Rejoice South Africa. The Ramaphosa factor – R11.65 to the US dollar.
There was a time Big Business thought the Zuma factor was just what they needed and the Rand:Dollar traded in the 8.50 – 6.70 band. Then in January 2016 they decided Zuma was bad for business, warning shots were fired, the Rand fell almost to 17. Point made but keeoing the pressure on they let it range between 14 and 13 for most of last year[i].
Currency valuation makes money what it is, heralds what it can and cannot do. Motivation gurus lecture money isn’t everything, that a driving personality, affinity with others and smart use of quality time makes life worthwhile. Reality says no money or monopoly-money only, no anything. I’ve drive, a good smile, I’m non-threatening and useful yet when I tried to pay in Rand they laughed then they cried when they saw that’s all I had. Old joke but no money means no comfortable Hospice bed or, at the rich end of life, no private ward in a hotel-hospital with a jab to ease that final fade away.
Until rich and poor South Africans understand negative Rand valuation hurts they will continue to slide into their respective pits – the poor mothers to jail for pinching bread and the rich making do with Thailand instead of Paris.
Profits (in USD or Euro) banked is the only goal of the modern Capitalist way. To meet that goal Big Business has to control raw material cost.
In colonial times whoever took de facto control over a country controlled the raw materials, its removal, beneficiation at home and the sale/export as a finished good. There was no currency exchange nonsense. The governments of Europe (and later the USA) decided (and fought over) who would exploit who. The rise of post-World War II liberalism and worker’s rights movements encouraged the people of the 3rd World to seek self-determination – a similar idealism to that pushed by the motivation gurus. Feigning agreement with this enlightenment Europe (particularly France and Britain) fell over themselves to comply. Suddenly the business of making obscene profits was to be much easier.
When the politicians of the colonial powers granted local rule to groups they had regarded as totally incompetent the day before all they actually handed over was the burden of physical administration. They retained all of the rights of ownership of the financing bank, land and mine, processing factory and primary supplier of all needed technology, machinery, intellectual capacity, and the market. Even as they were busy with that independence process, at the same time, the same politicians were quietly handing over their people’s government’s right to control the economy: The age of the giant multinational and the deregulated bank was ushered in and by 1980 Free Trade was their call. For the emerging, newly liberated nations Free wasn’t Fair. These new colossuses owned all those financing banks, processing factories, lands and mines and primary suppliers of all required technology, machinery, and intellectual capacity and so on. And the market. Borders? What were they?
The grand celebrations of the World Economic Forum in Davos, Switzerland last month again reminded us the presidents and their politicians have been supplanted. The owners of the system, the invisible zero point one percent, manipulate world trade and finance through Big Business direct and the goal has changed from profit to maximum profit.
To continue maximising USD or Euro banked the way devised to get around the pesky nuisance of independent nation states is currency freedom, currency exchange markets, easy valuation changes. And they have the rating agencies in hand to give the necessary impetus to their requirements.
Big Business dictates change
For 50 years Big Business was content with the way South Africa was run under a scratch-my-back arrangement between Oppenheimer’s Anglo-American Corporation and theAfrikaans Broederbond. Then apartheid became unfashionable. Big Business with Anglo spearheading engaged the Nationalist Party but change was too slow in coming and finally it lost patience with PW Botha.
Manipulations of the rates of exchange (explains author-activist Susan George) are the most subtle of all the modern mechanisms to continue to subordinate targeted countries. Devaluation is done in such a friendly manner it is eulogised as the medicine that will arrest the mess its government has made … and that’s the way it looked to the great majority of the political left as Big Business set about orchestrating change in South Africa.
From 1:1 in 1983 the Rand was crashed to R2.60 to the USD in ’89 then to over R3 by the time the handover talks with the African National Council (ANC) started in earnest. In the country only De Klerk and Mandela and their closest aides (Ramaphosa) knew reality was that the ANC was simultaneously the senior midwife and head undertaker at the birth of the death of the new Republic. By the end of 1994 the Rand-Dollar rate stood at R3.55 to US$. Down 350% in 10 years.
On the surface much to celebrate: the Black community had replaced the fascists. For reasons officially unknown after many (semi-secret) talks in Anglo board rooms and Oppenheimer’s home[ii] the ANC, the country within its grasp, ignored its Charter and acceded to the West’s monetary and trading system. It even took on the apartheid foreign currency debts and, behaving as though the IMF/WB and others had done them a favour, the ANC handed over neatly divided provinces of neatly divided people and all the commerce and industry, mining and agriculture sectors, all serviced by taxpayer enabled roads, harbours, electrical capacity and water, on a plate back to, effectively, the original colonisers, those who had sent in Rhodes.
Back then business needed concocted legislation like the Grey Act (1894)[iii] to dehumanise. Now all South Africans (all colours) have much to cry over. Once a country relinquishes control over its currency it is ‘owned’.
