SOUTH AFRICA’S POWER CRISIS COULD TRIGGER RECESSION
With its strategic mining industry, which is dependent on cheap power and labour, its long distance from export markets and its inherent political instability, South Africa is a place where crises always wait just around the corner. Nevertheless, over the past three-quarters of a century, the country experienced only three real crises. First was the Depression of 1929-33, and then the crisis of 1985-1990 inflamed by P.W. Botha’s Rubicon speech. Now we sit with a crisis around the infrastructure, skills and crime.The great crisis of 1929-33 affected South Africa when the economy still stood on wobbly legs with mines of limited life-spans. A weak manufacturing sector and a struggling agriculture. Then came the world-wide Depression, a grinding drought and a financially disastrous attempt to stick to the gold standard. Capital poured out of the country and there was a general expectation that South Africa would sharply devalue its currency. Exports fell dramatically, the production of the manufacturing sector plunged by about a fifth, and the price of maize, the main agricultural crop, declined by half. Some banks considered closure.
Despairingly, Jan Smuts, leader of the opposition, wrote: “There was never a test for our economic civilisation, and the question is whether we can come though the drift without a serious challenge to our spiritual heritage’. Gen. J.B.M. Hertzog, the prime minister, and Klaas Havenga, minister of finance, found the demands of the farmers for large-scale help intolerable. Hertzog was on the point of writing off both capitalism and democracy as systems which had encouraged people systematically to put their own private interests above the general interest.Crisis faded
The political and economic crisis faded virtual overnight. The National Party and the South African Party first formed a coalition and then merged. Late in 1932 South Africa stepped down from the gold standard and the gold price almost immediately rose by a half. Over the next 40 years the economy would grow by an average of 5 percent every year. South Africa was ‘saved’.The Rubicon crisis of August 1985 was preceded by a year of continuous riots and strikes which brough white supremacy ever increasingly under pressure and forced the governent to introduce a partial state of emergency. Sanctions and a lack of solid investment began to gnaw at the economy. Cabinet ministers in the National Party under the leadership of P.W. Botha believed that a dramatic political declaration was necessary to break out of the political and economic throttlehold.
Then came the hammer blow of President Botha’s speech on August 15 1985 in which, while jabbing his finger, he wrung the neck of the enormous and wholly unrealistic expectations of ‘power-sharing’ in and outside South Africa.
Damning reaction
The economic comment was damning. The rand fell immediately by 10 percent and then weakened further. Economic growth was at nil, inflation at 16 percent, and rates at 21 percent. The international community under United States leadership imposed comprehensive economic sanctions.
And yet 15 years later it looked as if South Africa was out of the plight. With sanctions and political instability out of the system, and with a sensible macro-economic policy, the economy would find benefit in the great flowering of the commodity market in the East. The growth rate was at a level which until recently had been regarded as impossible. But at the beginning of 2008 it looks as if South Africa finds itself in a political and economic crisis of the same order as 1929-34 and 1985-1994. We have a crisis over skills and infrastructure, dramatically underlined by the power shortage.
Whereas the first two crises can be compared with someone who has been hit on the head with a heavy hammer, this one looks like a person who is being increasingly throttled and is thrashing around for breath. It is a dismal tale of too rapid transformation, ideological idiocies, the alienation of minorities and the loss of their skills, instability in the governing party, and above all a lame duck of a president with deplorable credibility.
The crisis now
There is an inclusive infrastructure crisis now: electric power, roads, railway lines, water delivery and drainage. There are schools where four-fifths do not function properly and a public service where big sectors do not know what service delivery and book-keeping mean. There is a crime crisis of enormous extent.
For South Africa to come out of this crisis, a global approach is necessary in regard to affirmative action, training, employment, development of the infrastructure, and of the criminal justice system – together with strong leaders with great vision and courage. In contrast to the earlier crises, such leaders presently seem to be as scarce as chicken’s teeth.
But one thing is certain: we can also come out of this crisis.
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