Madeleine Wackernagel
Sometimes it does not pay to take advice. Everyone I asked upon arriving in Johannesburg recommended I exchange my travellers’ cheques immediately; little did I know I could have virtually doubled my money 10 months later. And as the rand continued to fall and economic gloom set in, the question I often heard – “What made you come back?” – took on a certain piquancy.
Post-election South Africa had a sense of optimism – largely illusory, as it turned out. Success on the sports field was not mirrored in the economy, though it helped to buoy the new patriotic fervour for longer than was justified.
Before long I too was adjusting my sights. I had hardly got off the plane when the rand experienced its first “blip”. The fact that it was overvalued in the first instance escaped many people. Problems had been building up on the current account throughout 1995, but still the money kept flooding in, so the sudden turnaround in sentiment caught everyone wrongfooted. And the blame fell squarely on the foreign dealers who were cynically cashing in on our misery by betting against the currency.
Much was made of the strength of the economic fundamentals. But no matter how often Minister of Finance Trevor Manuel or Chris Stals, Reserve Bank governor, stated the obvious, nobody was listening. Ministers and financiers soon learnt that the market always wins – a lesson that was to have a marked effect on the government’s policy course.
Just as the euphoria of 1994 and 1995 was overdone, so was the correction, but for once, the markets had the upper hand – and they weren’t backing down. The tough lesson for South Africans was that foreign investors don’t care too much for ideological niceties.
Ministerial assurances that everything was under control and the economy was progressing apace were not borne out by reality – increasing conflict between labour and business, soaring crime, the escalating brain drain, low savings and high unemployment.
Upheaval at the finance ministry served only to rattle investors further. When Manuel started to talk of “amorphous” markets – those same markets he would seek to mollify with the government’s macro-economic strategy a few months later – the die was cast.
White South Africans have always had a tendency towards negativism – never was that trait more in evidence than in the past six months. The bubble had burst, the post-election honeymoon was over and immediately the pendulum had swung to the other extreme – “we’re going the same way as the rest of Africa” became a familiar refrain. Not that many had been north of the Limpopo.
When Manuel finally presented the strategy for Growth, Employment and Redistribution (Gear), it reflected a significant volte-face on the government’s part. Populism had been replaced by Thatcherism, in all its manifestations, including the dreaded P-word.
The president and his men duly set off around the world to convince international investors that this was not just paying lip-service to the forces of globalistion but a genuine strategy to put South Africa on the growth path. Their sincerity was not in doubt; more so their ability to put theory into practice.
In itself, Gear should have confirmed South Africa a place in investors’ hearts: no more talk of nationalisation, minimum wages, or spending sprees. But the scepticism fostered earlier in the year is not easily dispelled. Now the frustrations hinge on implementation and the government’s apparent impotence in the face of opposition from unions and the communist party.
Manuel maintained the strategy was “not negotiable”; the unions were not convinced. Neither was the business community. The ideological battleground has been set, but the only clear winner must be the country itself.
And as the rand continues to fall, a new realism is setting in. Earlier in the year, when I added my voice to the call to abolish exchange controls, Stals justified the decision to maintain the status quo by saying such a move would result in huge capital flight, further undermining our delicate reserve situation.
More likely, the investment community was merely reacting to the Sword of Damocles the authorities had thereby placed over our heads: how could we expect foreigners to invest when we have no faith in this country?
At the risk of mixing my metaphors, that negativism will be South Africa’s Achilles’ heel. The fundamentals for 1997 are encouraging: the balance of payments should recover, inflation will remain below double-digits, growth should come in at about 2% (at least it’s not negative), and there is scope for an interest-rate cut later in the year.
Now we need the government to put its policies into place, with a realistic and achievable timetable for state asset sales and lifting exchange controls, together with private sector action on investment and job creation, and we could be on our way to performing a second miracle.