SOUTH AFRICA: A CANARY IN THE MINE

The economic hardships sweeping South Africa are getting worse.
Heavily subsidized industries are failing.
Last week, South African Airways (SAA), whose last profit was made in 2011 and is notoriously dependent on state bailouts, filed for bankruptcy protection.
Once the country’s biggest airline, SAA felt the blows of a recent strike. Considering the nation’s faltering economy, the government is not only hesitant to direct resources to rescuing the airline, they don’t have the money to do it.
After ten years of flat growth, South Africa looks likely to lose its investment-grade status afforded by Moody’s. Tito Mboweni, South Africa’s finance minister, cautioned that government debt will rise to 80 percent of the GDP mid-next year if state-held companies’ bankruptcy claims are not reigned in.
Not only are state-operated companies collapsing, but the multinational corporation Rio Tinto, one of the world’s largest metals and mining corporations, has halted operations. The company blamed its reduced productivity on the local violence against the workers. Job distribution and contracts have been mired in corruption, leading to the deaths of labor activists.
It should be noted that numerous South African mining companies are contending with problems of unreliable power supplies, increasing wages, increased security costs, and an aging workforce.
In 2018, South Africa elected Cyril Ramaphosa, previously a miner union leader and now a businessman worth some half a billion dollars, as president. To date (as with most politicians who are pathological liars), he has failed to live up to his promises to end the rampant corruption, increase economic opportunity, and improve public services.