South Africa: The Next Zimbabwe

Apartheid was a terrible crime against humanity. It left people with deep scars,” Faleni Mzukisi of the Presbyterian Church of Africa said last October. “But I can assure you poverty is worse than that.”

He was referring to the current state of the Republic of South Africa. Fourteen years after the end of apartheid, some people are longing to return to its relative prosperity. For millions of South Africans, the Mandela “rainbow” revolution has become a gloomy cloud.

While apartheid denied people rights and privileges, the poverty that has grown to strangle South Africa deprives them the ability to meet even more basic human needs, Mzukisi told the participants of the 2008 World Association of Christian Communication Congress: “People do not eat human rights. They want food on the table.”

An astounding 40 percent of South Africans now live below the poverty line.

And the Southern African Regional Poverty Network says that since the official end of apartheid, “households living in poverty have sunk deeper into poverty and the gap between rich and poor has widened.”

The exact unemployment rate is under debate. Government statistics say it is “only” around 23 percent; unions peg it at around 40 percent. Either way, it is horrendous. Unemployment in the U.S. during the Great Depression peaked at around 25 percent.

And, although government ministers claim that South Africa is still growing and will avoid “recession,” conditions on the ground show recession has already arrived. Barclays Bank has warned that the economy is contracting. Over 200,000 jobs were lost during the last quarter of 2008—a huge number for a country of only 44 million people.

An Economy in Collapse

House prices in South Africa fell 4 percent last year. Add to that the 11 percent inflation the government reported, and in real terms homes actually lost 15 percent of their value.

The auto industry is another clear indicator of economic turmoil. New vehicle sales were down a massive 27 percent in December 2008. For the whole year, new vehicle sales fell 20.3 percent across all categories compared to the year before.

The metals and mining industry is getting pummelled. Though gold prices remained firm and even rose over the past year, the prices of virtually every other metal—including platinum, palladium, manganese and chrome—plummeted. Platinum, which makes up more than 14 percent of all South African exports, plunged from over $2,000 per ounce to around $960. Mining is the single most important employment sector for the South African economy. It is also the most important source of foreign revenue. But with commodity prices plummeting, revenues have fallen, and more job losses could result.

South Africa’s energy infrastructure is old and decaying. Due to government corruption and lack of new investment, much of the country now suffers the same widespread power outages the rest of the continent has grown used to in the post-colonial era. Last year, the state introduced electricity rationing; after the national electrical grid almost collapsed, much of the mining industry and other heavy electricity users started receiving only 90 to 95 percent of their power needs. Eskom, the state power company, is trying to borrow money to upgrade the grid, but the global credit crunch has made it difficult to find willing lenders.

Meanwhile, the cost of eating is skyrocketing. National food price inflation hit 17.1 percent in December. Coffee, tea and cocoa products became a fifth more expensive than the previous year. Grain products were up over a third; fats and cooking oils jumped more than 27 percent. Prices for vegetables, dairy products and meat all climbed significantly as well.

No jobs, and higher-priced food—not a good combination. It is no wonder that crime continues to escalate.

Fifty Murders a Day

South Africa’s social problems have progressed right alongside its economic woes.

HIV infection rates remain tragically high. Almost one in three pregnant women visiting hospitals is infected, according to a 2006 government survey.

Unchecked violence besieges much of the country. About 19,000 people were murdered last year—more than 50 per day. On average, a woman is raped in South Africa once every 26 seconds; less than 1 percent of those rapes lead to a conviction.

Rule of law has become the rule of organized crime. In February, 500 police in South Africa’s crime-ridden commercial capital, Johannesburg, went on strike, accusing authorities of failing to bring senior officers to task over corruption. Three days earlier, the government had disbanded the country’s elite anti-crime investigating unit, known as the Scorpions. The Scorpions had a much better track record than the police at solving crime, but according to Agence France-Presse, they fell afoul of the ruling African National Congress party for their corruption investigation of ANC leader Jacob Zuma. Zuma is expected to become the country’s next president when elections are held April 22.

But as bad as conditions are in South Africa, they may be about to get dramatically worse.

The Plan to Bankrupt the Nation

Under Jacob Zuma, South Africa’s government has shifted radically to the left. In a move to placate angry voters and cement power, Zuma is pushing a manifesto largely dictated by the South African Communist Party. His election promises, if adopted, could easily bankrupt the country.

The ANC already promises a free allowance of water and electricity to all people and has introduced “the largest welfare state ever seen in a developing country,” according to the Sunday Times. More than 40 percent of the population currently receive state handouts.

But these handouts are only beginning. The possible new state manifesto is said to call for universal health insurance, free education, increased child allowances, new maternity grants, wage subsidies, an old age savings scheme, subsidized housing for farm workers and military veterans, and free food handouts to all poor families.

On top of that, the manifesto proposes to transform the private sector through the “development of cooperative financial institutions.” In other words, to nationalize and communize the economy. Steps in this direction have already occurred, with far-reaching affirmative action laws forcing mining companies to place non-white people in managerial and executive positions regardless of qualifications.

Zuma’s program also calls for the state to take over South Africa’s central bank.

Economists are astounded. Servaas van der Berg, professor of economics at Stellenbosch University, says that just the proposal for a basic income grant of R100 (us$10) a month would force up marginal income tax rates from 40 percent to 66 percent.

So where will South Africa get the money to finance all these reforms? Zuma, who knows relatively little about economics, seems unconcerned. Most likely, he’ll get the money he needs the same way his friend Robert Mugabe gets the money he needs.

Lest we forget, Zimbabwe used to be even more prosperous than South Africa was at its peak. But then Robert Mugabe set off on his post-colonial reforms, social programs, government handouts and land grabs. How did he pay for it all? First, he redistributed the land in order to fill his coffers and buy favors. Next, he started nationalizing other sectors of the economy, including some of the world’s richest mines. Eventually he nationalized and asserted complete control over the nation’s reserve bank so he could print whatever money he wanted to pay the bills.

This policy destroyed the value of Zimbabwe’s currency, wiping out what little savings his people had left.

The ANC’s apparent desire to nationalize the central bank indicates what may well lie ahead for South Africa: Zimbabwe economics. That would mean a Zimbabwe standard of living for the vast majority.

Source: www.thetrumpet.com