Tuesday, 19 June 2018

The future

Few would dispute that South Africa is stalled at a crossroads, watching other competing states zip by as we run the battery flat frantically trying to start our dead engine.  Even Ethiopia, the poster child for malnutrition, is purring along with an 8% growth rate.  So what does our future hold, apart from being flattened by the truck of history if we don’t get our economic engine started soon?
History has this annoying habit of repeating itself. No matter how special we may think we are, we will get the same results as last time if we repeat the same mistakes. To think otherwise, Einstein tells us, is the very definition of stupidity. And that is one thing we have in plentiful supply.
Here are three scenarios.

Greek scenario

Timescale
Description
Consequences
Late 2018
The “Incident” occurs. This might be an Eskom or SAA loan default, a natural disaster, an assassination, a major riot, an epidemic.
The fragile fiscal house of cards collapses.
The government runs out of money. Salaries, grants, creditors cannot be paid.
Financial panic, stock market tumbles, widespread rioting.
Government applies for urgent IMF loan. Agrees to virtually all terms.
Payments restored, rioting winds down, stock market 60% down.
ANC splits into verligte wing, committed to market friendly policies and economic recovery, and verkrampte wing committed to ongoing socialist policies.
Verligte wing absorbs most black members of DA, forms the DANCe party. Remains titular government under Ramaphosa.
Verkrampte wing (called the ANC Loyalists League) merges with the EFF, forms the EFFALL party.
Remainder of DA becomes a liberal party with minuscule support..
Early 2019
IMF flexes its muscles. Insists on changes to labour law. Parliament under huge pressure to pass changes, unions are apoplectic. Government unable to pay salaries and grants again.
Widespread rioting. Economy close to collapse.
State of emergency declared by Ramaphosa.
Elections delayed indefinitely. Labour law changes passed in emergency parliamentary sitting.
Riots move from dusty townships into leafy suburbs. Army deployed to curb riots, but ineffective. Death toll in riots exceeds 1,000.
Many middle class suburbs form armed militias, close off access, erect major barriers to entry.
Many union leaders, EFFALL officials, rioters taken into custody. International concern expressed at deteriorating situation and potential for civil war.
Riots begin to abate. Separatist movement in Western Cape gains strength. Tax revolt in Western Cape.
Basic services in northern provinces severely compromised.
Mid 2019
Country is effectively under lockdown. State of emergency continues. IMF imposes many further conditions before approving payments, including 30% reduction in state salary bill.
Western Cape groups begin serious secession planning.
Late 2019
As IMF conditions begin to take effect, business and investment climate slowly improves. Overseas investments improve. State of emergency dropped. Elections scheduled for 2020.
Unemployment drops for first time in 10 years. Rioting stops. Growth rate ticks up to 3%.
Serious famine conditions emerge in northern provinces.

Zimbabwe scenario

Timescale
Description
Consequences
Late 2018
The “Incident” occurs. This might be an Eskom or SAA loan default, a natural disaster, an assassination, a major riot, an epidemic.
The fragile fiscal house of cards collapses.
The government runs out of money. Salaries, grants, creditors cannot be paid.
Financial panic, stock market tumbles, widespread rioting.
Government applies for urgent IMF loan. Refuses to agree to virtually all terms. IMF withdraws.
Government announces new settlement currency, called COMRADEBONDS(CB). All available foreign currency assets seized. Bank assets placed under government management. Draconian wealth tax imposed.
SOE bail outs continue. Salaries and grants paid in CBs.
Several farms and businesses targeted for expropriation without compensation.
Currency blackmarket emerges instantly. Capital flight from SA becomes a flood. Most overseas companies freeze all further investments, begin looking for buyers at any price. Emigration applications triple.
Early 2019
Early elections announced. Ramaphosa under huge pressure from radical elements in ANC and EFF. In order to curry favour with ANC base, several businesses and farms expropriated in high profile cases.
Court cases challenging expropriation ensue.  DA is enraged. Massive inflation in value of CBs. State employees and grant recipients demand payment in dollars. Many strikes followed by riots occur.
Elections take place. ANC wins 51% majority, EFF 25%, DA 19%.
Economy continues to crumble. Growth rate is negative 3%. Zero new fixed investment. Unemployment reaches 50%.
Radical wing splits from ANC, forms new party (ANC Loyalists League).
Separatist movement in Western Cape gains strength. Tax revolt in Western Cape.
Basic services in northern provinces severely compromised.
Mid 2019
ANC no longer enjoys parliamentary majority, must enter into coalitions with EFF or DA. .
Service delivery rioting increases around country. Riots move from dusty townships into leafy suburbs. Army deployed to curb riots, but ineffective. Death toll in riots exceeds 1,000.
Many middle class suburbs in Western Cape and Gauteng become walled cities with own management, independent of state entities.
Tax collections plummet, adding to pressure on fiscus.
Late 2019
Ramaphosa declares state of emergency. SA defaults on most foreign loans. Economy in free fall.
South Africa is labelled as a failed state.  Appeals for international aid to feed starving citizens. Warlords arise in northern provinces and take control of state assets.

Ramaphosa scenario

Timescale
Description
Consequences
Late 2018
The “Incident” does not occur. Eskom or SAA do not default on their loans, there is no natural disaster,  assassination,or epidemic.
The fragile fiscal house of cards remains intact.
The government manages to borrow enough money to avoid catastrophe. Salaries, grants, creditors continue to be paid.
The rand declines, the stock market declines, service delivery protests continue.
Ramaphosa’s government continues to strengthen, prosecutes corruption, reduces size of cabinet, makes reassuring noises on EWC.
The delicate juggling act begins to pay off for Cyril.
EFF and the Zuma faction become ever more hysterical, and irrelevant.
The DA continues to flounder.
Malema’s star begins to wane. Internal dissensions in EFF mount. Court cases takes their toll on Zuma and Malema.
Early 2019
Early elections announced. Ramaphosa under huge pressure from radical elements in ANC and EFF. In order to curry favour with ANC base, several businesses and farms expropriated in high profile cases.
Court cases challenging expropriation ensue.  DA is enraged. Ratings agencies threaten further downgrades.
Elections take place. ANC wins 55% majority, EFF 15%, DA 20%.
Economy continues to crumble. Growth rate is negative 1%. Little new fixed investment. Unemployment reaches 50%.
ANC splits into verligte wing, committed to market friendly policies and economic recovery, and verkrampte wing committed to ongoing socialist policies.
Verligte wing absorbs most black members of DA, forms the DANCe party. Remains titular government under Ramaphosa, with narrow majority.
Verkrampte wing (called the ANC Loyalists League) merges with the EFF, forms the EFFALL party.
Remainder of DA becomes a liberal party.
Separatist movement in Western Cape gains strength. Tax revolt in Western Cape.
Basic services in northern provinces severely compromised.
Mid 2019
DANCe party encounters major internal strategic and philosophical differences. Majority dwindles due to desertions.
Service delivery rioting increases around country. Riots move from dusty townships into leafy suburbs.Many middle class suburbs in Western Cape and Gauteng become walled cities with own management, independent of state entities.
Tax collections plummet, adding to pressure on fiscus.
Late 2019
Ramaphosa remains president of a deeply divided country.
South Africa stumbles along with no major policy shifts and poor future prospects.

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