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What, no crisis? You're kidding

By Clem Sunter

Since writing the column about South Africa looking over the edge of a cliff, I have had plenty of responses from: "you should have said teetering on the edge" to: "anywhere but South Africa if you're thinking of investing in the continent of Africa."

Nevertheless, the two comments I want to respond to are from respected members of the political and business establishments. Neither said it to me face to face; I read about their opinion in the media. The first stated that there was no crisis and there was no cliff, basically dismissing the idea of a 25% probability on a "Failed State". The second one said that South Africa has always lurched from one extreme to another, but we have always managed to right the ship and survive. Have a glass of nice red South African wine and think more hopefully about the future!

I beg to differ. Chantell Ilbury and I put the cat among the pigeons precisely because we believe the chances of a real crisis have risen dramatically (though we still give a 50% probability to South Africa staying in the "Premier League"). Moreover, as the Titanic showed when five of its 16 watertight compartments filled up, there is a point of no return. We are just over one full, with water starting to leak into the second compartment. Remember Egypt and Greece were the number one nations on Earth at some stage in ancient times. Now they are nowhere and Italy, formerly, Rome is heading in the same direction.

The assumption that South Africa will retain its premier status in Africa is distinctly dodgy, seeing how much our brand has declined in the last few months. The dismal cover of The Economist featuring armed and angry mineworkers; the policy uncertainties around nationalisation, property rights and land ownership; the fraught relationship between striking workers, the unions, government and employers as well as the creeping anarchy that it has produced in the mining and agricultural sectors; the lack of leadership from the centre together with the unending stories of corruption and waste; the absence of any sense of crisis among many worthy members of the ruling class - all these factors have combined to produce a tipping point or, as I like to call it, a crossroads.

Back in the mid-1980s, Michael O'Dowd and Bobby Godsell as members of the Anglo scenario team produced a truly prophetic diagram on South Africa's transition from where it was at the time to South Africa becoming a modern democratic state and a winning nation. The first crossroads was the political one where we either negotiated a settlement with the real leaders like Nelson Mandela, or co-opted tame black representatives into a tricameral parliament. We took the "High Road" and came up with a world-class constitution, which led to a perfectly reasonable election in 1994.

But there was always a second crossroads to face; the economic one where either we cemented our presence on the "High Road" with sensible economic policies that gained the approval of the majority of the electorate and the outside world; or we undid the entire progress we had made on the political front by adopting disastrous policies that caused us to swerve onto the "Low Road" of alternating populism and dictatorship - a pattern we called the Argentinian Tango. We could even spin off into a Waste Land.

South Africa is at that second crossroads where we either get our act together by having an Economic Codesa which establishes a consensus around what economic freedom really means and what the measures to make it happen really are; or we sink into an abyss where "anywhere but South Africa" is the guiding principle for all those foreign investors wishing to bet on Africa. We move from first to last in the minds of the world with little hope of recovery.

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