Who would have expected that on the day that SA’s parliamentarians confirmed that they were hellbent on taking the economy on a potentially ruinous path, the rand would actually gain?
Yet Thursday’s constitutional review committee’s recommendation to tinker with the property rights provision in the constitution was accompanied by a gain in the rand against the pound that was, at least on an intraday basis, the biggest since Cyril Ramaphosa won the ANC leadership in December.
For the ANC members of that committee, it would be a mistake to see that gain as some sort of endorsement of their populist-driven move, which comes despite the absence of any evidence that the constitution had prevented the implementation of land reform in the more than 24 years the party has been in power.
Ramaphosa’s initial announcement of the ANC policy change in July was notable for its lack of conviction. If anything, his contradictory statement talking up the need to rewrite the constitution, while at the same time conceding that there was no need to, helped to build a narrative of him not being really in control of events.
Deaf to all reasoning to the contrary, the committee, after paying much lip service to expert and community opinion, confirmed it would push for a policy whose costs are fairly obvious and significant. Describing the potential benefits as debatable would be overly generous.
The sanguine response in financial markets last week may have come as a bit of a surprise, considering this unnecessary land debate has been cited by potential investors as one of the biggest obstacles to attracting the funds that Ramaphosa says we need to advance his economic agenda.
So it should not come as a surprise that our land policy announcement went under the radar, coming at the same time that the UK’s own act of self-harm was hogging the headlines.
I’m not sure that this apparent lack of a negative reaction should be taken as a positive sign or a signal that the policy suddenly either makes sense or has become irrelevant.
It could well just be confirmation, if anyone had any doubts, that we are not exactly what one would call a systematically important economy. In finance that term is usually in reference to a financial institution whose failure is seen to have the potential to trigger a wider financial crisis. In everyday speak, they are referred to as “too big to fail”.
Even among emerging markets, we are far from that. We tend to suffer from sell-offs triggered elsewhere — think of Turkey’s spat with Donald Trump earlier in 2018 — rather than be a source of general turmoil that infects others.
So it should not come as a surprise that our land policy announcement went under the radar, coming at the same time that the UK’s own act of self-harm was hogging the headlines.
British voters were convinced in the middle of 2016 to leave the EU, in the mistaken belief they could keep all the benefits of membership and still be able to get rid of the things they didn’t like, such as free movement, which had “burdened” them with an influx of young hard-workers (and taxpayers) from Eastern Europe.
Last week, Prime Minister Theresa May had to go back to her people and tell them that far from “taking back control,” the price of continued trade with the EU was even less sovereignty. For the foreseeable future they will remain tied to all the existing and future rules, the only difference being that that they will no longer be one of the major powers setting them.
Not surprisingly, the true Brexit disciples are furious and would rather go for the kamikaze option, while the remainers are emboldened to seek to reverse the whole thing. The current government might not last long.
While the UK’s glory days as a colonial power ruling most of the world are long gone, it’s still the second-biggest economy in the EU and the fifth-largest in the world, and there is no doubt economic and political chaos in that island will also bring some harm to the rest of Europe.
Our economy is equivalent to just about a tenth of Britain’s. When we shoot ourselves in the foot, we’re the only ones to suffer and there is therefore no incentive for anyone else to bail us out. Greece, for example, insignificant in the bigger scheme of things, had to be rescued to keep the major French and German banks out of trouble.
We have an economy that’s barely growing, an unemployment rate that’s near 30% and a need for a constant flow of foreign capital to plug our budget deficit.
But our misguided politicians still think we are such a compelling proposition that we can afford to keep scoring own goals and still emerge unscathed. It might only have been true last week because nobody was looking that closely.
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