One thing is clear amid all the uncertainty: South Africa’s economy is in big, big trouble, writes Ferial Haffajee
Like emergency tow-truck drivers who rub their hands together eagerly when an accident report crackles over their citizen- band radios, the repo men are waiting.
A month or so after an interest-rate hike, business picks up for those in the repossession trade. That’s when many people with cars, houses and other goods bought on the never-never get into trouble.
“It doesn’t happen immediately – you only see it in a month or two,” says Boykie Koopman, a sheriff who operates in the suburbs south of Johannesburg.
He sees the trouble in all areas, from comfy Northcliff to the solidly middle-class Newclare, to the dirt-poor Westbury.
Koopman’s job is to attach goods to cover the cost of the debt of people who have landed in trouble with the banks, or to repossess items they can no longer pay for.
Many local businesses and furniture stores are built on the dependability of hire purchase, but interest-rate hikes are bad for business.
Creditors hope people will come in and make new arrangements to pay their debts once the sheriff visits, but these days most cannot.
“Some say to us: `What must I do? I haven’t got a job. I can’t get a job,'” says Koopman.
This has been a week for the repo men and the repo rate. The Reserve Bank pushed up its repo rate – the rate at which the central bank lends to commercial banks – twice in the past week.
By Thursday it was down again, but the interest rate levied by banks is unlikely to dip below 20% for the rest of the year.
Within a fortnight, real interest rates have climbed to their highest level ever and although the government, business and the Reserve Bank have rejected talk of a recession, it’s clear the economy is in big, big trouble.
Economists across the spectrum have revised their growth targets for 1998 down to about 1%, and lower in some cases.
The government has predicted a turnaround in the second half of the year, but it hasn’t addressed the glaring failings of an economic strategy which hasn’t managed to achieve the basic goals it takes its name from: growth, employment or redistribution.
There is growing evidence that jobs are being shed and that more will go as the ugly side of the global economy shows its face.
“If we want access to foreign capital, we have to take the pain,” said Reserve Bank governor Chris Stals from Hamburg, Germany, this week.
Stals has not changed this tune, despite growing evidence that his monetarism is not packing a punch where it counts most: poverty alleviation and job creation.
Increasingly, the pain which Stals inflicts is having less and less effect on the markets it is meant to appease.
At the Johannesburg Stock Exchange this week, there was concern but no panic in the face of the rand slipping and sliding on world markets, hitting an all-time low … and another … and another.
At the offices of stockbrokers Socit Gnral Frankel Pollak, it was the disastrous Bafana Bafana-Saudi Arabia match on Wednesday, rather than the economy, which had dealers on the edge of their seats.
The healthy 5,1% inflation rate announced on Tuesday didn’t move the market much; the Reserve Bank’s decision to bolster the currency with another bail-out only improved share indices slightly.
“We’re keeping our eyes on Japan,” said dealer David Shapiro. Increasingly, for the markets, Asia is the indicator of where the South African economy will go.
In the corridors of the World Bank, a fundamental question about globalisation is being asked: what benefit is the new world economic system to the poor?
There is little evidence that the government is doing similar soul-searching. Instead, in South Africa, the conservative economic strategy threatens to knock people out of the middle class. Often the emerging middle class has high debts.
Cars, homes, furniture and luxury appliances are often bought on hire purchase, and the higher monthly repayments are becoming more than many households can manage.
Electrification has provided a fillip to furniture stores, which have seen a shift in buying trends toward luxury goods like television sets, stereo systems, stoves and fridges.
Although Ellerines director Jeff Gritz says the growth was “pedestrian”, it was a healthy indicator of where the economy could be headed. Now the trend toward a growing middle class could be reversed.
“This is the most organised and articulate class, which could vote with its feet,” says policy analyst Steven Friedman.
“[The economic crisis] puts pressure on Gear [the growth, employment and redistribution strategy], which is largely an outward strategy, and strengthens the hand of people who are saying a totally deregulated market is a problem.”
One of those people is James Hinds of the labour think-tank Naledi, who says those worst affected by a tight monetarist policy are the jobless.
“They stand less and less of a chance of getting into the job loop.”
What South Africa faces is the prospect of a ballooning underclass with little chance of finding a job – more than six out of 10 South Africans live below the poverty line – and the phenomenon of a working poor.
The high cost of borrowing makes it prohibitively expensive for small and medium enterprises to operate or expand.
This sector is the best engine for large- scale job creation. While big companies have expansion plans, they will provide few new jobs.
“The agenda should be jobs, jobs, jobs,” says University of the Western Cape political studies lecturer Keith Gottschalk.
He echoes a growing cry for greater government spending on community public works and investment in sectors like information technology and tourism which could earn a quick buck.
Instead, the government is increasingly throwing money at the poverty problem – this week it was a R1-billion bail-out for indigent families.
Productive investment from abroad, already slowing down after two years of healthy growth, is threatened by high interest rates because these long-term investors seek prospering markets, while the Reserve Bank’s tight monetarist policies are geared to attract short-term foreign capital.
In the halls of high power – the government, the Reserve Bank and the stock exchange – the dons are talking up the currency. Most predict an economic upturn by the end of the year, with a corresponding fall in rates.
But predictions like these are proving little more reliable than a gypsy fortune- teller at the side of the road. If their crystal-ball gazing had proved correct, South Africa would by now have had hundreds of thousands of jobs, far lower interest rates and significant economic growth.
Put this to them and the answer is either “take the pain” or “wag ‘n bietjie, alles sal regkom [wait a bit, everything will be all right]”.
Those taking the pain are not the elite like Stals and Minister of Finance Trevor Manuel.
The job queues are snaking, soup kitchens are running dry, the shadow economy of crime is growing and the repo men are busy.
If defaulting creditors cannot pay their debts, Koopman’s assistants arrive in a bakkie to remove their goods. “I don’t touch beds, robes, kitchen tables or stoves. Otherwise, how will people eat?” says Koopman.
But everything else goes – fridges, television sets, videos and “the things people can do without”.
The repossessed goods are taken to a huge warehouse on the outskirts of Johannesburg, where the well-used fridges and hi-fis with finger smudges on the volume buttons are the headstones in a graveyard of dreams and aspirations.