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South Africa Rocked by Financial Crisis as Unemployment and Debt Soar

Economics / Recession 2008 - 2010 Oct 29, 2009 - 04:37 AM GMT

By: Danny_Schechter


Best Financial Markets Analysis ArticleJohannesburg: There was lots of skepticism when I came to South Africa two years ago to show my film IN DEBT WE TRUST. While my critique of consumer debt resonated, the film’s forecast of a financial crisis didn’t. Their economy seemed to be doing well and it was hard to tell a society that tends to look inward that they would be affected by a financial crisis in America, l0,000 miles away.

Most believed it would pass them by.

It hasn’t. A year ago, the International Monetary fund warned that 200,000 people would be affected. People living on $2 a day might end up surviving on $1 or not surviving at all. These victims around the world are mostly not part of the US debate or our media coverage. The faces and stories of these victims are as conspicuous by their absence as  have been stories of the one million families that had their homes foreclosed upon in the last quarter,

As if South Africa doesn’t have enough problems—the AIDS Pandemic, massive poverty, and simmering unrest, the Finance Minister yesterday discussed the impact that the global economic crisis is having. There’s been a loss of 500,000 jobs and a fall off of taxes and an increase in expenditures.

The projected deficit will soar with a shortfall doubling to 7.6% of GDP.  The government has to cut costs that will mean a further cutback in social services at the very time of growing protests against service failures and neglect of the poor. South Africa will now be forced to go deeper into debt, to borrow more money

Thank you Wall Street - although most of the media I saw here did not blame forces/financial criminals in the USA for causing this financial cancer. Perhaps they are too far away for most polilticans and pundits here to see the connection.  I did read about a big South African bank that got stuck with sleazy subprime losses sold by US firms but that is not being raised in connection with this emerging economic catastrophe.

They even have their own Ponzi schemers here. The government has issued arrest warrants for two scammers pushing phony investments in AIDS drugs. Several big companies are being prosecuted for pice fixing on commodities like bread and paraffin or healting oil.

This crisis has already led to an escalation of protests in municipalities against service cutbacks. At least one TV show here, The BIG DEBATE on ETV, produced by Ben Cashdan, is showcasing the real issues and generating lots of heat and light on financial issues. (

The debate raises deeper issues of transformation---something we in America should learn from.  President Obama has used that “T” word as did President Mandela whose campaign promised “A Better life For All” back in l994. For many, conditions are worse as a new black elite enriches itself.

The ANC still calls for deep change but it, too, is up against many of the same forces Obama faces—a mostly white business order  that has not made many sacrifices while promoting neo-liberal economic policies that sustains a status quo built on inequality.

While race may be more explicit an issue here in a country still coping with its Apartheid past, class is becoming as deep a divide.

This is not just a fight between black and white anymore—if it ever really was—but between the ideas and proposals of the left and the right. There is an active Communist Party, with many activists to the left of it, that is allied with the Government and pushing it. There are also well organized unions that are advocating for the interests of the workers, many who are now out of work. They too are fighting for a new health care system, preferring a more socialized model.

The government officials want to placate this constituency. They talk left with the new president Jacob Zuma calling for a “shift to the left in economic policy” while at the same time focusing on reducing wasteful expenditures and reorganizing public spending, fixing the tax base and other centrist reforms. There are no fewer than four Ministers involved in economic policies.

Listen to how Business Report, a national financial daily, analyzed the new Finance Minister Pravin Gorham’s speech to Parliament with the bad news on the economy. “Pravin Gordham managed to perform an egg dance, neither projecting himself as left-wing nor centrist during his first medium-term, budget policy statement…”

His focus is on “pragmatism.” Sound familiar? Egg dances can be dangerous. Remember Humpty Dumpty?

Activist/economist Patrick Bond offered a sharp critique.

“I just can't get over the disappointment at the speech Pravin Gordhan gave yesterday. The most telling point is that notwithstanding unrelated financial market flurries yesterday, capital was quite satisfied with the speech, judging by some of the comments I heard on radio talk shows

I think the civ soc watchdoggers immediately below missed a couple of crucial points: first, it is now quite apparent that Gordhan is not going to fund the NHI (NATIONAL HEALTH INSURANCE) , based on the inadequate health budget increases through 2012; and believe it or not, after railing against global capital and SA's rich - and belatedly prosecuting financial pyramids after the damage is done - Gordhan has the nerve to loosen exchange controls substantially! Sure the budget deficit - 7.6% of GDP - is vast, double what (Former Finance Minister Trevor) Manuel estimated six months ago... but that's mainly due to falling tax revenues, while on these crucial struggle sites like monetary/financial policy and NHI, the news is very very bad for the left…

Sadly, the vast declines in manufacturing and the need to generate a more environmentally-sensitive and locally-oriented economy are ignored. What a waste of a peaceful coup, when just 13 months ago and then in May, it looked like many processes were open to change. How naive!” (“Naïve? Could the same be said of us?)

Meanwhile, the perceptions of corruption at the top are everywhere. Even Trevor Manuel, considered by business as the most competent official on economic matters is being challenged for buying a top of the line BMW at government expense. He says now that it was “ill advised” but is “within Ministerial guidelines” and he will not give it back. Another Minister who is the head of the Communist Party was earlier exposed for driving a Mercedes. What started as empowerment is now being seen as enrichment.

The prognosis: More and sharper conflict as this debate takes to the streets.

It is time for our media to start explaining the international impact of the irresponsible and fraudulent practices pursued by Wall Street’s banksters. We may not be the world, but what happens in the USA affects and infects the whole planet.

News Dissector Danny Schechter, blogger in chief at, is making a film based on his book PLUNDER (Cosimo) Comments to

© 2009 Copyright Danny Schechter - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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