I’m not an economist. The goal here is to make average people (like me) understand how dangerous our country’s financial situation is.
Yesterday was the record breaking drop in South Africa’s currency.
$1 cost almost R18. Currently, it’s R16.55 to the dollar.
It’s not as simple as this but as a practical figurative (and for lovers of oxymorons), imagine saving up for a fridge for 1 year. When you start, it’s going to cost you R3000 but by the time you’ve saved that money, 12 months later, they tell you that it the price has changed to R4650.
The world just threw away our buying power.
Now imagine that happening to the whole of our country.
Imagine unemployed people trying to beg enough for food. Imagine what medical bills will cost. Imagine people not understanding China’s currency devaluation and the oil war. Imagine people not fully accepting that politicians are robbing their country but needing someone to blame for their deepening hardship. Imagine politicians trying to get elected on hate…
You don’t have to imagine reality..
South Africa is a massive maize exporter yet, this year, will be importing R2.2-billion of maize because the drought has damaged crop yields. Farmers are selling their thin cows to butchers at a loss because that’s worth more money than a dead cow. The pension fund is owed almost R900-million by a newspaper group. Two weeks ago, Citigroup cancelled a R250-million, short-term banking facility that South African Airways was using, leaving the airline without cash. Citigroup wants South Africa’s government to guarantee any money loaned.
Oil may be at rock bottom prices now but it’s guaranteed to rise once they’ve nowhere to store it.
It’s to be expected that the South African Reserve Bank will be forced to raise interest rates early this year.
As bad as all of this sounds, it’s nothing compared to the disaster that would happen if international financial ratings agencies dropped the value of South African bonds to junk status. Overseas investment firms may own the majority of the local stock market but their company laws would force them to disinvest.
South Africa is in trouble. Will we discover the real meaning of community or will we destroy ourselves.
PS: Tomorrow, in Knysna, the DA and ANC are holding a Special Council Meeting regarding their salaries. Will the Mayor of 68 000 people take the R63 000 per month that’s on offer?