South Africa's Woes Don't Show Any Signs Of Subsiding
June 08, 17
The economic and political situation in South Africa is sad and frustrating, but for the diamond industry, it's all the sadder given the country's storied diamond history. South Africa remains Africa's economic power house, but the past two years have been economically and politically trying in the extreme.
The country's economy has just fallen into a recession for the first time since 2009. Even a strong performance by the powerful mining sector could not prevent it as the economy shrank for a second straight quarter in the first three months of 2017. This recession is the first in eight years as poor manufacturing and trade figures made a big dent in the economy which declined by 0.7 percent following a 0.3 percent shrinkage in the final quarter of last year.
Even more worryingly, some analysts said that fundamental conditions remain so weak, with limitations on growth so widespread, that expansion is likely to come in at less than 1 percent this year. The South African central bank last week revised downwards its 2017 growth forecast to 1 percent from a previous forecast of 1.2 percent.
Politics inevitably is connected with a country's economic state, and politics is one thing South Africa is not lacking. President Jacob Zuma's handling of political and economic affairs seems to have one aim in mind: ensuring he stays in power and out of the courtroom and possibly jail.
His decision to kick out previous Finance Minister Pravin Gordhan at the end of March had an immediate deleterious effect: weakening the rand yet further and leading the globally important agencies Standard and Poor's and Fitch Ratings Ltd. to cut their ratings on Africa’s leading industrial economy to junk status. An extraordinary state of affairs by any measure.
Zuma has been entangled in a series of scandals for the past couple of years and faced calls from within the African National Congress to step down. However, attempts to remove Zuma have led to nothing, and the latest attempt, with a meeting last weekend of party executives, led to the same result.
A conference of the ANC in December is due to pick a successor to Zuma as party leader, but he will remain as President until elections due in 2019.
The people of South Africa deserve better, but political considerations, it seems, will prevent that happening for several years.