In partnership with

South Africa through US eyes

Oct 12 2012 16:22
Fin24 user Ike Jakson writes:

I am submitting this article as I received it from an email friend in America, verbatim and with no editing (note from the editor: this piece appears with American spelling intact).

A COUNTRY ON THE SKIDS: Striking Miners, Plummeting Currency: Few Good Options for South Africa.

For political economists, Africa wonks, and geopoliticians, this is bad news.

Just as the fabulous mineral wealth in South Africa’s mines serves as an engine for the whole economy, labor  relations between miners and the mining companies reflect many of the forces that threaten to rip South Africa’s precious democratic experiment to bits.

We’ve written about these problems before. For now at least, the government doesn’t seem to have an answer. The government desperately needs to keep mine profits high so that it can cream off a lot of tax revenue while keeping investors happy.

That basically means squeezing the mine workers in order to transfer some of the wealth they produce to programs that would ostensibly benefit the majority of South Africans who still live mostly outside the formal sector and the modern economy. (We say “ostensibly” because a certain amount of corruption and inefficiency plagues the South African government machine.)

But the miners are well organized and have a history of militancy dating back to the struggle against apartheid and beyond.

The miners want the government to squeeze the foreigners and investors more and the workers less - even nationalizing the mines outright.

There are three problems with that politically attractive course.

The first problem is that, if the government really did nationalize the mines, it would have to either expropriate them without giving their owners fair compensation, or it would have to pony up and pay a hefty price.

The first alternative would thoroughly mess up South Africa’s relationship to the global economy and expose its nationalized companies to all kinds of legal actions around the world.

The second would saddle the country with immense debt that would take years to pay off and consume all or even more than all of the hoped-for new revenue.

I’m not optimistic about South Africa’s future. It has a political class so bad that it makes ours look good.

Here is the entire link:
A COUNTRY ON THE SKIDS: Striking Miners, Plummeting Currency: Few Good Options for South Africa.
via Instapundit by Glenn Reynolds on 10/10/12

 - Fin24

*For more on Fin24 stories, check out our Facebook and Twitter pages.

Disclaimer: All articles and letters published on MyFin24 have been independently written by members of the Fin24 community. The views of users published on Fin24 are therefore their own and do not necessarily represent those of Fin24.

Fin24 reserves the right to obtain service providers' comments before publishing any articles or letters. Fin24 editors also reserve the right to edit or delete any and all user material comments received.

mining unrest  |  strikes  |  myfin24



Read Fin24’s Comments Policy publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Comments have been closed for this article.

Company Snapshot

We're talking about: MINI BUDGET

Finance Minister Malusi Gigaba has laid bare South Africa's economic woes. Visit our Mini Budget Special for all the action.

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

Free education in South Africa is:

Previous results · Suggest a vote