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The great danger for SA’s future – Part I

The collapse of economic activity.
South Africa has had 10 unproductive years of inept leadership and a weakened economy built on a house of cards that has now collapsed. Image: Shutterstock

This is a two-part article looking at the implications of the Covid-19 pandemic. Part II looks at how almost every job is now at risk and the South African industries that have been hardest hit.

While listening to an international economic podcast on the consequences of this global pandemic and how governments are responding, I was prompted to think about how the first two months of lockdown revealed South Africa’s weakness – the shutting down of economic activity has led to its collapse.

This is a long-term if not permanent danger for the country’s future.

The economy will not return to its pre-crisis level because it was already defined by slow growth, rating downgrades, and a recession. Furthermore, South Africa and its people still face many months of second- and third-wave economic impacts that will linger, probably for 24 months or more.

Two factors informed this view.

Vicious cycle

Firstly, the shutdown that led to an abrupt stop in demand affected the interconnected relationships that are the heartbeat of the economy – the links between companies and their suppliers, between workers and employers, between importers and exporters; the links in the movement of goods and people; and eventually the link between the whole system and the consumer.

The collapse in economic activity led to a collapse in demand.

The latter stimulates supply, and every spent rand contributes to the creation of income, to production, to more demand, and eventually to the economy.

The naked truth

Secondly, South Africa has had 10 unproductive years of inept leadership and a weakened economy built on a house of cards that has now collapsed. The pandemic is like payback time for all the years of bad decisions and poor leadership.

In short, Covid-19 has exposed the weaknesses and there is nothing to use as shield.

It may be that the entire world economy is in crisis as a result of the pandemic. However, some countries will bounce back more quickly than others. They had economic good times – not by chance, but due to competent leadership and distinct policies that balanced the idea of an open economy with a national developmental programme that was responsive to a changing global economy. In turn, this has created a safety net that will catch their fall and enable them to bounce back.

Economy in freefall

South Africa has no safety net. The economy is freefalling into oblivion and the longer the lockdown continues, the longer the economic misery will persist.

Furthermore, there is a real risk of complete ruin for many small- and medium-sized businesses, caused by delays in accessing the allocated financial assistance. Diverse industries continue to lose income. At a government level, provincial and national budgets have been modified to respond to the crisis and we know the unintended outcomes of this action will be evident in a few years.

These, to me, are factors that will interrupt any chance of recovery and although I want to believe they will not materialise, we know that’s unlikely.

The worst outcome will be the impact on South Africans employed in smaller businesses and those in the informal economy.

Many will likely never find jobs again or have a way of generating income, because the wiping out of economic inactivity has given rise to ripples that will entrench prevailing socio-economic conditions.

Capacity to recover hollowed out

This is the gravest implication of the pandemic: in severing the interconnectedness and complex relationships that fuel and maintain the economy it has hollowed out its capacity to recover.

The emergence of businesses and jobs in place of those wiped out by the pandemic is going to be difficult and will take years to recreate or build.

The state’s response to the crisis, while commendable for its good intentions in some respects, has been found wanting in its long-term approach and has at times appeared random.

While the global economy of 2020 is shaken and unsettled, South Africa’s economy of 2020 is torn to shreds.

When citizens are unable to find jobs, create businesses and kindle demand because they have nothing to spend, will it be utopian to tell business and politicians that South Africa’s recovery pivots on plans that take climate change, distributive justice and the idea of a regenerative economy seriously?

A country divided

Is South Africa too divided to make American political scientist Robert Putnam’s notion of social capital work in the post-Covid-19 future? The concept suggests that a society that adopts reciprocity and cooperation built on trust for the benefit of the collective, rather than individuals, can produce high levels of economic and civic success.

The country is at the point where its leadership needs to stop lying to itself.

The government would have us believe that an already-weak economy pre-Covid-19 can be resuscitated with a cash injection, when in truth so much more is needed.

It will take much more than the R500 billion pledged thus far. Where will the needed cash come from? And what about all those pre-existing economic conditions; funding is needed, but so too is direction.

Turning to the International Monetary Fund (IMF) implies an acknowledgement that South Africa is ready to be told what to do.

