South Africa

SAfxit? How South Africa’s economy can lead us to Greece-like slavery

By Richard Poplak 14 July 2015

SAfxit: a neologism that describes the South African economy being shot out of the global economy’s bottom, spinning into the greater universe until there is nothing left of the country at all. Africa’s second biggest economy is in better shape than Greece’s, even if Athens achieved a ‘deal’ with its European masters early on Monday morning. But there are real problems with South Africa’s fiscal books, and they can’t be solved by Angela Merkel forcing us to wear a gimp suit until we’re shamed into respectability. RICHARD POPLAK runs the numbers.

Want proof that the world has gone bonkers? People actually took sides during the recently ‘fixed’ Greek sovereign debt crisis. How you interpreted the soap opera, the plot of which concerned the abjectness of late-capitalist economic discourse, apparently came down to your political affiliation. The longhairs were outraged by the strong-arm bullying tactics of the Kaiser’s unsmiling scions, led in the main by arch neo-liberal Angela Merkel. The ‘fiscal conservatives’ anted to see the indolent Greeks, who hadn’t worked an afternoon since the sacking of Athens by Xerxes, punished into producing something more than the world’s third best olive oil.

Austerity doesn’t work! They must be made to pay with their pensions! Go Team Picketty! Viva, ‘democracy’-via-Brussels, viva!

But don’t be fooled. The operating system otherwise known as reality is coded in an unintelligible language, and nothing about this ‘crisis’ has been tangible – mostly because money doesn’t actually exist – except for the very real suffering it has brought to Greece’s poorest. The only way to understand the situation is obliquely, through dreams or shaman-induced trance-states or the by the injudicious employ of entheogens. Or, perhaps, through the work of the brilliant Spanish comic artist Joan Cornella:

inside SAfxit

None of which answers the question: where does South Africa stand in all this? Is the country, as Democratic Alliance leader Mmusi Maimane insists, one macro-economic misstep away from a Greece-like blow out? During a discussion with the South African-German Chamber of Commerce and Industry in Cape Town last Friday, Maimane reminded his lebensraum-loving interlocutors that South Africa stood only one place above Greece in the corruption perception index. But while high levels of corruption certainly didn’t help the Greek economy, officially sanctioned thievery was nowhere near as damaging as catastrophic stupidity. I wanted to learn whether the stewards of the South African economy were as dumb as the ungodly combination of (Harvard trained!) legislators who were the architects of Greece’s euro zone debacle, and the French and German idiots who lured them in in the first place?

In order to figure this out, I phoned Dr Adrian Saville, a professor at GIBS and a chief strategist at Citadel Wealth Management. Saville is a soulful sort of analyst, and I picture him reading Rilke on flights from European necropolises to Asian mega-cities. What does Saville make of the South African economy, I wondered? Are we going strapped to a board alongside the Greeks in Austerity’s BDSM dungeon? (Africans have long had another, less morally tinged term for austerity: ‘structural adjustment’. It didn’t do the continent much good.)

Well, you can almost touch the pessimism here it’s so heavy,” Saville told me over the phone last Friday. “It’s hard to find people who have good things to say about this country right now, and the markets aren’t helping.”

No they are not.

Saville was, however, quick to point out several obvious and important differences that nearly invalidated my South Africa vs. Greece bout. South Africa is not part of a monetary union, and therefore has some flexibility on currency valuation. The government can, if need be, “quantitatively ease” a gummy economy by printing rands. What’s more, the International Monetary Fund isn’t breathing down our collective necks, and our sick days aren’t sponsored by Bavarian autoworkers that want us dead. But those points aside, said Saville, there are many worthy areas of comparison.

For instance?

No one on Earth considers Jacob Zuma to be a competent steward of a shebeen, let alone a middle-income economy. Nonetheless, Alexis Tsipris, the current Greek PM and the single worst European negotiator since Neville Chamberlain, makes Zuma look like an unalloyed genius. Indeed, the ANC has a 20-plus year history of delivering conservative neo-liberal policies that have left the banking and corporate sectors in robust good health. The government’s debt is not running 177% higher than GDP – in Greece’s case a whopping $320 billion – but closer to 40%. While it’s not easy to start a business in South Africa, it is not functionally impossible. Our former ministers of finance, Trevor Manuel and Pravin Gordhan, are highly respected talk-circuit regulars, while the current holder of the office, Nhlanlha Nene, can expect some serious private sector love upon retirement. The reserve bank has $50 billion in foreign currency set aside for a rainy day. And if you don’t happen to have Zuma’s private number on speed dial, good luck getting the better of the South African Revenue Service (SARS).

But all this neoliberalism has a downside. The South African economy grows at below 2% a year, while financial folk talk in rapturous tones about our rapidly growing northern brethren in Ethiopia and Rwanda – former charity cases that now serve as financial lodestars.

