Magnus Heystek is a chop.
At least, he was one last week when he wrote “Death of the Rainbow Nation“, which has rapidly burrowed its way into my facebook feed, email, and lunchtime conversation*.
*Also, the time that he declared that retirement advice should come with an age restriction because anyone that’s younger than 60 lacks “real life experiences in the real world”. I shake my head. Could it get any more old-timer?
There have been a few rebuttals since (one from the Moneyweb managing editor, and one from DA Parliamentary leader Mmusi Maimane). And I’m adding another one here.
- Magnus Heystek believes that South Africa is “hurtling towards being a failed state”.
- Because the ANC is “a power-mad liberation movement prepared to follow a scorched-earth policy in order to achieve its political objectives.”
- On November 13th, one of those political objectives was allowing President Zuma to get away with all the taxpayer spend on his Nkandla residence, by approving a report exonerating Mr Zuma.
- The DA and EFF opposition parties got together (how’s that for rainbow-nationing?) and filibustered the voting for a good three hours.
- During that filibuster, one of the EFF members stood up and declared “President Zuma is a thief. He is a criminal. He is the greatest thief in the world.”
- She was directed to withdraw that comment.
- She refused.
- The riot police intervened.
- People scuffled.
The intervention of the riot police is meant to represent a dramatic constitutional crisis. And from that, we can infer the following (thanks Magnus):
The ANC has only one political objective and that is to remain in power.
It will use every mechanism available to it. It will use legislation that was drawn up by the Nationalist Party in 1961 in order to control the flow of money, namely foreign exchange control.
It will use the legal system for as long as it can at the expense of the taxpayer. It will use the tax system to spy on taxpayers. And it’s bound to get worse.
But do we really think that this whole series of events was somehow filled with malicious forethought and intent?
It almost certainly wasn’t.
The EFF MP was making the speaker of the house look like a fool. She was spouting off wild defamation. She was refusing to act with any kind of decorum. The speaker was flustered and annoyed. And after months of this EFF attack on her authority, and after a night of filibustering, Baleka Mbete snapped. At least, that’s what I think.
But however you feel about it, here are the more important points:
- There was a filibuster. In South Africa.
- The President was called “the greatest thief in the world” during a Parliamentary session, and it didn’t end with arrests and MPs going missing and mysterious car accidents and the banning of opposition parties.
Those are not signs of a failed state.
In fact, I’m reasonably sure that if a US congressman tried to do something similar, he/she would be a threat to National Security and charged as a terrorist.
And as for the points about exchange control and spying on taxpayers – this is not uniquely South African.
Truthfully, South Africa is an amateur at it…
How (Not) To Deal With A Constitutional Crisis
Mr Heystek goes on to say:
- The ANC is planning “to take possession of property if it deems it to be in the national interest.”
- “And ‘property’ in this context, does not merely refer to your personal residential property, it refers to property in the broadest possible sense of the word, i.e. all your earthly possessions, be it a farm, business, factory, restaurant, café and even intellectual property rights which you might own.”
- So “repatriate as much of your personal assets out of the country as you can (sic).”
- “Government will one day, is my forecast, simply send in its jackbooted bankers from the Sarb to switch off the offshore investing tap. It will happen overnight, without warning and at precisely the time when the demand for foreign assets is at its peak.”
- “It reminds me of the old joke that used to circulate in the offices of The Star in the mid 1990s when I was employed there: there are only two types of ex-Rhodesians in the world. Those who took all their money out of the country and those who wished that they did.”
It sounds like… he’s having a bowel movement.
There are four main problems here (apart from the grand and sweeping leaps of logic):
- Firstly, there are actually four types of ex-Rhodesians. The third type stayed and invested in their Zimbabwean businesses and now spend much of their time fishing on Kariba houseboats. The fourth type moved to Australia and do their own housework.
- Capital flight is an expensive business for both the people fleeing and the people left behind. And it’s also self-fulfilling when it happens en masse.
- Taking possession of property is not nearly as simple as it’s being made out. It can happen in physical terms – but when it comes to businesses and the like, there is intellectual and reputational capital that can’t just be “confiscated”. Just ask yourself why Zimbabwe has been backtracking on its indigenisation plans…
- And finally, I’m not sure why he thinks that South Africa (and Southern Africa) are the only places where property rights are vulnerable to confiscation. Cyprus, anyone?
The Problem with Capital Flight
When capital decides to flee, it snowballs:
- Departing capital causes the exchange rate to devalue.
- Which causes more capital to flee.
- Which causes more exchange rate devaluation.
- Which causes inflation on anything imported (like fuel).
- While wages are constrained by time (because we don’t immediately adjust wages when the exchange rate plummets).
- So the consuming class have their purchasing power confiscated and spending slows down.
- And you get a recessive-depressive thing happening.
- Which makes capital even more likely to cut its losses and depart.
Makes it sound like you should get out the sooner the better, amirite?
- A devalued exchange rate mean that South African exports just got a whole lot cheaper in real terms.
- So there is a great opportunity to invest in export industries.
- And it’s particularly attractive, given the global alternatives.
- So foreign investment (and local offshore capital) starts to return to South Africa in search of return.
- And the exchange rate stabilises.
- And even, strengthens.
Frankly, I think the pessimists forget that the world has balance: my expense is someone else’s income; my loss is someone else’s gain.
Sure – you get situations where there is destruction, and then no one wins. But even in those extremes, there is opportunity. Just look at Germany – which suffered through two hyperinflations. Or France – which was once destroyed by populism and the guillotine. Or Zambia. Or Mozambique.
There is no need for dire pessimism. What we need is realism – and realism is not one-sided.
This naysaying, however, is one-sided, and blind to the fact that the world is filled with uncertainty. You don’t just travel abroad and find guaranteed returns and evergreen pastures.
To be frank, we need to stop being victims. It’s all “poor me” and “look at what this government has done to us”. We’re forgetting that we have the option to be active in all this. And I don’t mean “active” in the sense of having a political voice. I mean “active” in the practical sense.
Sour grapes can be made into wine. Spilt milk can be turned into cheese. Spoiling fruit can become jam.
But if all we want to do is talk about the sour, the spilt and the spoiling, then nothing will taste good.
Even if we have glorious sunshine.
Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at www.facebook.com/rollingalpha.