Have we reached that point?

Are we ready to accept the conditions that will come with such a loan?

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” The country is at a point where the leadership needs to stop lying to itself ”
I disagree on this take. The Commie ANC leadership knows exactly that they have stuffed up a previously relatively functioning country beyond repair through theft , incompetence and systemic corruption. They are not lying to themselves. They also know that they do not have the capacity to fix the disaster of their own creation. They are just playing for time to steal by any means whatsoever what was left “unstolen” so far and cover these deeds with smoke and mirror announcements. If this takes some more blatantly lying – so be it. It’s the ANC’s calling card.

What they are now doing is stealing from our future, mucking up any hope we had.

Future is already spent mojojojoe

An economy is a self organising network of capital, energy, income, labour, and information flows.

I’m sure you could add some more items to this list. But the big takeaway is that it’s self organising.

There is absolutely no way that state intervention can operate in all these arenas.

So, for example, if the state kicks off an infrastructure programme, how does this revive the tourist industry, or improve the educational outcomes of children who have lost a year of schooling? You can ask the same question of the increased social grants.

So it’s obvious that the destruction of economic activity can’t just be willed or bought back into existence – in the way that Nomvula Mokonyane thought that if the rand collapsed, we could just pick it up.

Tragically we have a state that’s a firm believer in magical thinking with a totally overblown view of its capabilities.

And the arrival of covid-19 is going to expose these fault lines in a brutal fashion. Because the virus will spread largely unchecked, the health system still won’t cope, and the lockdowns will drown us in debt and leave the economy in ruins for years to come.

People will likely start dying of hunger and starvation and many more will slide into poverty.

And from these ashes will rise a socialist paradise with a sovereign wealth fund, a state bank, a successful SAA, and a fully capable state that will create millions of inclusive jobs, implement local manufacture of nearly everything, and have all manner of social safety nets and minimum wages.

Seriously?

This is the problem when you have our type of electoral system and cadre type patronage politics in a post-apartheid SA. The ANC, who have even turned their backs on the few good leaders like Tutu and Kathrada (Tutu said even Mandela won’t for the current ANC) and the ignorant followers don’t course correct or do anything on the injustices of corruption, which kills economies quicker than anything.

Covid-19 exposed the SA economy in ICU, put there by ANCcorruption.

Different political-economic systems do not change the human psyche. Individuals from different political systems share the same hopes and fears, the need for basic necessities, and they want the future to be better than the past. People seek opportunities to improve their situation, therefore, they react, and adapt to a particular set of circumstances, in order to exploit the situation for their personal benefit. Different systems incentivise and reward different behaviour patterns.

The free-market capitalist system incentivises individuals to take responsibility for themselves because life is property. The right to life is the right to own and protect property. The individual will put in a lot of effort to gather food for the winter because the system prospects his right to the fruits of his labour. The system incentivises and rewards individualism and libertarianism because those who figure out the best way to serve the consumer with the best product at the best price is rewarded by those consumers. This system rewards individuals for acting in their own, narrow self-interest because the whole community benefits from the goods that are provided by that person who acts out of self-interest. The rule of law holds people accountable for their actions.

Although socialists want us to believe otherwise, people from collectivist societies also act out of self-interest, because they are also human. The system incentives and rewards quite destructive behaviour patterns though. The lack of property rights, communalism, in other words, incentivises people who act in their own narrow self-interest to exploit the property of the community. They keep the profits to themselves, while the community bears the costs. The most unscrupulous individuals are rewarded by the system when they overgraze communal lands, plunder SOE’s, raid BEE schemes, abuse the Mining Charter and abuse the legislative process to plunder the nation through taxes. This system incentivises people who act in their narrow self-interest to exploit the consumers and to plunder the resources of the community. Accountability is shared by the collective in this system, therefore, nobody is held accountable for their actions.

South Africa under the ANC government is an example of communalism in action. This is the road to slavery, the loss of liberty, the African disease.

I asked myself the other day, what is South Africa’s competitive advantage? What do we have the resources and skills to do here better than anywhere else? Apart from natural resources, i.e tourism and mining there is not much else.

