5 reasons why South Africa won’t become the next Zimbabwe: economist

Like the rest of the world, South Africans seem to read every bit of pessimistic news they can lay their hands on, says Francois Stofberg, economist at the Efficient Group.

Stofberg said it is easy to fall into “an eternal pessimistic cycle” online, because many South Africans don’t realise that Google and Facebook algorithms pick-up on searches, conversations, posts on various websites, and the videos being watched.

He said that, while the negative news may be daunting, and people feel like everything is heading in the wrong direction, “South Africa is not the next Zimbabwe, or Venezuela, because five fundamental structures are still in place”.

The economist outlined these five structures and their current role in the economy:

  • We have a (relatively) healthy and working democracy, which amongst others means that we can get rid of corrupt leaders without shedding blood. It also means that power-corrupt crooks can’t stay in power for too long;
  • Our press is free, and this leads to crooks being caught. Even though they are seldom sent to jail, their misdeeds are uncovered, and they’re removed from power;
  • Our judges are unbought, and the rule of law is enforced;
  • Our monetary policy is immaculate. Not only does this help to reduce the rate at which buying power is eroded, but stable prices create a healthy environment for an economy to thrive in. Also, at current and projected levels of inflation long term interest rates are reduced. This in turn reduces the total long-term debt burden;
  • Our financial markets are well-regulated, very liquid, and our assets are in high demand (even the government debt used to bail-out Eskom). This means that the same voters who put the ANC in power, feel the impact of this poor decision on their pockets. That’s why the ANC’s national votes have fallen from 67% to 55%, and why they lost Nelson Mandela Bay Metropolitan and Johannesburg Metropolitan.

“The ANC, not the president, know they must start getting their act together, just like they did in 1994,” Stofberg said. “But like then, it will take at least 15 years to bring us back to a place of progression.”

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5 reasons why South Africa won’t become the next Zimbabwe: economist