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Wednesday, September 04, 2019 / 06.30PM
/By Teslim Shitta-Bey, Managing Editor
African Politicians have a
slyness that is not inherited but acquired; they speak from places of crude
political expedience rather than clear economic integrity. The recent xenophobic attacks that have swept
through South Africa (SA) and Nigeria over the last week are a product of
political complicity serving as a basis for economic duplicity. A number of
politicians in South Africa have stirred the racial gauntlet by interpreting
the rising jobless rate in the country as the evil work of foreign migrants
(2.6m people) taking work from native South Africans. The story is compelling
to an agitated populace of young, jobless black men and women, but is not borne
out by the facts.
SA Still A White
Man's Fiefdom
The bulk of the South African
economy is still firmly in the hands of its white population. Recent data
suggest that 85% of the Southern African nation's economy is held by 8.7% of
its population, the majority being white. The disproportionate distribution of
wealth in favour of its white population is just as much a problem as the fact
that this white population has increasingly moved investible funds from the
country and placed the cash in other economies such as Britain and the United
States of America. Furthermore, 6,000 European families own 85% of the
countries agricultural land.
To compound this problem black
politicians have done a hack job of managing the South African economy and have
conveniently placed the blame at the feet of foreign migrants, but have refused
(or simply avoided) to explain how foreign migrants have caused a decline in
the country's manufacturing Purchase Managers Index (PMI) and GDP (South Africa's
GDP grew by 3.1% at the end of Q2 2019, faster than Nigeria's 1.94%).
Demonizing foreign labour for fundamental problems with the economy is as good
as putting band aid on a brain tumour.
The South African economy has
been on a slow but persistent decline over the last half decade as the real
sector has had to cope with rising inflation, declining export and deteriorating
competitiveness. The fall in fortunes has not been the consequence of migrant
labour but a shrinking global economy, a fall in the quality of domestic
infrastructure (typified by the Eskom power palaver), and a slide in
domestic efficiency and productivity and a fall in world commodity prices
(making mining less profitable).
Both South African and Nigerian
economies have demonstrated major weaknesses with national output (GDP) in both
economies slowing to an unsteady beat, as unemployment rises (South African
youth unemployment in Q2 2019 was 56%) and inflation takes a larger bite out of
stagnant per capita earnings.
White South Africans have been pretty cheery over the new wave of xenophobia amongst their black compatriots as it has deflected attention from their disproportionate hold over the economy.
Black South African politicians
have also been blase about the black-on-black violence as it has bought them added
time to figure out how to find proper and lasting solutions to the structural
challenges that face the South African economy.
Foreign investors are losing
patience with their South African investment assets as they dump their assets at
the fastest pace recorded in recent years as they try to head off any further
fall in government capital market instrument rating below the last wrung of
investment grade.
Foreigners have sold a net $4.8bn
of South African equities and bonds in 2019, the highest sell-off on a
year-to-date since 1998, according to Bloomberg data. Sell-offs, especially
in the fixed-income market, have sped faster since June 2019 as ratings
companies and deposit money institutions turn bearish over the country's fiscal
outlook.
More Trade Not
Xenophobia
Both Nigeria and South Africa
could do without the negative optics of xenophobia and would do a lot better if
they both stopped the carnage and searched for ways of deepening trade between
both economies. With both countries having the largest economies on the
continent, the sensible resolution of the disagreements over labour movement
between the two economies is to grow trade and investments.
Available data suggests that
South African accounts for less than 10% of Nigeria's trade export and over 90%
of this trade is in Oil and Gas exports with less than 10% being non-oil
exports (see Proshare Ecographics below). In terms of imports from
South Africa, Nigeria imports next to nothing, and the only major import seems
to be coal.
In Q1 2019 Nigeria exported
N495bn worth of goods to South Africa (representing 9.7% of total exports) and
imported only 1.9% of total imported goods by value during the quarter.
Most of South Africa's economic
interaction with Nigeria is in respect of large investments by companies such
as MTN in the telecommunications sector, Shoprite in the fast moving consumer
goods (FMCGs) sector and DSTV in the digital entertainment/services sector.
South African firms are also heavily present in Nigeria's building/construction
sector and are involved in a large number of upscale properties in Lagos and
other parts of the country.
Nigerian businesses in South
Africa are mainly small and medium-sized and involve less capital layouts that
the typical South African investment in Nigeria, however, South African
investments in Nigeria have proved quite success and have resulted in large
repatriation of dividends and other cash flows to South Africa, an escalation
of the current attacks on Nigerian citizens in South Africa could only end in
both nations being worse off.
Dodgy political/economic
perspectives
A number of analysts in South
Africa have argued that a deepening of the conflict between South Africa and
Nigeria over citizenship harassment would leave Nigeria worse off; this perspective
is wrong. Although it is true that Nigeria perhaps has somewhere in the region
of 800, 000 citizens in South Africa (although the South African government
insists that there are only 30,ooo Nigerians in the country), and very few
South Africans are resident in Nigeria, the economic reality is that the size
of individual corporate investments in Nigeria by South African companies is several
times larger than the size of investments by small and medium-sized Nigerian
companies in South Africa.
A recent example of the significance of the
Nigerian market to the South African economy was the recent incident of a $5bn
fine on MTN which required high level diplomacy to reduce the fine to $1.5bn
and the promise of a listing of the company on the local Nigerian bourse. The
impact of the fine saw an immediate caving of the price of MTN on the Jo' bourg
Stock Exchange (JSE). A diplomatic/economic skirmish between the two countries
would lead to a scorched earth outcome, critically hurting both South Africa
and Nigeria.
Rather than a war-war, both
countries need to jaw-jaw, with both governments making firm, verifiable and
sustainable commitments to keeping each other's citizens safe.
Sustaining the
Brotherhood
If South Africa and Nigeria are
to lead the charge of a resurgent Africa continent, they must push past the
debilitating barrier of narrow and false interpretation of national economic
interest and build the bridge of collaborative competitiveness that will lead
the continent to faster growth rates, deeper technological advancement and
higher national incomes accompanied by lower unemployment.
Both Nigeria and South Africa
need to trade themselves out of their economic binds. Engaging in a US-China
type trade/economic face off would serve no meaningful purpose and would likely
make both nations poorer by worsening their unemployment levels and shrinking their
GDPs, aside from the additional negative impact of perverse and adversarial
political relations.
More reflective and somber minds
in South Africa and Nigeria may need to step up to the plate and turn the
narrative from one of near disaster to that of a defining comeback between two
great African nations, as Political Economist, Edmond Burke, once noted, "for
evil to triumph it takes good men to do nothing".
Related News
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2. South Africa and
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3. SSA Equity Market
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4. Sub-Sahara African
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5. In the Footsteps of
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6. South Africa’s Q1-19
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7. South Africa's Rand
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8. South Africa's
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