We do have many competitive advantages but they are smothered under our one huge disadvantage, namely the ANC government. We have the best-regulated financial markets in the world, a relatively well-capitalised and well-regulated banking system, an independent Reserve Bank with a highly-capable Governor, relatively large pension fund savings, the most abundant mineral wealth on earth, innovative people with the entrepreneurial spirit, some of the best doctors, nurses and teachers in the world, world-class academic institutions that provide world-class CAs, PhDs, CEOs, lawyers and academics. There is a lot of goodwill in our diverse society. We even managed to build the atomic bomb at one stage, when we needed it.

We do have a lot of potential all right. All this potential is smothered under the debilitating force of communism. By smothering our competitive advantages, the ANC is handing a competitive advantage to our international competitors. They create the jobs that we destroy. Their economies grow while ours shrink. They can afford social projects while we cant. They can afford the public wage bill while we cant. They can provide public healthcare while we cant.

The fact that we have an ANC government is a competitive advantage to our competitors and a disadvantage for us. When our people support the ANC, they are voting for famine.

“…world-class CAs, PhDs, CEOs, lawyers and academics.”

These are not the sort of people needed to rescue a crippled economy!

Adding to Sensei below I think we have, or did have, quite a few “advantages”. Skilled, experienced and well resourced professional firms (er, not including accountants he he), construction and mining expertise etc. But mostly driven out and squandered by the ANC regime, also by their ongoing support of destructive kleptomaniac dictators in some of our surrounding countries, destroying their economies and any growing market for SA goods and services.

But all this is just theoretical under the ANC; we may as well be discussing Uruguay say.

We have 9000 species of Fynbos that doesn’t grow anywhere else in the world, now beat that!

The great danger for SA’s future – Parts 1, 2, 3, 4 . . . is the ANC/EFF/COSATU/SA Commie Party and all their hangers-on. Get rid of all these knuckledraggers and we’ll be in a much better position.

Mamokgethi Molopyane …you surgically dissected the very rot in the ANC ending off with …

“Turning to the International Monetary Fund (IMF) implies an acknowledgement that South Africa is ready to be told what to do”

If you are crossing your fingers this quote “guidance” will arrive with abated breath ….so many more are with you holding theirs

Everything seems to be about quick fixes. There is a inequality issue – no problem, lets just make the rich poorer.

It is a lazy way of running a country, it is a lazy way of being a leader! It has nothing to do anymore about raising the poor from poverty, but everything to do about lowering the rich.

And I agree, it will be difficult to take the road less traveled for everyone’s benefit, because going against the law of Entropy usually is .. but if our leaders is not even willing to consider this route then they do not deserve to be leaders at all..

And it reminds me of the Christian Golden Rule “Do unto others .. ” versus “Do not do onto others” .. IMHO the former will yield the best outcome for our country

Well done Mr Molopyane , I think you got part 1 right, as scary as it is. Looking forward to part 2 . Indeed if you have some solutions to this unfolding disaster , love to hear them. I have just been contacted by a mother in the local township. She has no food , no electricity and is sitting with a winter storm howling around outside. This is the reality of life for many in this country.

Very good article.
Just compare. 75 years ago, two completely devastated countries, Germany and Japan, rose out of the ashes and within twenty years, became economic powerhouses, surpassing the UK, France, Canada, etc.
But then the German/Japanese work ethic prevailed.
One other country, the USSR which suffered incredible devastation at the time, continued with socialist/communist ideologies which lead to its complete demise 35 years later.

The problem with the the current political system is that the politicians making the executive decisions are able to insulate themselves from the CONSEQUENCES of their decisions. And always, ONLY the BAD consequences. The good consequences they very quickly and loudly claim credit for.

Doesn’t matter whether Capitalist or Communist. Same sly behaviour. See how Trump exploits this.

What we need to drive is a Political system that puts into practice the principle that politicians MUST eat their own dogfood.

Unfortunately for Sensei’s arguments, the country that is best demonstrating this now is actually China.

Sensei’s exemplar – The USA?

Now in a death-spiral terminal decline to REAL 3rd World status!

