Thanks this website
Thanks this website

This article is doing the rounds on my Facebook newsfeed: “Asking RE Johnson why SA only has two years left“. I actually read it some time ago, but the article came from – and in my experience, their news tend to be more inflammatory than necessary. And the title is well-misleading – it should read “…only has two years left before…a regime change.”

I was asked for some thoughts. Fortunately, I do have some.

What RE Johnson actually thinks 

Unemployment would continue to soar. The budget and trade deficits would continue to rise. Foreign investment along with domestic capital would continue to leave the country. Downgrading by the ratings agencies would continue, resulting in the inevitable junk bond status. With that, the cost of our debt will sharply rise to a point where it may become impossible to service the debt at all.

Followed by IMF assistance. Only…

For the IMF would, of course, demand conditions for its support, the government would lose control of economic policy and inevitably part of the deal would be huge spending cuts, certainly in the public service pay bill and perhaps also in social grants. In addition there would, inevitably, have to be a liberalisation of the labour market which would give the coup de grâce to Cosatu and thus the SACP. And much more besides.


When that happens […] a coalition government would be ushered in.

And all the coalitions sound unattractive (DA-ANC, ANC-EFF, DA-EFF).

But don’t worry, because:

I’m not pessimistic or depressed about this because I think it will be actually quite good for us. But I think we are in a situation where things have got to get a bit worse before they get better.

And we’re listening to Mr Johnson because…

I start off with the fact that there is a sort of iron law about South African history that, ever since the discovery of deep level gold, this country has worked on the basis of a steady inflow of foreign capital. It’s been fundamental for our development for over a century. And if that is ever threatened, it stops, and you do get a regime change.

That is: when the capital goes on strike, you get regime change.

Some thoughts on predictions

You know what makes me very uncomfortable?

Specific forecasting.

And that bothers me because, well, here is my world view of economies:

  1. Economies are massive and greatly complex ecosystems.
  2. Let me take the example of a rainforest.
  3. You can walk in it, look around, see some tree frogs, and be generally impressed with all the leaves.
  4. But you are barely catching even the right overall impression of said rainforest.
  5. Within that rainforest, there are a myriad of animals, birds, insects, bacteria, viruses, fungi and plants, locked in a constant state of flux with each other, varying their behaviours and functions around the time of day and the seasons and the availability of sunlight.
  6. You can isolate out a particular species, and study them, and get a good idea of how they will act.
  7. But if you try to predict what would happen with a particular area of rainforest over a specific period of time, then you’re in for some work. For starters, you’re going to need some information about weather patterns.
  8. But the weather patterns mean that you need to extend your area of study to the entire world as an ecosystem – where it turns out that some economies are deserts, and some are oceanic, and actually, all economies are different and have different impacts on the global climate. Including the economy that you’re in.
  9. So you can make some general observations, but if you want to know the actual amount of rainfall that will fall here in this area over a short-period of time, so that you can make very specific observations about the future of the isolated part of the rainforest in which you are standing, then you basically have to be God.

Here is a general prediction: “The ANC will not last forever.”

This is almost certain to be true. Because no government in the history of the world has ever lasted indefinitely (with the possible exception of the Vatican – although, give it time).

Here is a specific prediction: “The ANC will be forced into a coalition government in two years’ time by the IMF.”

This is almost certain to be false. Not least because the IMF generally tends to fail at what it sets out to do.

Some thoughts on African Economies and Historical Precedent

Mr Johnson last made a prediction in the mid-1980s, after the Soweto riots, about the collapse of the Apartheid regime. Which was a good prediction – although having the whole world enforcing sanctions from outside, and having the internal resistance gaining ground, and having the rest of Africa under African rule already, that’s not the least-sound bet in the world.

But consider what he’s saying now:

  1. The last time that foreign capital went on strike, about a decade later there was regime change.
  2. That’s an “iron law” and is doomed to repeat itself.
  3. Even though last time, you were talking about a minority colonial government running a fairly centrally-planned economy.
  4. And even though this time, you’re dealing with a popular majority government running a fairly liberalised market-economy (albeit with highly regulated labour and strong unions).
  5. It does not matter that in terms of my ecosystem analogy, the economy was once a “desert” and is now a “rainforest” – a capital drought will affect them in the same way.
  6. Whaaaat?
  7. No, man. That’s far too simplistic.

When it comes to African economies that have recently emerged from colonisation – the honest truth is that most economists really don’t know much about what’s going on.

Look at Zimbabwe. It suffered through IMF-imposed liberalisation, and then through rejection of IMF assistance. It suffered through hyperinflation. It suffered through a flurry of laws and regulations that have been oppressive and bad and all those things.

But regime change?

Not a bit of it.

Despite all the much-vaunted predictions thereof.

And those old white men with the predictions have ended up looking like meerkats, popping up from their safe burrows and squeaking bloody murder, while the rest of the savannah carries on without them. And yes, it does seem strange that the gazelle continue to graze where the lion roam – but unfortunately, meerkats really have no idea what life is like for a gazelle, no matter how much time they spend observing it from a (safe) distance.

Some thoughts on the future

I think that we need to stop worrying so much.

You can be two types of people in this:

  1. The first kind run around, trying to work out what the future rainfall will be so that they can decide whether they need to leave, or take shelter, or stay, or not worry at all.
  2. The second kind don’t worry too much about the weather patterns. They build houses with solid foundations, so they’re not too worried about flooding. They install a water tank and a borehole, in case of drought. And they get on with the business of living.

And actually, given that the weather patterns rarely give you just the right amount of water, it probably makes sense to prepare for both sides of the scale.

Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at