More worrying,” notes Saville, “is the current account deficit,” the indicator that shows the imbalance between imports and exports. We ship in containers of cars, T-shirts, TVs, flip-flops, computers, and other such 20th century consumables, while our exports are chiefly primary goods – stuff that’s yanked out of the ground by our dysfunctional mining sector. And if we don’t make or sell anything, then that paltry GDP growth must ipso facto be attributed to government and consumer spending. The country’s account deficit, which stood at 5.1% in the last quarter, is funded by ‘hot money’, an economist’s term referring to foreign capital that flows into the bond, stock and currency markets. “As a rule of thumb those funds can leave in about 24 hours,” Saville reminded me. “Which is a recipe for a currency crisis.”

And as bad as this might be, Saville believes that South Africa’s actual woes have little to do with how we’ve managed our economy. The real problem is the country’s heinous social imbalances. Apartheid’s education policies were designed to create a vast black underclass, and despite Nelson Mandela’s insistence that education constitute the biggest spend on the national budget, public schooling here is unconscionably awful. While Black Economic Empowerment and its sequels, prequels and TV-series spin-offs have made (some) people rich – to the tune of R317 billion – the business environment in this country belongs to a small network of oligopolies and a newly fattened hyper-class, largely affiliated with the ruling party’s patronage system.

Then there are the three ticking nukes that keep Saville awake at night.

Twenty-one years into the new dispensation, we have a GINI coefficient that is one of the worst in the world. While there’s clear evidence of change of economic participation, it remains the case that we have these glaring inequalities. It’s stubbornly rigid and elevated.”

Shit.

When Zuma came to power in 2010, our official unemployment rate was near 20%. He aimed to halve it by 2014. Now its 26 percent, and that’s only by one definition of unemployment. In real terms, it’s likely closer to 40%.”

Shit shit.

The demographic structure of this country? You have a relatively younger population. Put these three things together – entrenched inequality, stubborn unemployment, and a young population, these are worrying ingredients. And NONE of them are moving, despite all the lip service to equality.”

Shit shit shit.

Examining at the problem this way, growth isn’t the primary ingredient in solving South Africa’s financial mess. The ANC’s National Development Plan calls for 5.4% economic growth, but so what? Who will that growth serve, assuming it is achievable at all?

I would venture that as impressive and admirable as our policy efforts are, they’re simply not enough,” said Saville. “To put it in another way, the ANC is not capable of solving South Africa’s socio-economic problems. There are few, if any, governments in the world that could solve this. I would equate our current challenges to the dismantling of Apartheid. It was social forces that dismantled Apartheid – unions, women’s groups, churches, political parties. I would say that’s exactly where South Africa’s solution lies.”

Um, in a revolution?

We’re either going to have a silent revolution. Or we’ll have a hot, violent revolution. For the simple reason that South Africa at some point has to cave in on itself. It’s fair to say 40% extended unemployment, a horrific GINI coefficient, a young population that economic immobile – its simply unsustainable. Either you have some form of social upheaval, or some form of social remedy.”

So there you have it. SAfxit isn’t a government problem, but a South African problem. Everyone is going to have to pitch in and behave like actual, active citizens to avoid the absolute humiliation that was delivered to the Greeks on Sunday. “It’s not simply government’s task. This isn’t about planting vegetable gardens and painting schools,” said Saville. And it isn’t about CEO Sleepouts and acts of auto-fellating self-aggrandizement.

It’s about going to war for having the future.

And before anyone in South Africa starts weeping for the Greeks, I want to share a few points that came courtesy of Dr Martyn Davies, CEO of the consultancy firm Frontier Advisory.

If Greece was an African country,” he wrote in an email, “it would be the fourth largest by GDP. On a per capita basis, Greeks would be the wealthiest Africans with the lowest Gini coefficient. Even if Greek left the euro (and went back to the drachma) and halved their currency value, they would still be the fourth wealthiest Africans on a per capita basis.”

When South Africa implodes, we may wish for the comparative benevolence of an Angela Merkel. Our reality, running on a particularly unintelligible code, may prove to be far crueler than that of the Greeks. We may soon be on our way to being pooped out of the global financial system, insofar as there is a global financial system, and the only possible salvation will come from within. DM

Photo: (Left) Greek Prime Minister Alexis Tsipras arrives in his car at a euro zone leaders summit in Brussels, Belgium, July 12, 2015. Euro zone leaders will fight to the finish to keep near-bankrupt Greece in the euro zone on Sunday after the European Union’s chairman cancelled a planned summit of all 28 EU leaders that would have been needed in case of a “Grexit”. REUTERS/Philippe Wojazer (Right) South African President Jacob Zuma attends a session at the World Economic Forum (WEF) in Davos, January 27, 2011. REUTERS/Vincent Kessler.

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