by Hussein Solomon
The South African economy stands on the precipice of economic recession as a result of an unhappy confluence of external and internal variables. Externally, South Africa’s integration into the global economy is resulting in our economy feeling the negative effects of the Eurozone crisis and the slowing down of the Chinese economy. With no short-term solution in sight to Europe’s economic woes, our exports to Europe are shrinking. China, meanwhile, perceived to be the engine of global economic growth, is also slowing down. Indeed this year, Chinese growth is estimated to be the lowest in more than a decade. For South Africa, this holds disastrous consequences for our widening current account deficit and as jobs start to evaporate.
Internally, the current wave of strikes is sapping local and foreign investor confidence in the local economy and foreign disinvestment has become a noticeable trend since the Marikana tragedy. As the strikes in the mining and transport sector is set to spread in the coming weeks and as government lacks a clear strategy on how to deal with this, the rand has plummeted to almost R9 to a US dollar, rating agencies have already downgraded our economic prospects, and the International Monetary Fund (currently meeting in Tokyo) has lowered its forecasts for South African growth prospects for 2013. Indeed, an economic recession looks imminent.
This combination of internal and external variables are exacerbating an already weak South African economy and heightening the costs of corruption which has increasingly become institutionalized in the country. Moreover the danger of intensified social strife as people are laid off works is very real. Already, only four out of ten adults work – and only two of these in the formal sector.
In all this, what is lacking is political leadership. In this time of economic crisis, when the country is desperate for decisive and effective leadership, the ANC is turned inwards with a firm focus on Mangaung and political succession. Moreover, so-called solutions bandied around by the ruling party like the amorphous “Second Transition” hardly qualifies as an economic strategy. What does the “Second Transition” say about creating a flexible labour market? What does the “Second Transition” say about making the economy more competitive? What does “Second Transition” say about easing regulations to facilitate small business? What does “Second Transition” say about restoring investor confidence? What does “Second Transition” say about our failed education system which has difficulty with producing students who can read and write – forget anything more sophisticated. We simply do not know.
South Africans, you are on our own. Do not look for leadership from this rudderless, morally bankrupt and intellectually inept government to get you out of this mess.