China actually proves my point! They are not a democracy, therefore the voters who do not own property cannot determine economic policy. The one party system actually ensures a capitalist economy and property rights. This is the opposite of what we have locally and that is why China will be the largest economy in the world soon, and why the South African economy will be decimated by the democracy.

Sorry Sensei!

You are repeatedly propagating this “property ownership” theory.

While this does have its merits, the premise is quite superficial because it totally ignores the REAL foundation underpinning a nation’s success.

China’s success is is built upon the INHERENT strength of STRONG family units – which is producing well-behaved, hard-working and teachable children in abundance.

China understands the FUNDAMENTAL importance of having this aspect in place. It’s front and centre in their policies!

Singapore too!

I’m afraid Western “Economists” just don’t have the tools or mindset to grasp the FUNDAMENTAL IMPORTANCE of this concept to national success.

Hence all this clinging to half-baked economic theories that totally miss how real life ACTUALLY works.

Jonnox, if you know how real-life economics actually works then I presume you are a Nobel Prize laureate. My views are formed by August von Hayek, among others, who won the Nobel Prize for economics. If you have superior ideas you should publish it. It might be worth something to someone.

Tsk, tsk, Sensei!

You must do better than distracting with red-herring sideshows that DELIBERATELY avoid actually addressing the issues I raise. This only draws MORE attention to the weakness of your thesis!

My arguments are clear. And DIAMETRICALLY opposite to yours.

My thesis – albeit my naive opinion – SATISFACTORILY explains not only the fundamental foundation supporting China’s rise. But also, why China now possesses an INHERENT strength that will provide a formidable future advantage over peer Western competitors.

The alternative that YOU offer – the much vaunted “Principle of Property Ownership and Capitalism” – is an INSUFFICIENT explanation of the Root Cause of China’s growing success. And by extension also, the USA’s terminal decline(my opinion).

I’m not disagreeing with you that property ownership is an important consideration for developing a nation. It certainly is! I however FUNDAMENTALLY disagree that it’s anywhere near the FIRST building block that one must put in place.

My thesis is UNIVERSALLY APPLICABLE to ANY country that embraces it’s core principle (that national success begins FIRST in the Family Unit). China is just an outstanding example where the influence of these important factors are really easy to see.

Finland and Israel are additional examples.

Singapore is my favourite example for the very reason that the social problems they faced – and so successfully overcame – after WW2, are very similar to the EXACT SAME problems SA faces.

I firmly believe that if SA can do what Singapore did, we will find our path to our own success.

Gentle Hint (because many erroneously think otherwise!): Singapore’s success was (and is) NOT due to their Education policies! Education was NOT the FIRST priority for Prime minister Lee.

Sensei, you have to knock my thesis out of the park with a properly-argued rebuttal.

Or else it’s MY thesis that bust yours, and is the last-man standing!

There’s no place for half-baked opinions from EITHER of us (me included!).

Your turn to serve …

🙂

I think all you folk should include the word DISCIPLINE

Entering the debate here I understand that Jonnoxx is arguing that encouraging core family units is a prerequisite for economic success. Whereas Sensei argues that property rights are requisite, They cited Japan, Germany, China and the USA as examples of their arguments.
I have to say I like Jonnoxx’s idea but he doesn’t explain his reasoning for a strong family being a driver for economic growth. How then does a strong family cause strong growth in an economy?
I would like to offer a rebut to his argument that China is the future; this is based on the emerging demographic forecasts for the following century. Prediction is that China’s population is going to drop to 700million people due to the after effects of the 1 child policy. (Is China a case for encouraging core family unit?) Previous forecasts have pointed to 1.4billion people(as far as I remember). Furthermore, this will be an ageing population, a demographic bomb. China has a big problem on her hands I don’t see how Jonnoxx can say the future belongs to China even under his core family theory.
On the other hand due to immigration, USA population numbers rise to above 500million people in the next century. The next century belongs again to the USA.
Unfortunately, due to the grinding and relentless progression of the global fertility cycle the global population starts to go into terminal decline from 2050 onwards when it reaches its peak. The countries that draw the immigrants are going to perform best thereafter.
Based on this growing realisation geopolitical attitudes are changing. China is no longer being seen as the future star, even if her economy takes emminence, the figures that come out of China are unreliable and often plain lies.
Also, arguing that the USA is capitalist is incorrect. It is more and more some other construct. I would even argue that the USA is not even a democracy, but rather an oligarchy.
Some authors suggest that the crux to a successful economy is access to lots of free, open and accurate information – information economies.

