quite a long way.
All of which means that the West may be forced to intervene at some stage. Not militarily, of course, but politically and economically.
The peaceful settlement achieved by De Klerk and Mandela has unraveled quite a long way. A small and wholly unrepresentative Communist group has achieved critical influence over state policy and, unbelievably enough, seems to think that it can build socialism in one country at the tip of Africa. Huge economic damage has been done and more will be done.
As heavily dependent as it is on Western trade, aid and investment, South Africa is currently embarked on an anti-Western crusade. America, in particular, is viewed as an enemy state. Despite his genuine popularity in many other parts of Africa, Obama is seen as putting a deceptively human face on U.S. capitalism and imperialism. The ANC has never praised him for anything — not even for his Nobel Prize.
To date, Western diplomats have tried to stay as close as possible to the Pretoria regime, emphasizing their commitment to a sort of “Mandela version” of South African democracy and pretending — that is all it is — that that is what is still happening in this country. This sort of fellow-traveling has not worked. The time is fast approaching when the gloves will have to come off and some hard truths have to be spoken.
Source: http://www.politico.eu/article/south-africa-hurtles-south-mandela-anc-economy/