SANE Views

Vol.1 No.22, 15 December 2001

The Collapsing Rand: Threats and Opportunities

\Aart Roukens de Lange

The dramatic fall of the rand in recent months should not really have caught us by surprise. It is a reaction - an over-reaction perhaps - by the market to structural shifts that have been evident in the South African socio-economic system over many years. The essential nature of these shifts can be summarised as the following:

Increasingly hi-tech industry with declining demand for unskilled labour
Increasing unemployment and consequent loss in consumer power
Continued population growth, particularly among the poor
Process of globalisation with attendant competition and loss of markets in areas of comparative advantage, e.g. in mining and agriculture.
Increased skewing of income distribution.
Loss of skilled and professional manpower by emigration
Closing down of formerly viable industries (e.g. textiles) in the face of global competition.

These issues could be elaborated upon but here we only wish to point out some of the essential factors which have turned against us. We are now experiencing acute and worsening poverty and unemployment. We are sitting on a social time bomb!

The above factors have been in evidence for a long time but the market did not react to them fully at an earlier stage because of a positive sentiment towards South Africa following its political transformation. The honeymoon is over now and, particularly as a result of developments in Zimbabwe, there is a rush to get out of Africa.

South Africa's economy has been performing badly since the middle 1970s. In the 1980s it also suffered from the sanctions imposed against it (although these also acted as a protective barrier for local industries). In the 1990s South Africa exposed itself fully to global forces, and through the Growth, Employment and Redistribution (GEAR) policy, swallowed the bromide of structural readjustment promoted by the International Monetary Fund (IMF) and the World Trade Organisation (WTO) which has brought us to our knees.

What should we do now to put us back on our feet? Some suggestions offered by SANE are:

Take a leaf out of the book of Malaysia which closed its markets to currency speculation when East Asian economies collapsed in the late 1990s. They thumbed their noses at the so-called Washington Consensus - and prospered..
Re-introduce the financial rand as a form of exchange control.
Break the dependency of township and rural communities on the developed economic structure of metropolitan areas by promoting community currencies and paying basic income grants to encourage local economic activity.
Promote local and community economics in every way possible while recognising the necessity and value of trade.
Issue work rights to people in terms of which they will receive payment for work in community development, environmental protection and social projects.
Note the 'Six Pillars of Sustainability' (see SANE Views #1) and apply these to South African circumstances.

These guidelines offer a wide range of possibilities and more can be brought in for consideration. We now require a commitment from all role players to participate in a process in which the basic paradigm of the mainstream economy is transformed from one determined by unfettered and morally neutral market forces, to one based on consensus where the 'rules of the economic game' are set to induce role players (e.g. by means of tax and incentive structures) to achieve desired social and environmental objectives.