BRUCE WHITFIELD: A template for certain poverty
If the government's strategy is to make you poor, it's doing a great job. With no realistic plan to dig South Africa out of its current mess, it's hard to imagine it's going to achieve anything else. Ironically, its current fiscal fumbling is serving to make the already super-rich with globally diversified portfolios even more wealthy in rand terms while condemning the rest of us to a less prosperous future. This week provided a perfect example of how poor management of the economy and state-owned enterprises contributes to widening the chasm of South Africa's economic divide.
Investors are starting to price in a full ratings downgrade by December on both local and foreign debt. Another recent bail-out of SAA served to confirm the state is willing to keep throwing good money after bad, and the postponement of Eskom's results on Tuesday means we don't know how deep that money pit is.
The centre may have held to protect South Africa from the worst of the lunatic fringe proposals at the recent ANC policy conference, the public protector is trying to save face following her clumsy attempts at meddling with monetary policy and the mineral resources minister is facing legal pushback on the Mining Charter, but the damage to confidence has been done. You can see it in both the currency and the bond markets.
This is where it costs you money. The Reserve Bank is damned if it does cut rates this week, damned if it doesn't. If it does, it will be at pains to explain it's doing it because inflation is under control and not because it's succumbing to political pressure. If it doesn't cut, it might be accused of trying to prove its independence at the expense of the economy.
Goodness knows we could do with a confidence boost. Mining policy is interesting. South Africa has one of the world's greatest repositories of mineral wealth per head of the population anywhere in the world. Untapped reserves are worthless, however. The new Mining Charter, while unlikely to succeed in its current form, simply delays the speedy exploitation of natural resources. Platinum - trading under $900/oz this week following Volvo's announcement of a move away from PGM-hungry autocatalytic converters - could be worth even less if the pace at which fossil fuels are phased out of motoring speeds up.
Perhaps the greatest irony of the charter is the damage it could do to the wealth of a generation of ambitious black entrepreneurs. It may be based on the noble ideals of the Freedom Charter written at Kliptown in 1955, but the charter threatens to trap black investors in a sunset industry from which they will be unable to extricate themselves as the real base for future wealth shifts towards a knowledge economy.
Large-scale, labour-intensive mining is the antithesis of that. Policymakers need to be forward-looking and nimble to allow South Africans the very best opportunity to capitalise on its resources.
Instead, we hark back to an idealistic past that created a template for a future that no longer exists.
• Whitfield is a multiplatform, award-winning financial journalist and a public speaker on the political economy