Prepare for the coming economic storm

Source: News24, 25/08/2015

The South African middle classes will have to take note of the
imminent economic crisis that could cause much hardship, even
destabilisation.


Ordinary citizens aren`t normally much interested in economic analysis
and projections, but in this case it is in their own interest to at
least understand the basic trends and developments so that they can
prepare for the coming storm.


China`s economic growth has been weakening significantly in recent
months. This has a direct impact on South Africa, especially because
this is driving commodity prices lower – China is the world`s biggest
consumer of raw materials. The country is also South Africa`s biggest
single trading partner.


The indirect impact of China`s economic woes is that it has a negative
influence on the global economy. Already there are predictions of a
chain reaction and even a new global recession if China can`t quickly
revive its economy.


China is the second biggest economy in the world.
Emerging markets such as South Africa usually get hurt most by global
economic glitches. Our currency is already weakening to record lows.



Job losses
Lower commodity prices and competition between trade unions that are
destablising the labour market can in the months ahead result in about
a hundred thousand job losses in the mining, steel and manufacturing
sectors.


In the South African reality this could mean that around a million
people will be affected, because the typical worker in these
industries have up to ten dependents.


The hardship of these people will affect everyone in South Africa,
including business.


Analyst and commentator Moeletsi Mbeki famously warned four years ago
that South Africa will face its "Tunisia Day" (the beginning of the
Arab Spring) when China concluded its minerals-intensive
industrialisation phase that had forced up the price of South Africa`s
minerals.


We can`t blame China for all our problems, though. South Africa`s
economic growth had already faded to less than one percent in 2015 as
a result of the severe energy crisis, labour problems, investor
reluctance, corruption, maladministration and wrong policies.


If these trends continue, the growth in the economy could decrease to
close to zero by the end of next year.


Simmering anger
This economic decline couldn`t have come at a worse time for South
Africa. There is a simmering anger among the unemployed, the workers
and even the black middle class that poverty and inequality have
persisted and that the pace of economic transformation has been
painfully slow.


This manifests in increasing aggression, confrontation and even
distabilisation.
The state simply can`t afford the plasters any longer that had so far
been put on these sores.


We`re not the only country facing an economic crisis, but our
government seems to be less able and willing than most others to
navigate through the storm.


The discussion documents released by the ANC last week indeed warn
against weak economic growth and raised expectations. But they are low
on real solutions, mostly arguing for faster "radical economic
transformation" and a stronger role for the state in the economy.



At least it appears that some state departments realise the importance
of talking with the business and mining sector about ways to
ameliorate the impacts of mass lay-offs by providing soft landings,
training and alternative job opportunities.


It is high time the private sector tried much harder to get through to
government and to play a more pro-active role in dealing with our
serious challenges.


Time for cool heads
How should you and I, the ordinary middle class citizens, prepare for
the tough times ahead?
It`s definitely not a time to live extravagantly or to get deeper into
debt. It is time for consolidation and to get one`s house in order,
financially and otherwise.


At the same time, paralysing negativity and wild prophecies of doom
won`t help even a little bit. It is time for cool heads and a good
understanding of the prevailing dynamics and undercurrents in South
Africa`s politics and economy.


Unhappiness in one`s personal life undermines one`s ability to survive
trying times. If the boat you`re sailing in is without leaks and has a
reliable engine, your chances of getting to the other side of the
storm in one piece is much greater.


I think people should start paying extra attention to their personal
relationships, family life and friendships; they should ponder the
ways they relate with their communities and the rest of society; and
they should care about their own physical and spiritual health.


But we shouldn`t retreat so far into our cosy corners that we desist
from having our voices heard and push back against those who are
toying with our future, whether they are politicians, mine