On the eve of the past weekend’s spring meetings of the World Bank and International Monetary Fund (IMF) in Washington, the Finance Minister dropped us an obscure news item: “Gordhan concerned about rand volatility” (Reuters, April 16).
Hidden away in the business pages, it was nevertheless an important confession. Pretoria can no longer remain in denial about a glaring economic HIV+ status, what with our regular breakouts of full-blown financial AIDS.
The opportunistic infections are all too obvious: a persistent balance of payments deficit that by early 2009 made South Africa the world’s riskiest emerging market, according to The Economist magazine. By 2011 that in turn forced up our prime interest rate – the equivalent of a cheap perfume to attract sleazy one-night-stand banksters – to the world’s second-highest level, after Greece.
The illness actually dates to March 1995, when the Treasury and SA Reserve Bank cut a gaping hole in the only condom we had on at the time, the Finrand, our decade-old system of discouraging capital flight.
Since then, like blood-letting in the 18th century, those promiscuous Pretoria players – the latter-day Lotharios Chris Stals (1989-99), Tito Mboweni (1999-2009) and now Gill Marcus at the SA Reserve Bank and Chris Liebenberg (1994-95), Trevor Manuel (1995-2009) and now Pravin Gordhan at Treasury – have steadily rolled back that condom, relaxing exchange controls more than 30 times.
The worst period was 1999-2001 when the largest Johannesburg Stock Exchange-listed firms – Anglo, DeBeers, Old Mutual, SAB, Mondi, Investec, Didata and others – were given permission by Manuel to take their party to London, switching financial headquarters and primary stock market listings from Johannesburg.
The blood hemorrhaged: corporate dividends, rich white people’s apartheid-era loot and BEE tycoons’ tenderpreneurship takings (e.g. Mzi Khumalo’s illegal R1 billion+ of capital flight) spurted out of SA at record rates.
Our country is left with an ever-worsening case of economic Slim’s Disease. In 2007, according to economists from Wits University, the capital outflow – much of it illegal – was more than a fifth of the country’s GDP.
Worse yet, our children will be adversely affected by our generation’s irresponsibility: in order to pay off the capital-flight financiers, Manuel and Gordhan contracted foreign debt that is now $100 billion higher than the $25 billion Nelson Mandela inherited in 1994.
Each time there is a flare-up of the sickness, instead of staying home and recovering through tightened exchange controls, our financial fanatics raise the repo rate to appear more attractive, and go out for more wild-and-crazy unsafe international monetary intercourse in the multiply-afflicted global capital markets.
No wonder, as Gordhan has just complained, there’s extreme volatility in the temperature of the economy (the rand’s value). SA’s currency has crashed by more than 15 percent on six occasions: 1996, 1998, 2001, 2006, 2008 and 2011.
That’s the worst ongoing currency malady in the world, if we discount that fatal case across the Limpopo River, the wretched patient known as Zimdollar, who died in January 2009.
Though he is a trained chemist, Gordhan believes the cure is simply more globalization, with the vain hope that his intimate partners on Wall Street and the City of London will somehow discover a cure – though all evidence is certainly to the contrary, with Iceland, Ireland, Greece and now Spain keeling over. The Euro itself could be next in the morgue.
Not even an AIDS specialist like Dr Jim Yong Kim – the just-named World Bank president who while at the World Health Organisation helped get cheap Anti-Retrovirals to millions of HIV+ Africans – has the skills to cure this ideological plague, also known as the Washington Consensus.
The fast-lane financiers should have learned a lesson from the 2007 firing of World Bank president Paul Wolfowitz due to nepotism (high-salaried favours for a girlfriend), or from the tragically sex-addicted Dominique Strauss-Kahn, formerly IMF managing director, whose Viagra-fuelled orgies left him in a professionally-vegetated state of decay last May. He resigned in disgrace but his influence lingers, as the thinning IMF now seeks $430 billion more so that Strauss-Kahn’s successor Christine Lagarde (herself still under investigation for politico-financial corruption in France) can in turn lend more to the European 1% elites to hammer their 99%.
Instead of putting scarce SA resources into the IMF’s recapitalisation, it’s long overdue for our svelte swingers to take some time off to detox and then practice the ABCs: Abstain; Be faithful; and Condomise. That entails:
Abstaining from further financial liberalization.
Being faithful to poor and working people at home, instead of partying with the unfaithful Goldman Sachs mafia (the ones who hired Mboweni after his 2009 firing)
Condomising by putting our exchange control system back on as tight as we can.
Patrick Bond’s recent authored and co-edited books are Politics of Climate Justice, Durban’s Climate Gamble and Zuma’s Own Goal.