BRIC a Brack

We use the acronym “BRIC” to refer to those developing economies on a surge, but in fact this is a formal association among Brazil, Russia, India and China sharing that economic leadership, holding summits to discuss mutually relevant issues. In 2010, South Africa, that continent’s economic lion, lobbied the association for membership and was admitted, and the group became known as BRICS. We’ve noted in recent blogs how China’s growth, notwithstanding optimistic (albeit revised) statistics seemingly to the contrary, has stalled, and how internal political wrangling and corruption have tanked the Indian economy. It’s time to look at another BRICS nation facing severe economic struggles.

South Africa, a supplier of gold, platinum, diamonds and a host of other vital mineral wealth to the world, is now hitting an economic wall, inflicting more pain, inviting more violence and causing more disruption that at any time since the battle to overcome apartheid (a statutorily and brutally enforced racial divide) in the 1980s and 90s. Despite her vast wealth, there is a still a major schism in South Africa between the haves and the have-nots. Poverty is pervasive, unemployment always high and the nation ranks among the top ten countries in economic inequality. And since South Africa is a powerful exporting country, the crash of the global economy has drawn down demand for its exports.

“The crisis in Europe, its largest trading partner, has taken a grim toll. Amid the slump, hundreds of thousands of jobs have disappeared. Economists are cutting their already anemic growth forecasts for South Africa, the continent’s biggest economy.” New York Times, October 13^th. The tension between falling demand and abysmal wages has produced new levels of public disapproval that have resulted in police shootings, protests and strikes.

“[T]ens of thousands of workers [walked] off the job in the biggest wave of labor unrest to hit South Africa since the end of apartheid. Wildcat strikes by gold, platinum and iron ore miners have crippled one of South Africa’s most important industries, prompting the nation’s first credit rating downgrade [citing political instability] in nearly two decades and a slide in the country’s currency, the rand, to a three-year low.

“And the troubles are far from over. The truck drivers have ended their nearly three-week strike, but not before causing food and fuel shortages that sent shudders through an already struggling economy. The mine strikes have dragged on, and some municipal workers have announced plans to join the picket lines as well.” NY Times. The post-1994 political scene led by activist Nelson Mandela, where apartheid was finally quashed, was supposed to bring new opportunity, lifting millions of impoverished Blacks into the mainstream. But to maintain significant profitability, the mines fought strongly to keep wages to a minimum, and the governmental pledges and union efforts have failed to stem the tide of a growing wave of anger and frustration that really, little has changed.

“South African employers and unions have long had rancorous relations, and strikes are a common feature of life here. But this time seems to be different. While the unrest is specifically about pay, it has tapped a deep well of anger among the employed, who are frustrated with the [leading political party in power, generally taking 60-70% of the vote, the] African National Congress, which came to power in 1994 at the end of white rule promising ‘a better life for all.’

“Nowadays, the party is increasingly seen as interested mainly in self-enrichment, an impression underscored by reports that the government is paying for $27 million in renovations to [President Jacob] Zuma’s private village home, ostensibly for security reasons. The project is the subject of multiple investigations…  Altogether, the labor unrest, broad disillusionment, dimming economic prospects and political inertia represent perhaps the most serious crisis South Africa’s young democracy has faced.” NY Times. Political in-fighting at the ANC and challenges from smaller parties seem to be accelerating. A horrific incident in August at the Lonmin platinum mine (above) in Marikana resulted in the police killing of 34 rock drill operators engaged in an illegal strike, a moment that seemed to open the floodgates of frustration.

According to pollster Afrobarometer, almost half (47%) of all South Africans describe their country’s economy as bad or very bad, heading in the wrong direction (46%),  and 41% said their lot in life was fairly bad. Although timing for such economic disruption may have been particularly heavily based on the fall in global demand, clearly, the general perception of inequality and the country’s failure to meet its most basic pledge almost two decades after the fall of apartheid needs to be addressed.

The vast mineral wealth will still be in South Africa, regardless of global issues, and will regenerate in better times. But unless the underlying system changes radically, that wealth will remain at the top with very little filtering down to the bottom of the economic ladder. The mood in South Africa tells us that this radical change is about to happen. How this will impact this vulnerable nation has yet to be seen, but there are lessons in this for us all.

I’m Peter Dekom, and the less people have to lose, particularly when they are surrounded with the trappings of wealth in others, the more volatile the political system that supports the inequality.