REJOICE THE BELOVED COUNTRY - A Response: Economist Magazine Article

“CRY THE BELOVED COUNTRY – South Africa’s sad decline” were the words emblazoned on the front over of the highly influential Economist magazine (week 20-26^th Oct 2012) over an image of desperate stick wielding striking miners. The editorial emphatically declared that South Africa is sliding downhill while much of the rest of the continent is clawing its way up. Why this is important is that the 1,5m hard copies of the weekly circulation of the Economist magazine is read and quoted by the world’s most influential business and political leaders and decision makers. In addition the Economist.com website attracts over 14m unique visitors per month. As a country and as a public relations exercise, you simply do not want to make the front cover of this highly regarded publication for all the wrong reasons. The Economist is known for its well researched and brilliantly written editorials and special reports. The world’s two most influential ratings agencies, Moody’s and Standard & Poor both downgraded South Africa’s sovereign debt during September and October respectively. Moody’s also downgraded a spectrum of South African corporate investment instruments, including several South African residential mortgage-backed securities. As the risk profile of these securities increases so does the cost or interest payable on them.

Isaac Newton published “Mathematical Principles of Natural Philosophy” in 1867, which was to become one of the most important books in the history of science, providing what we refer to as Newton’s Laws of Motion. His third law states that for every action there is an equal and opposite reaction. This is so profound and infinitely applicable to so many aspects of life. Something happened in South Africa in August 2012 that has had this type of equal and opposite reaction across the economic and political playing field. The Lonmin owned Marikana mine strike started on 10^th August 2012 and the resultant clashes with police left 34 workers dead followed by extensive CNN coverage. The contagion to other platinum and gold mines resulted and even 20,000 truck drivers went on strike, resulting in fuel shortages in some parts of the country. This labour unrest directly affected Moody’s and Standard & Poor’s downgrading of South African sovereign debt. How striking miners at a platinum mine can impact the market for residential property along the Dolphin Coast may be quicker and more direct than you can imagine. Professor Philip Frankel of Wits, published an outstanding article entitled “Marikana: 20 years in the making” in the Business Report on Oct. 21^st 2012. As a leading political scientist and consultant to the Office of the President and Department of Mineral Resources, he points to structural aspects of how migrant labour is sourced by labour brokers and employed by the mines, the conditions these miners live in and the social and economic consequences surrounding their existence. The high incidence of HIV infection and the questionable safety records and working conditions at specific mine shafts he mentions.

The Economist article declared that foreign investment to South Africa is drying up, it highlighted the government’s failure to provide services, the disgraceful state of our education system (according to the World Economic Forum, South Africa ranks 132^nd out of 144 countries for its primary education and 143^rd in science and maths), our extra-ordinarily high unemployment rate – officially 25% but probably nearer 40%, and our tragic inequality of wealth. We all know that since the end of apartheid a tiny black elite has accrued great fortunes, which according to the Economist has only widened the wealth gap. South Africa’s “Gini coefficient”, the best measure of inequality, in which 0 is the most equal and 1 the least, was 0.63 in 2009, but 0.59 in 1993. It pulls no punches in blaming the ruling political party’s incompetence and outright corruption as the main causes of what it terms South Africa’s sad decline. The essence of the article was that South Africa is experiencing a failure of Leadership, where the independence of the courts, the police, the prosecuting authorities and the press are being undermined. The article does provide some advise on how to spur change and integrity. It calls for more accountability of political representatives through a constituency-based system and more political competition, including the disposal of the president (although most pollsters suggest this is highly unlikely). The office of the President, through spokesperson Mac Maharaj was quick to respond, calling the article grossly incorrect and highlighting South Africa’s inclusion in Citigroup’s World Government Bond Index, the successes achieved in fighting HIV and AIDS, growing inbound tourist arrival figures and the government’s New Growth Path framework and its 20 year infrastructural development programme.

In October, Gill Marcus, the Governor of the South African Reserve Bank, said that the past two months had hurt South Africa’s reputation as a place to invest, pointing to billions of Rands in net equity-market ouflows as evidence of this loss of confidence. Clem Sunter and Chantell Illbury are extensively published authorities on South African future scenario planning. In a widely circulated commentary written on 10^th October 2012, Mr. Sunter stated that they were holding the odds at 50:50 on South Africa progressing to the “Premier League” on the one hand or declining to the “Second Division and Failed State” on the other. He maintains that we are at a tipping point where it could tip either way, and with extreme consequences. Mr. Sunter suggests that we need a new economic accord, which gets rid of waste, inefficiency and corruption. To tighten anti-monopoly legislation to create the space for millions of new small enterprises, to return to a stable industrial relations climate and greater wage parity, better living conditions for workers and a greater sense of common purpose.

Faced with such negative sentiment from so many influential sources an excellent letter addressed by Paul Harris, co-founder and non-executive director of FirstRand to a friend in Australia enquiring after his wellbeing provides the silver lining to the cloud. He makes the point that doomsayers have been predicting South Africa’s imminent demise since the sixties, that we have survived far worse, and as a banker points to our healthy local banking system compared to the crisis Europe is facing. As South African’s he notes that we tend to fluctuate between off the scale euphoria and inspiration on the one hand and the deepest depression on the other. He states that the South Africans he knows get of their butts and do things to build our country rather than whinge from a position of comfort. To this I say “Amen”. Yes we have our challenges but as a nation we are incredibly positive, resourceful, tenacious and have a well-developed sense of the importance of uplifting underprivileged communities. Together we can make a difference. Visit a faith based community project such as the LIV Village in Cottonlands to see this at work and your heart will soar on the wings of eagles. You will be inspired and positive about the future of those HIV Orphans being cared for and for South Africa as a nation. Property investment is by nature a long-term activity. When I am faced with a wave of negative sentiment I get excited and immediately start looking for the buying opportunities, knowing that the money is made when you buy rather than when you sell. REJOICE THE BELOVED COUNTRY – we are not in decline, we are great by choice!

(Author: Andreas Wassenaar, Published in The Ballito Mag, Dec 2012)