Friday, April 12, 2013

Collapsing Countries: South Africa

If you take the red pill, you know that South Africa is sliding down the Zimbabwe pole. Power switched from the ruling, educated whites governing to educated blacks with a massive group of illiterate adults (SA: 30% adult illiteracy rate) voting the same cronies into power. Since the end of apartheid there has been a rise in nationwide problems like corruption, rape, murder, electric grid and infrastructure decline, rape, worker exploitation by black management, HIV/AIDS, security issues, rape, and some more rape. Just over 400,000 whites have fled South Africa since 1994. Black on white violence is reaching levels associated with genocide, and pundits think Mandela's death would spark even more. Population has increased significantly since 1994, so why is everything falling apart? It's a mystery says the liberal media. Masking the societal decline has been the run out of the tremendous industrial and economic base that was in effect in 1994. That amazing economic base has declined and is heading for collapse. This will have a much larger impact on the globe than the North African uprisings or a year ago.
 
Since the discoveries of diamonds and gold, South Africa has had a healthy balance of trade. Going back 25 years, one can see the consistent good balance of trade trend sharply to the negative after 1994. In the 2000s emerging market bubble, South Africa was treated like many other emerging markets but had an extra boost because of the long period of South African economic growth when under white rule. South Africa had a developed mining and commodity sector and was open to foreign investment after the end of apartheid. This fit perfectly in the secular commodities boom the world has had as well as the easy money FED practices that began in the early '00s. South Africa attracted investment and received lots of hot money in their high yielding commodity country currency due to past performance, which does not reflect the reality of SA today. They have grown the public debt, and the FED's ZIRP policy has helped keep their yield low (lower than their inflation rate). They have a well traded currency and keep depreciating. A perfect storm is set up for SA.
 
South Africa has experienced high rates of inflation, massive strikes and rough union negotiations, a decrease in investment, and a lack of infrastructure maintenance. This has created a major problem with electricity generation, which in turn hurts their mining operations. Mining is of the utmost importance for South Africa and the world because SA is the source for 75% of the world's platinum and 39% of the world's palladium. Platinum production peaked in '06, declining 19% since then. Gold production peaked in the early '70s and has dropped 80% since then. Some of this is resource exhaustion, but how much of this is replacement of the Boers who ran the show with Africans who do not have the same organizational and educational skills. South Africa's education scores are horrendous, land reform (white farm confiscation) is hurting farming and most socioeconomic measures are worse now. Government went from racist (anti-black) and efficient due to global pressure to corrupt, disorganized, bloated and racist (anti-white) with global enabling.
 
There is a possible out. If South Africa does fall into economic chaos and proves to be too big or too reluctant to change for IMF treatment, China could come riding in to save them. This would be a big, juicy target for China. China would have the cash to lend to SA in exchange for those rich natural resources. China would probably send their own crews to extract minerals. China could even help SA set up a tighter government to control the crime in SA. This would fall right in line with Xi Jinping's speech on respecting diversity of governments, refraining from meddling, and welcoming China's friendly help. The elites of the ANC selling out their nation's natural wealth to the Chinese while brutally cracking down hard on their people would count as a not in 1 million years unintended consequence of the end of apartheid.
 
The problem with South Africa is that the global community enables the bad governance of their nation. They get a free pass on many problems due to the memory of apartheid. They have 'freedom' but dysfunction. South Africa has expanded government spending for the people with redistribution and confiscation, but their future is Zimbabwe. Apartheid ended 15 years after Zimbabwe's switch to black rule, and their decline has tracked Zimbabwe's at a roughly 15 year differential. All of those government programs looked good when nice, South African natural resource companies were operating as they did in '94. It is not '94, the whites are leaving and the debts underwritten on past economic assumptions are racking up. As the machinery runs down, mining will shift to a trickle (crushing exports), their economy will suffer massive inflation, blowing up unemployment (25% now), and there will be a suspension of government services. Timed with Mandela's death, the already sky high crime rates could explode in the rainbow nation.
 
South Africa collapsing would destroy a more stable, large nation in sub-Saharan Africa. South Africa currently takes in refugees from other African crapholes. South Africa is also a well traded currency with a fair amount of foreign debt. The nation still exports many minerals, and still is a player in gold production, which is a commodity watched very carefully by our bankocracy. The media will never give this attention until it has blown up. By then, the media narrative will be that is was the legacy of apartheid that created failed South Africa. The mass media makes comic books whitewashing Mandela's life for kids. The real lesson is that people do matter. I'm willing to bet a majority of liberals thought South Africa could replace the whites for blacks and the economic gem in southern Africa would keep shining. Their materialistic, people are interchangeable cogs worldview, is refuted by SA's decline. The demographic change correlated to economic decline in SA is a real life experiment in replacing one set of people with another and testing the hypothesis. The results of failure are in. When South Africa has collapsed economically and socially, the whole world will be watching. Some will understand why, fewer will say why.

1 comment:

amaxen said...

Further, the rest of Africa has grown by an enormous amount in the last decade. SA is one of the very few which did not. When you consider that South Africa has an extractive economy similar to Australia's, it should have done *extremely well* during this rare time of rising metals prices. If the price of metals crashes as it has historically done, we haven't seen anything like how ugly it's eventually going to get.