South Africa About to Collapse?

At the Wall Street Journal Max Meizlish warns:

Multinationals and finance houses recognize South Africa’s deteriorating domestic conditions: youth unemployment above 60%, frequent power and water outages, and failing state-owned enterprises. But they haven’t priced in sanctions and compliance risks stemming from Pretoria’s foreign alignments and collapsing standing in Washington. South Africa’s rand is one of the world’s most volatile currencies, yet its modest 4.28% dip against the U.S. dollar since the beginning of President Trump’s second term doesn’t capture the scale of Pretoria’s increasing isolation.

Amid South Africa’s alignment with China, Russia and Iran, its anti-Israel lawfare and systemic corruption, the Trump administration has taken steps to isolate Pretoria: suspending financial assistance in February, expelling the country’s ambassador in March, denying its special envoy a visa in May, and signaling it may oppose reauthorization of a key regional trade program. This week, Treasury Secretary Scott Bessent skipped the Group of 20 finance ministers’ meeting in South Africa. These moves reflect South Africa’s pariah-like status in Washington.

concluding:

Most investors still see South Africa as the country of Nelson Mandela—the “rainbow nation” of democratic reform, racial reconciliation and rule of law. But that legacy has long given way to a pernicious reality: a corrupt, anti-American kleptocracy aligned with some of the world’s worst regimes. Mandela’s legacy no longer guides the country. It blinds the world to the menace the ANC has become. And it’s in that blind spot that all the risk lies.

There may still be time to change course. But if the ANC refuses to recalibrate, the Trump administration won’t hesitate to act. Trade preferences will vanish. Sanctions will hit hard. And China will fill the vacuum left by Western firms—not to invest, but to extract.

The risk is real. Yet Wall Street is still pricing in business as usual while South Africa edges toward collapse.

I have no way of determining whether his alarm is realistic or not. It’s certainly consistent with the Trump Administration’s actions WRT South Africa since coming into power.

7 comments… add one
  • bob sykes Link

    It is mere human decency to oppose the genocidal Ashkenazis in Israel. What is indecency it to support the genocide, like we do.

    However, South Africa collapse. like Rhodesian collapse is regression to the mean. The British left better institutions in Kenya, Uganda, Egypt, and Nigeria, but breeding still matters.

  • steve Link

    I think it’s another one of those wicked problems. White people came and took all of the wealth and then installed apartheid. They ended apartheid but white people kept most fo the wealth and the new black people in charge, not having experience or wealth, decided not to offend the US and Europe by getting revenge on the white people and taking back what they stole to begin with. It’s pretty clear that what we see over and over is that when you destroy human capital its hard to rebuild it and even worse when wealth capital is retained by the destroyers.

    Steve

  • Charlie Musick Link

    “You can only confiscate wealth that exists at a given moment. You cannot confiscate future wealth – as that future wealth is less likely to be produced when people see that it is going to be confiscated.” – Thomas Sowell

    Like all countries, South Africa needs to chose a path of economics whether it be a free society or a regressive one. After Apartheid, they had to choose between following the path of Botswana (more economic freedom) or Zimbabwe (less freedom). Their economic freedom index has been slowly declining moving from moderately free to mostly unfree. The current government talks about land confiscation without compensation. Gee, that worked so well in Zimbabwe. This is all very unfortunate for all of the people of South Africa. It’s very sad.

  • steve Link

    Sowell ignores that you have stolen the path to future wealth when you destroy human capital. Note that Botswana always strongly opposed apartheid. Seriously, how can you not know that?

    Steve

  • Charlie Musick Link

    Steve, The Heritage economic freedom index goes back to 1995. This is after Apartheid ended in South Africa. In 1995, South Africa had a higher economic freedom index than Botswana (60.7 vs. 56.8). South Africa also had a higher per capita GDP ($3855 vs. $3156). Until 2003, South Africa increased economic freedom with the index rising to 67.1. Their incomes also increased. Since then, their economic freedom index has been in pretty steady decline now sitting at 57.3. The decline began well after Apartheid ended. Also, South African per capita GDP has declined considerably since 2011.

    Meanwhile, Botswana has been increasing their economic freedom from 56.8 to 69.9 (highest in Sub-Saharan Africa). Their per capita GDP now exceeds the per capita GDP of South Africa ($7820 vs. $6022). Botswana has gone from being about 20% poorer to 30% richer than South Africa in 30 years. That’s not due to Apartheid. That is due to policy choices made by both governments.

  • steve Link

    So it’s just a coincidence that Botswana never had apartheid? The issue here is that once human capital is destroyed it takes a long time to recover, not just 20 years. It is made worse by the fact that the white people in South Africa continue to control much/most of the wealth. The effects of apartheid linger past its termination.

    There is lots of literature looking at this but it’s really just common sense. Let’s assume you have kids. Take away one of your parents. The remaining parent is not allowed to have a job that pays well. Your kids are not allowed to go to good schools or have decent medical care. Nutrition will be just barely adequate. Now your kids raise their own kids under the same circumstances. They see that only one specific group, based upon their color, are allowed to have all the good stuff. Now their kids raise their kids the same way. There is no role model of success in the family and frankly little ambition since there is no real chance of success.

    Now you suddenly say you are all free. Your greatgrandkids have little money, no experience with success, crappy schooling, etc. How long does it take them to overcome those handicaps. Oh, and the people who were keeping them from success before, they get to keep all the money, land, education, health, infrastructure and other benefits they accrued at your descendants expense.

  • Charlie Musick Link

    The lack of Apartheid is not the reason for Botswana’s relative success. Mozambique did not have Apartheid, yet remain poorer than South Africa and Botswana. Why? Their economic freedom has been much lower than South Africa or Botswana. It bounces between mostly unfree and repressed. As a result, they are much poorer than either country,

    All of the excuses you give for South Africa being damaged by the loss of human capital also applied to South Africa from the end of Apartheid in 1990 until 2003 when their economic freedom peaked. During this time their economic freedom increased and their wages increased. The same loss of human capital existed in this period as it does today.

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