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The economics of looting and the eye of the perfect sto...

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The economics of looting and the eye of the perfect storm

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By Tim Cohen
19 Jul 2021 6

Tim Cohen is editor of Business Maverick. He is a business and political journalist and commentator of more years than he likes to admit. His freelance work has included contributions to the Wall Street Journal and the Financial Times, but he spent most of his life working for Business Day. After a mid-life crisis that didn't include the traditional fast car, Cohen now lives in the middle of nowhere in the Karoo.

It’s never been easy to be positive about South Africa’s future. Whenever you are, it seems like you are stating the counterfactual. And this week, the sense of having a future at all has probably reached its nadir – at least until we hit the next nadir.

First published in the Daily Maverick 168 weekly newspaper.

When one of DM168’s reporters was discussing the looting situation with a prominent businessman in the property industry, he said simply, “I really don’t know why I invest in SA. It’s just pointless.”

That feeling of emptiness and despair has probably been the prevailing feeling within SA’s business community this week. Desperation we have known before, plenty of times, and SA has unexpectedly rebounded. But this feels different.

The social contract in SA has always been wafer-thin, with protests a common feature of daily life. What is different this time is that a combination of factors hit simultaneously, some of which we know all about and some of which we are only beginning to realise. It’s been the perfect storm: high unemployment and huge inequality, the seemingly never-ending Covid-19 devastation, a dysfunctional government, a disaffected business community. Add to that a political crisis and opportunists of the worst kind.

On this last point, I think there is some reason for hope, because clearly the Zuma faction who were recently distributing on social media billboards of President Cyril Ramaphosa being shot at by what seems like a pump-action shotgun are suddenly now disavowing their flagrant nihilism.  

In some ways, for them, it’s their Donald Trump moment. Just as Trump subtly encouraged the Capitol invaders by telling them to back off – old political trick – the Zuma faction have overplayed their hand. And now they will forever be branded with the economic devastation they encouraged.

If nothing else, it’s a classic lesson in the limits of populism: promising the world by feeding short-term enrichment but delivering grand devastation and extended hardship might be a winning strategy in the short term, but it is always a losing strategy in the long term. As Donald Trump knows.

The past week of looting and violence has in some ways been a graphic, fast-motion version of what the Zuma administration delivered economically over the longer term using the same economic tools: the irresponsible delivery of immediate gains at the expense of gradual, sustainable improvements.

I’ve always thought the most underappreciated fact of the Zuma presidency was how much SA was underperforming its comparators economically. That gradual white-anting of SA’s economic situation put SA in a poor economic position at the start of the pandemic, which compounded the difficulty the Ramaphosa government has had getting the train back on track. And, in retrospect, it’s odd how little it was noticed; every year, it seemed the next year would get better, and it didn’t. It got worse. By and large, SA’s media just went along for the ride. Meanwhile, SA’s middle class began moving assets offshore and businesses started investing more outside the country than in.  

The economics of the Zuma faction are absolutely governed by the mantra “give it to me now, give it to me for free”. Apologists for the looting blame poverty and inequality, which obviously play a role. But there are hundreds of poorer places in the world than SA, and it was really eye-opening to see people driving BMWs joining the looting.

The economics of looting are such a curiosity. I’m sure in the minds of the looters, they are winners. Look at my new wall-sized TV! But like the economy of the Zuma administration and populist economics around the world, the gains are a mirage. What seems to be a win reduces longer-term growth and confidence, which reduces employment levels and economic activity, which in turn reduces growth and confidence…

If anything good can possibly come out of this devastating week it will be that ordinary people will trust false prophets less and trust the longer grind more. It’s hard, but going forwards slowly is so much better than going backwards fast. DM168

This story first appeared in our weekly Daily Maverick 168 newspaper which is available for free to Pick n Pay Smart Shoppers at these Pick n Pay stores until 24 July 2021. From 31 July 2021, DM168 will be available for R25 at Pick n Pay, Exclusive Books and airport bookstores.

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All Comments 6

  • Zumanomics is an antisocial ‘science’ concerned with the production, distribution, and consumption of goods and services for selfish purposes. It studies how to influence individuals, businesses, governments, and nations in order to make choices about how to capture resources. The building blocks of zumanomics are the studies of labor (where and how to place loyal cadres) and trade (which SOE’s have large enough turnovers).

  • Miles, I don’t think so because there are too many forces acting in different directions and add weak, indecisive leadership into that with a president and cabinet ministers that can’t come up with the same story and we have this disaster. Add to that police intelligence and military intelligence having totally different stories and it makes it difficult to prosecute. I don’t believe in a good ANC. I only see a slightly pragmatic ANC that has to keep the channels of patronage open, hopefully on a low key basis, in order to save the ANC and a violent criminal element that will do anything to enrich themselves. I hope I’m wrong but I can’t see it as the pragmatic side is being blocked from implementing market friendly policies. The private sector could start sorting things working in the wink of an eye but the ANC won’t let them because that will make govt look completely incompetent.

  • It is time the ANC led government came to its sentences and put policies in place to GROW the economy instead of stifling it. Sticking to the same destructive, racist doctrines like BEE in the mistaken belief that these will rectify the inequalities of the past, will perpetuate the same disastrous situation we have now – a dying economy, and high unemployment! Cadre deployment also needs an overhaul. Placing unqualified, inexperienced and dubious characters in positions they are totally unsuitable for will further hollow out and bankrupt our once successful, world class State companies. If this is supposed to be a rainbow nation, the ANC would be well advised to remember that it takes everyone working together to make a success of this country. The current policies are counter productive and stifle the potential of this great country!

  • It’s a bleak picture well painted, Tim. The perfect storm has been brewing for a decade. Like most, I have been hoping against hope that a new dawn would bring a change and re-awakening. But there are only so many times that the most optimistic can hope for a move in the right direction. Now my fear is that the life in South Africa will only continue to worsen – and sadly there is little the writers in these columns can do to effect it one way or the other.

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