Cheap, cheaper South Africa
Individual Europeans (and now Chinese big time) who most likely wouldn’t be able to get a job in South Africa fly in and have a grand time … subsidised by the locals. I’ve met Mr and
Mrs Dutch Average earning a very average iv€76,500 (Euros) a year[v] who were considering buying a place in Camps Bay, a Scandinavian bus driver who earned 14x more than a local long-distance bus driver, a retired UK police constable whose 1995 pension converted then to more than what a South African constable earned in 2017 [vi] and I can go on. The bottom line is while half of South Africans never see wholesome food regularly the best of South African meat, sea-food, vegetables, fruit and liquor are available in shops overseas and if the consumer cannot find the South African item sought, no worries for the Argentinian, Kenyan, Thai and etcetera weak currency nation equivalent is available – all year round. And if the product has a blemish or looks droopy it isn’t presented for sale but thrown out – profits are handsome enough.
The West with the United States leading (noted economist Michael Hudson) shaped “international finance to promote gains for its own bankers, farm exporters, its oil and gas sector, and buyers of foreign resources – and most of all, to collect on debts owed to it.” Beware! Legalised-by-the Club-of-the-West theft of resources in progress.
The resources are turned into finished goods which the Industrialised Nations effectively swap (the “balance of payments” lark pushed on the 8pm business news) among each other. When, however, those finished goods are exported back into the source country there is no swapping – the poor importer must pay in foreign currency earned through the export of more raw materials. A process repeated again and again and often what is imported is machinery and enabling technology etc. their miners and farmers need to compete against neighbour countries to supply the same Industrialised Western manufacturing nation. So skewed is the cycle of exported cheap yet finite raw materials to imported throw away finished goods the supplier countries fall into (more) debt. As that debt[vii] is denominated in a powerful and protected currency the West scores a quadruple whammy: Cheap raw materials, favourable export prices and interest on ‘money’ loaned forever. And instead of cooperating, planning and controlling as fellow travellers should the poor nations blindly compete, criticise each other.
Big Business’ secret is to make sure the barriers to industrialise are kept high. The exceptions to the rule depend on return on investment. Big Business is happy that South Africa be a mini Europe to manufacture and distribute minor finished goods into Africa and by return to import basics like raw cotton and cattle hides. The limitation is such that although South Africa is Africa’s biggest and most advanced economy it is mired (writes South African activist Patrick Bond) in debt at levels never experienced before.
Unserviceable debt is a killer: Failing infrastructure, falling government social expenditure and inefficient/ineffective services lead to rising and violent crime, corruption, collapsing communities and is compounded by rampant white collar crime, tax evasion and Rand flight. Increasingly the bottom 60% of South Africans struggle to survive … If South Africa is the best of Africa what is to come?
Devaluing currencies of supplier nations isn’t the only mechanism but it is a major, and a primary initiator of world-destroying inequality. Zuma and his Gupta pals are only a blip on the screen. The trend is South Africa’s enemy.
Only the few citizens who have been educated to a 1st World professional level are protected, are internationally mobile.
The trend has been in place since the ’70s
The trend is the friend of the overseas visitors – they come for value and if it’s not here they’ll go to some other exploited land to get their kicks. Likewise the overhyped investor.
“Investor” is an economist’s soft term for “profit on best terms seeker” and if cheap resources, labour, set-up and living costs for expat-staff aren’t cheap enough to entice the investor the South African Reserve Bank plays the good host. Those super high (by world standards) bank interest rates aren’t there to protect South Africans from the ravages of potential inflation but as a risk mollifier for “investors”.
In 1972 when Big Business was reaping the rewards offered by apartheid the exchange rate was around R0.75 for a US dollar. In 1983 Big Business shifted the rate to 1:1 with the warning, “time for change, Zimbabwe has”. In 1994 three Rand and fifty five cents bought a US dollar[viii], in 2004 R6.70 and in September last year (2017) one United States dollar bought R13.30. The trend-line is obvious; 18 and stable looms.
What South Africa is experiencing right now is new president Ramaphosa’s honeymoon – embrace it.
He is no angel but his patron Saint is Corporate South Africa not the 3 Guptas. It is amazing how people are happier when ripped off by those they know. There was a time Nelson Mandela was lionized but then Corporate South Africa dumped him for London. They ran because Mandela really wanted to do good for all of the people and that doesn’t make for extraordinary profits (converted to USD or Euro) banked.
Picture: Tessa Steyn
[ii] Among others see Sampie Terreblanche’s recollections of the pre-agreement talks.
[iii] “The Glen Grey Act (1894), assigning an area for exclusively African development, was “a Bill for Africa,” as Rhodes proudly called it. In reality it served to enforce segregation of native Africans, further disenfranchise them …” https://www.britannica.com/topic/Glen-Grey-Act and Kruger’s proposal for a railway alarmed and allowed preparation for Boer War II, a prelude to making Southern Africa British.
[iv] Holland is No 7 on the EU list of best, on average, salary payers … https://www.reinisfischer.com/average-salary-european-union-2017
[vi] Around R13,000 pm https://www.payscale.com/research/ZA/Employer=South_African_Police.../Salary
[vii] https://www.pambazuka.org/economics/new-evidence-africa%E2%80%99s-systematic-looting-provided-increasingly-schizophrenic-world-bank … “Yet Bank policies and practices remain oriented to enforcing foreign loan repayments and transnational corporate (TNC) profit repatriation, thus maintaining the looting.”
[viii] https://www.thesouthafrican.com/how-the-rand-has-fallen-since-1994/ and see https://businesstech.co.za/news/finance/116372/rand-vs-the-dollar-1978-2016/