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IN THE past days the rand depreciated like almost never before. When I last looked on Tuesday morning, it was well below 14 to the euro and 10 to the US dollar.
For exporters it is, of course, good news, because their products become cheaper and more competitive overseas. But in a country so heavily dependent on imports it is, by and large, bad news. A whole range of products becomes more expensive, threatening to push those who have just recently escaped extreme poverty back into despair.
I do not want to seek simplistic causes for the depreciation of the rand. But one does not have to be a rocket scientist to see that at least some of the most important reasons are to be found in South Africa itself.
One reason is the growth in the current account deficit to 6.8% of GDP, the largest gap in five years. It is almost an iron law: if a country imports much more in goods and services than it exports, its currency will devalue.
But we have to dig deeper. The growth in the current account deficit has, in part, to do with the sluggish growth in exports. And that may be coupled to the ease with which some trade unions strike. Bear with me and I will explain.
I do not want to minimise the daily struggle many workers must go through to stretch their income in order to survive. I can see that striking at times must be an attractive option to increase workers’ income, especially when they see how shamelessly the bosses enrich themselves.
But workers must also contain their understandable anger and view things rationally and without too much emotion.
Look at these figures: according to Naamsa, the organisation representing the automotive industry, car sales last month went down by 4.6% compared to November 2012.
In its statement, Naamsa said: “This was due to the lagged effects of the September and October, 2013 automotive industry strike and the current disruptions, experienced by some exporters, as a result of the ongoing industrial action in the car carrier industry.”
Our exports have also been hit by the strikes – car exports are down by 4.8%. And that is part of the explanation for the current account deficit growth.
The fact is that strikes like these hurt not only the bosses. They also help to drive the rand down, making imports more expensive and driving inflation up.
And who is, when all is said and done, most disadvantaged by a higher inflation? Right: the workers themselves. Not the bosses with their huge salaries; they make sure they do not feel the pain.
The irony is that South Africa has at last reached the stage where it is slowly but surely starting to move out of crippling poverty. According to a study published in Pretoria on Tuesday, the rate with which South Africans are escaping poverty has increased by 11% since 2008.
This is welcome news. But there is also another side of the coin. First of all, the main reason for this is state intervention, which is artificial and unsustainable in the long run.
Also, the growth of the South African economy – 33% since 1994 – has never been enough to generate sufficient jobs to let the economy provide enough new jobs and prosperity. This is illustrated by the fact that growth in global emerging markets, according to economist Jac Laubscher, has been 115% during the same period.
And he also points out that the Gini coefficient, the statistic model with which the difference between high and low incomes is measured, is very high – between 0.6 and 0.7 (1 means absolute inequality and 0 absolute equality). About 40% of South Africans are unemployed.
Some years ago, a colleague of mine said something which actually was very cynical indeed, but not without truth. He said: “What can be worse than being exploited? Answer: not being exploited.”
In other words, not having a job or income at all.
Of course, this is no excuse for inadequate wages or bad labour conditions, and here the trade unions play a necessary role. But they should be careful not to throw out the baby with the bathwater.
In the broader South African scheme of things, the trade union members form a labour aristocracy vis-à-vis those without a job, without an income, without hope. They should therefore look beyond their grievances to the state of the economy.
When they, perhaps inadvertently, help the rand depreciate and slow down economic growth, they disadvantage first and foremost themselves. Even more importantly, they disadvantage those who are escaping from extreme poverty.
And by doing that they are adding to a social powder keg which is slowly building up in South Africa. So they have to ask themselves: who are they benefiting with their eager strikes?
Sure, in the short term themselves - maybe. In the long run? Nobody. We all will suffer for the shortsightedness of a few trade union leaders.
- Fin24
*Leopold Scholtz is an independent political analyst who lives in Europe. Views expressed are his own.
For exporters it is, of course, good news, because their products become cheaper and more competitive overseas. But in a country so heavily dependent on imports it is, by and large, bad news. A whole range of products becomes more expensive, threatening to push those who have just recently escaped extreme poverty back into despair.
I do not want to seek simplistic causes for the depreciation of the rand. But one does not have to be a rocket scientist to see that at least some of the most important reasons are to be found in South Africa itself.
One reason is the growth in the current account deficit to 6.8% of GDP, the largest gap in five years. It is almost an iron law: if a country imports much more in goods and services than it exports, its currency will devalue.
But we have to dig deeper. The growth in the current account deficit has, in part, to do with the sluggish growth in exports. And that may be coupled to the ease with which some trade unions strike. Bear with me and I will explain.
I do not want to minimise the daily struggle many workers must go through to stretch their income in order to survive. I can see that striking at times must be an attractive option to increase workers’ income, especially when they see how shamelessly the bosses enrich themselves.
But workers must also contain their understandable anger and view things rationally and without too much emotion.
Look at these figures: according to Naamsa, the organisation representing the automotive industry, car sales last month went down by 4.6% compared to November 2012.
In its statement, Naamsa said: “This was due to the lagged effects of the September and October, 2013 automotive industry strike and the current disruptions, experienced by some exporters, as a result of the ongoing industrial action in the car carrier industry.”
Our exports have also been hit by the strikes – car exports are down by 4.8%. And that is part of the explanation for the current account deficit growth.
The fact is that strikes like these hurt not only the bosses. They also help to drive the rand down, making imports more expensive and driving inflation up.
And who is, when all is said and done, most disadvantaged by a higher inflation? Right: the workers themselves. Not the bosses with their huge salaries; they make sure they do not feel the pain.
The irony is that South Africa has at last reached the stage where it is slowly but surely starting to move out of crippling poverty. According to a study published in Pretoria on Tuesday, the rate with which South Africans are escaping poverty has increased by 11% since 2008.
This is welcome news. But there is also another side of the coin. First of all, the main reason for this is state intervention, which is artificial and unsustainable in the long run.
Also, the growth of the South African economy – 33% since 1994 – has never been enough to generate sufficient jobs to let the economy provide enough new jobs and prosperity. This is illustrated by the fact that growth in global emerging markets, according to economist Jac Laubscher, has been 115% during the same period.
And he also points out that the Gini coefficient, the statistic model with which the difference between high and low incomes is measured, is very high – between 0.6 and 0.7 (1 means absolute inequality and 0 absolute equality). About 40% of South Africans are unemployed.
Some years ago, a colleague of mine said something which actually was very cynical indeed, but not without truth. He said: “What can be worse than being exploited? Answer: not being exploited.”
In other words, not having a job or income at all.
Of course, this is no excuse for inadequate wages or bad labour conditions, and here the trade unions play a necessary role. But they should be careful not to throw out the baby with the bathwater.
In the broader South African scheme of things, the trade union members form a labour aristocracy vis-à-vis those without a job, without an income, without hope. They should therefore look beyond their grievances to the state of the economy.
When they, perhaps inadvertently, help the rand depreciate and slow down economic growth, they disadvantage first and foremost themselves. Even more importantly, they disadvantage those who are escaping from extreme poverty.
And by doing that they are adding to a social powder keg which is slowly building up in South Africa. So they have to ask themselves: who are they benefiting with their eager strikes?
Sure, in the short term themselves - maybe. In the long run? Nobody. We all will suffer for the shortsightedness of a few trade union leaders.
- Fin24
*Leopold Scholtz is an independent political analyst who lives in Europe. Views expressed are his own.
