Violence adds to economic woes

Anti-foreigner violence in South Africa has already hit the mining sector, a mainstay of the domestic economy, and threatens to undermine confidence among international investors, analysts say.


Even before the unrest broke out, the outlook for the South African economy, Africa’s biggest, was clouded by uncertainty about its political leadership and major infrastructure problems.


Added to the already sky-high crime rate, the recent tide of violence against foreigners, which has left at least 42 dead and 16 000 displaced in 12 days of rioting, is a further blow.


Independent economist Dawie Roodt said the main danger was a shift in sentiment among foreign investors.


“This is not a nice neighbourhood to be in,” he said. “We have to prove we are different from the rest of Africa. If this carries on investors will say ‘this is just another African country’.”


Roodt said the past few days had put the currency under pressure, which threatened to add to inflationary pressures in the country that the central bank is already concerned about.


Claude Baissac of United States company NSA Risk Management Services, based in Johannesburg, said most companies had adopted a wait-and-see attitude towards the violence.


“The business community is shocked. 2007/08 is a year of every danger with the electricity crisis, the high inflation, the crisis of political leadership and now the very serious social and civic crisis,” he said.


“Companies are starting to realise that the risk profile of the country is changing.”


Political uncertainty stems from the possible influence of communists and trade unions on the direction of the ruling African National Congress (ANC) party, as well as doubts about ANC leader Jacob Zuma, who faces a corruption trial.


Presidential elections are to be held next year.


The electricity crisis is a result of chronic underinvestment in power infrastructure that has led to frequent power cuts since January and is set to crimp expansion in heavy industry.

Tension and fear

Those conducting the deadly attacks across South Africa might not want to believe it, but the domestic economy is also highly dependent on migrant labour, as illustrated by this week’s problems in the mining industry.


Chamber of Mines spokesperson Frans Barker warned of long-lasting damage to the economy if the violence was not “contained quickly” following reports from mines around the Johannesburg area that their production had been affected.


Companies and unions reported that many foreign employees had failed to show up for work this week.


National Union of Mineworkers (NUM) spokesperson Frans Baleni said the Primrose gold mine on the eastern outskirts of Johannesburg, which has a workforce consisting of between 85% and 90% Mozambicans, “has not been operating since Monday”.


“It has affected our members, not only those who were physically assaulted, but it has created tension and fear—at the moment they are targeting Mozambicans, tomorrow it might be Lesotho, it might be Botswana,” he added.


The NUM estimates that 35% to 40% of workers in the mining area east of Johannesburg are foreign.


DRD Gold, a major mining group, and Pamodzi Gold, a smaller black-owned South African gold mining company, both said that they had had production problems around Johannesburg because of absent workers.


Leaders in the tourist industry are also concerned.


For the first time, police reported on Friday that violence had spread to Cape Town.


Southern African Tourism Services Association chief executive Michael Tatalias warned on Thursday that the attacks could do “untold damage” to the industry that contributes more than 8% to the country’s gross domestic product.


A farmers’ union has also expressed concerns the violence could spill over into rural areas, and impact on the agricultural community.


“It is not far-fetched that even farmers employing workers lawfully from neighbouring states could experience at first hand that xenophobia is not restricted to metropolitan areas,” Transvaal Agricultural Union spokesperson Paul Van der Walt said in a statement.—AFP



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