Jonnox and mojojojoe, thank you for your contributions as well as for the opportunity to debate this very important issue. We certainly cannot say that communalists in South Africa do not love their children? They love their children as much as anybody else, but the economic system makes it impossible for them to protect and strengthen the family structure.

The Chinese and Japanese people count among those with the highest IQ on earth. The Japanese and Chinese culture, due to their highly sophisticated philosophical and spiritual foundations in Confusionsims, Taoism and Buddhism, have always held the family structure in high regard. This has been true for ages. The respect for the importance of the family structure has been there before, during and after the extremely destructive period under communist ruler Mao Zedong when famine led to the deaths of 45 million people.

The family structure, their relatively high IQs, the most sophisticated spiritual philosophies, their long academic history and their sheer determination could not mitigate the loss of property rights under communism. Property rights form the foundation of the family structure. The migrant labourers in South Africa came from the communal lands, not from those lands where people held title deeds. On one side of the fence, the lack of property rights enabled the decimation of the family structure, while on the other side of the fence, the title deed protected the family structure. Less than one metre marks the difference between a sound family structure and structural decline. We can incorporate Maslow’s Hierarchy on Needs to explain why the family structure falls apart under communalism and thrives under private ownership. The family structure, as well as private ownership, results from accountability. The lack of accountability under communalism leads to the implosion of both.

The family structure is a result of financial security as well as a driver thereof. This positive feedback loop, and how it rests on the foundation of property rights, is explained and propagated by the Ten Commandments. The religion protects the sanctity of the family structure, therefore the religion protects property rights as the foundation of law and order.

I look forward to your kind reply.

Thanks Mojojoejo and Sensei for putting my thesis to critical examination.

@ Sensei:

The argument that “communalists do, or do not love their children”, is irrelevant. Being a Socialist, Communist, or Capitalist, has very LITTLE bearing on this aspect.

Good parents, wherever they are, love their families. Dysfunctional parents, wherever they are, are BAD NEWS for their children.

AND – to my point – for the NATION as well.

My point is simply this: a small, LOVING, nuclear family INHERENTLY provides SUPERIOR future LONG-TERM advantages to the offspring vs the similar siblings in a DYSFUNCTIONAL peer family in EXACTLY the SAME environment.

Children from a good family environment generally tend to be MORE intelligent, MORE well-behaved, MORE conscientious, and MORE teachable (in a good way!) than their peers from dysfunctional families.

Doesn’t matter where in the world, or under what type of political regime … this FAMILY advantage is material, and stands out as the KEY differentiator for determining FUTURE success of the progeny.

Its my thesis that “GOOD FAMILIES” drive EVERYTHING else!

This is – in my opinion – so important, that if you don’t have this in place FIRST, then NOTHING ELSE matters.

This is where I FUNDAMENTALLY disagree with Sensei.

While Sensei appears to admit now that while “a good family life” may indeed be useful, it is OTHER political or Economic interventions that are MUCH MORE important.

In my view, this is putting the cart before the horse!

Sensei’s thesis is COMPLETELY undone when you test his thesis against his poster-child for property rights – the USA.

The US reached its zenith during, or soon after, WW2.

Ever since then it has been on a decline.

Imperceptibly at first for many decades. But now the decline has suddenly gained dangerous – and VISIBLE momentum. And is this very minute, playing out on our TV channels in a virtual free-fall to Anarchy and a REAL 3rd World status!

Who wudda thought dat could happen in our lifetime???

EVERY important attribute that Sensei prescribes WAS in place! Yet still, the wheels are coming off. Why so, Sensei?

