Analysis
Margaret Legum Minister of Finance Trevor Manuels decision to allow Anglo-American to list in London turns out to have been the thin end of a very thick wedge. After Anglo, Billiton and South African Breweries could not be denied. Now there is a queue. Once you start, where do you stop? The clamour extends to totally removing all exchange control. Meanwhile we learn about R3,8-billion is flowing out of South Africa every month as profits to overseas shareholders of these companies. That will be R45-billion for the year enough to pay a hefty chunk of the controversial arms deal. OK, a small proportion will come back to South African shareholders. But London listing had been justified on the grounds it would bring in foreign capital. Nobody said we would be losing money: well, they wouldnt, would they. No doubt Manuel will be condemned, with hindsight, for the decision to allow the overseas listing. But that decision is only part of a package which he has been urgently enjoined to adopt by the entire financial establishment, foreign and domestic, for the past seven years. Under huge pressure from these people, our government has consistently opened our economy to the global market in capital and trade. Exchange controls have been relaxed almost to extinction; tariffs have been dropped, exports have been promoted over the local economy. Foreign capital has been wooed with low taxes, and low public expenditure. It is called “putting the fundamentals in place”. As a result, a million more people are unemployed, rural areas have died, city slums proliferated. Meanwhile the rand slides, not because it is overvalued, but because it is freely available to speculative mobile capital. It can be held as a kind of entrept container from which other currencies can be bought and sold. And speculators will always sell on a sliding market; it has nothing to do with the real value of the currency. Sadly, there is little to suggest that any real lessons have been learned from this. Day after day the pundits, always associated with the financial sector, tell us Manuel has no alternative but to “stick it out”, “keep his nerve” and so on while the money seeps out and the rand “hits new lows” daily. Some suggest he must further placate footloose capital with a 10% rise in the interest rate, thus ending any chance of local investment in actual enterprise; others suggest that he must throw good money after bad by taking an expensive loan from the International Monetary Fund. Actually, what Manuel needs to do is to take charge of our economy by putting in place regulations to end practices by which foreigners can arbitrarily dictate our monetary, fiscal, domestic and foreign policies. All Western countries protect and promote their own economies in many ways while advising countries like ours to open up at once to their exports. Many “emerging” countries have instituted “speed bumps”: to limit the right, or raise the cost, of speculation. Australia makes residence a condition of ownership of Australian companies. China is opening its economy at the pace that suits it (while Russia, advised by Margaret Thatcher/Ronald Reagan, opened overnight with catastrophic results). South Africa does not have to continue playing the stoic hero who weathers the storms it neither needs nor created. The truth is that real investors people who want to make profits from employing people to make things want a stable exchange rate, a growing internal market, rising employment and a government that is in control. It is only the speculators those who make their money by buying and selling shares and currencies who want wide open opportunities for mobile capital to skim profits over-night. Investing capital the only useful kind wants an economy that is working and expanding. We can give them that by acting decisively to protect our currency and our economy. Make no mistake the siren voices of footloose capital will be very shrill indeed. They are very powerful. It is in the face of their predictably frightening response to serious regulation that our government would have to “keep its nerve”. But it has a job to do. With the best will in the world, all our efforts to develop and regenerate our economy are being steadily eroded by obedience to the shibboleth that unfettered global market forces are good for us. Surely we can now see clearly that they are not. Margaret Legum is an economist and consultant on race and gender relations