Looking at social media in South Africa, it seems most South Africans celebrated alongside the majority of Greeks following the ‘no’ vote in Sunday’s referendum. Greeks overwhelmingly said ‘no’ to accepting the Troika rules for further bailout of the devastated Greek economy. Should South Africans rejoice? Is a poke in the eye of your nemesis a cause for joy? After all, the Troika represents the worst in the global capitalist system along with Bretton Wood’s International Monetary Fund (IMF).
To South Africans, the Troika represents oppressors who also financed Apartheid and helped keep Africa a dark continent with its punitive rules, which are now seen by many as unnecessary and cruel.
Best estimates are that Europe will need some $500 billion to get Greece right; that is equal to the total size of Africa’s largest economy, Nigeria. Chinese stock indexes have lost over 30% over Greece’s risk to Europe. South Africa needs both a healthy Europe and an aggressively cash flush China to get anywhere close to creating stability in its economy. The ‘no’ vote is not positive for Africa and not positive for emerging economies as both European and Chinese economies will be under extreme pressure, limiting the ability to supply needed foreign exchange to emerging markets.
With many global thinkers – from Krugman, Stiglitz to Chomsky – supporting the ‘no’ vote, joining academic turned Greek finance minister, Professor Yanis Varoufakis, in focusing on the nature of the loans and not why Greece needed the loans to begin with. No one can successfully argue that the Greek bailout conditions and interest conforms to fair trade. There is ample evidence that reckless lending occurred and draconian set of rules were put in place by the lenders and Europe’s regulators. The ugly face of the capitalist monster has been revealed.
Greece is not alone in the crisis; other eurozone countries such as Portugal, Ireland and Spain are also overhauling their economies.
South Africa also needs a focused Russia and China. As things are, only Russia has capacity to finance Zuma’s ambitious nuclear energy plans. While Russia has successfully funded a nuclear plant in Turkey, it remains clear that in terms of South Africa’s Treasury rules, only Russia’s Rosatom will meet the financing criteria for South Africa’s call for bids.
On the other hand it is unlikely that Zuma will have a stress-free negotiations, as it is likely that Russia will request sideline conditions for it to finance, build and maintain a nuclear power plant. One of these conditions could make anti-fracking groups of the Karoo very happy. It is my assessment that for Russia, shale gas in the Karoo remains a strategic risk they will be prepared to pay for South Africa not to exploit.
The question here is will Zuma accept this potential condition?
China has had a rough time getting lucrative assets in Europe, their defocus to Greece will also be potentially negative for South Africa as they use cash in Greece.
Brazil and South Africa have a tougher Brics Summit this week as a result. Theirs is to emphasise the strategic importance of Brics and hold on to it.
On the home front the SACP ‘caucus’ inside Zuma’s cabinet will be emboldened by global austerity failures, bar the Icelandic experiment. It will become harder for finance minister Nhlanhla Nene to sell austerity measures to his cabinet colleagues who already feel under-funded as Zuma is under increasing pressure to press on with spending on infrastructure and the creation of a patriotic bourgeoisie, the so-called, ‘100 black industrialists’, a 50 year old ANC strategy Zuma suddenly dusted off.
As Greece suffers from mostly self inflicted pain that includes lying about its fiscal and monetary position, South Africa is indebted to the strong reliable institution former Governor Tito Mboweni put in place at the SARB. The world today regards SARB as a trustworthy and reliable institution because of the measures Mboweni put in place. Because the Brics’ New Development Bank is designed as a reserve strategy for member countries, it is important that Zuma has given Mboweni the nod as country ambassador in the new bank. His expertise in institution building will be essential in building an institution that must work as it builds itself.
The same types of skills are sorely needed in AU Parliament and SADC Parliament. Without these two institutions being built correctly with the necessary speed, the incidents such as the Omar Al Bashir and state courts will continue to occur throughout the continent as universal law making remains absent. Human rights courts will take even more time to be established if these parliaments do not root and establish their respective institutions fast. Skills such as those of the likes of Dr Sindiso Mfenyane should be called upon in this regard.
Back to Brics. This writer will look closely at the head of states communiqué to get a sense of where the global geopolitical agenda is moving, especially with G20 coming up soon.
What we are learning is that institutions are important; trusted and respected institutions have no alternative. As Brics starts spending real money, it is important that state members formally institutionalise it. Let us hope the leaders see this need or else confidence in Brics will remain a problem. The costs of belonging to the Commonwealth may no longer be worth it if we compare its benefits to those of Brics. DM
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