Yet in China, it was – in my opinion – a DIRECT result of the enforcement of the one-child policy that RE-INFORCED above all else the sanctity of a small loving family in China. And it was the CONSEQUENCE of this (well-behaved, intelligent children) that has enabled China to grow into the Superpower it now is. It’s quite possible this was an unforeseen consequence of China’s planners. The other problems that Sensei alludes to wrt to China’s one-child policy are real, but have little bearing on this debate.

To digress, if only India had ALSO implemented a one-child policy. What a DIFFERENT nation they would now be!

The US catastrophe didn’t “just happen”. And it’s not restricted to just the USA. The UK has the EXACT same problems!.

WHY is this anarchy gaining ground?

In my opinion, it’s ENTIRELY because of the CONSEQUENCES of NATURAL inequality arising from the rapid growth of demographic cultures where STRONG family values are NOT practiced with ANY real enthusiasm.

Those communities that have MORE of GOOD family behaviour will exhibit GREATER – and a more sustained and robust – success than those communities where the quality of family life is regarded as a mere afterthought.

Clever hardworking FAMILIES make clever hardworking communities, make clever hardworking nations. The MORE a nation has of this, the BETTER and MORE competitive a nation is against its peers.

Importantly, one CANNOT escape the reverse of this!

That principle holds EQUALLY true WHEREVER – and under WHATEVER political regime – one is. Hence my criticism of Sensei’s thesis. I don’t so much question the importance or utility of his “Building Blocks for a Nation”, as dispute that THOSE blocks are the ones we should be FIRST considering to put in place for the FOUNDATION of a nation.

This is no different from building a house, where the Roof is certainly a VERY important part of the structure, but is WORTHLESS if you have not built the PROPER foundation first.

USA, China, Singapore or SA. Doesn’t matter. The ORDER a building is constructed matters!

I know of NO exceptions to this observation.

What’s happened in South Africa is relentlessly logical and quite stupidly simple: i.e. if some of the least informed people in a country are permitted en masse to elect some of the least principled people in that country, then things will definitely go wrong. What else could anyone expect? I mean, really?

It has been obvious for a while that South Africa is in a debt trap. I expect government will first use “prescribed assets” to fund the fast growing state debt cost and bloated public sector wage bill. And of course to loot. Only once all this money has been “stolen” will the government be forced to go to the IMF for a bailout. I would expect very violent protests and unrest when government implements the IMF forced austerity measures. All public sector workers and pensioners will probably have to take a salary cuts, the same thing happened in Greece. The state grants may also be reduced. Right now people should move any discretionary investable funds offshore before exchange controls are tightened to stem capital flight. South Africa’s future looks very grim. If you are young and skilled emigration is an option. Those of us that are to old will remain but the life will become a lot more difficult. Unless business and energy friendly policies are implemented soon we will turn into the next Zimbabwe and Venezuela.

Give Miss Molopyane another Bells (or rather Pimms for the lady) for another good article.

The economic policy stagnation, no, constipation in the ANC is causing more damage than State Capture.

Having trade unionists in charge of ANC economic policy and in charge of Trade and Industries makes as much sense as a rugby coach coaching a soccer team.

We are witnessing the decline of the ANC and a very slow rebirth of SA politics. However, SA do not have the time for that.

There is still some economic activity but the ANC is working on it. Economic freedom gets closer every day.

I’m always greatly concerned how this beautiful nation cuddles up with states like Cuba. A lot of honourable South Africans died fighting those people, and their failed ideology.

Pray SA borrows from IMF.

Things will not get better, not in the long run. mark my words, for things to get better at a sustainable level would require government to relinquish power and admit have been wrong for the last 24 years. No government in modern history has capitulated power to it’s people willingly. Only revolution and civil war leads to change, not politics. Politics merely shifts the power and problem to a different government.

If we had social cohesion, we might have had a chance. We have zero social cohesion. One group is being made the scapegoat for all of the countries ills. We have millions of unemployable people and millions that shouldn’t have the jobs that they do have. This country is finished, the so-called pandemic which is a load of crap has just accelerated the demise. We’ve hade the village idiots in charge for 27 years and now “Their people” will pay the price. There is a dark future awaiting us.

End of comments.

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