This is the final edition of our five-part series setting out why South Africa blew up a week ago, arguing that the blow-up was not due to a planned insurrection, that the experience will not see the government change tack and reform, and that the country will destabilize further, and suggesting what you should consider doing to survive the consequences. The analysis is based on our initial thoughts, read against our long-standing advice. We will add to it, and so improve it, over time, but are confident that the bones of it are right and will hold up to future critical scrutiny.
The advice that follows in this essay has been offered at length over the years, and the best summation of it can be found in the chapter of the same name as this article in our book, Rise or Fall of South Africa, published last year.
This essay, and that chapter, is geared at individuals, families, and small businesses more than large institutions and corporations, which have the means to call us in to advise on developing country strategies that will ensure their robustness and long-term viability in the volatile years that lie ahead.
That chapter started with this extract from a column I penned for Rapport a long time ago:
‘Six steps to surviving even the worst scenario
‘Consider the following scenario: government policy becomes increasingly antagonistic towards the private sector, with the consequence that we attract little fixed investment. Interest rates in America rise, causing the withdrawal of large numbers of portfolio investments from South Africa. The deficit on our current account escalates sharply, with the consequence of credit agencies lowering even further our credit rating. The exchange rate is well on its way to reaching R20/US dollar – and now we’re talking in terms of R30 per litre of petrol. Inflation, followed by interest rates, shoot up to new heights, while consumer spending falls and production costs rise. The state’s tax revenue collapses. A desperate government is forced into implementing an ever-increasing number of stringent regulations while demanding more and more taxes. At the same time, property rights are completely discarded.
‘Would your family survive such a chain reaction of economic woe? If you’re unsure about your answer, the following steps might be worth considering:
‘Consult an investment advisor on whether it would be a good idea to move some of your assets overseas. The risk is that the rand collapses and that such a collapse destroys your savings and retirement nest egg. A danger in this regard is that the Government, in the midst of economic collapse, makes it increasingly difficult to send money beyond South Africa’s borders. You must avoid being caught off guard, like so many Zimbabwean pensioners, by worthless rands in your retirement years.
‘Think very carefully if much of your asset worth is invested in land – especially in agricultural land. The state cannot but be tempted to nationalise such assets in a time of economic collapse. Over much of the past decade, the price of land has increased dramatically. It might be good sense to sell such assets and move to rent arrangements on such assets.
‘Consider the Western Cape as a good long-term option. Increasing numbers of well-off people will start moving to the Western Cape to escape the economic collapse in the more northern regions. The same advice goes for businesses. There is a real possibility that the Western Cape might avoid the full-scale national collapse.
‘If you or any member of your family can possibly gain right of residence in a foreign country, now is a good time to spend some thought on conceiving a future outside South Africa. Encourage your children to explore their options of spending some years in employment overseas. A few years’ work experience will make a rapid exit from South Africa much easier, were things here to deteriorate suddenly.
‘Ensure you place your kids in the best possible schools. It is very possible that the small number of good and functional state schools might decline in the coming years, and that the demand for private education will grow swiftly.
‘If at all possible, consider sending your children to study overseas. Such options are incredibly expensive and for many families, bursaries and scholarships will be the only options. The United States of America is increasingly becoming interested in competing internationally in rugby and events like the Rugby World Cup – correspondingly, many young South Africans could benefit from an increased demand at American universities for South African rugby players. Remember that a high-quality education and post-school qualification are among the few things that no state could ever expropriate.
‘Yes, things can change for the better, and such a devastating economic chain reaction as this might never come to be. But a dangerous set of circumstances are amassing on the horizon, and the wise will explore building their houses on the rock. Make sure your Plan B isn’t drawn up too late.’
In the 2020 book, the practical advice that grew out of that column became that you need to develop your Plan B in a manner that will make you robust enough to survive any South African outcome and to do so around four quadrants.
The first quadrant was your money and that you should see an appropriately qualified advisor. I don’t offer financial advice, only strategic insights. But it makes sense to diversify as broadly as possible across asset classes, currencies, and geographies. Be warned that after four decades of stimulus our outlook for the global economy and markets is not great either. Treat with particular suspicion any financial advisory firm that has been feeding its clients a diet composed almost entirely of the Ramaphosa reform narrative – that firm does not understand the risks facing your investments.
The second quadrant relates to your progeny. They need to be in the best schools (a good investment for your South African rands now, given our outlook for the local currency and global markets) so that they can be globally competitive and get into good foreign universities. South African universities are not going to make it given the lag effects of the ‘fees must fall movement’, affirmative action, declining standards, and the influence now of critical race theory (CRT). Even the standing of the top schools is at risk if they continue their descent down the CRT path.
The third relates to your business. A dynamic enterprise that does not depend on government work or large corporate work and is invested more in intellectual than physical infrastructure and able to serve a global clientele is where you need to be.
The fourth quadrant relates to your location. Here you want choices, both local and international. On the local front, you want to get into, or build around you, a robust community that appropriates for itself what were once state functions wherever you see the first signs of these collapsing. Securing such a community, will require developing the capacity to control basics as simple as access points during protest peaks, having sufficient stores of supplies on hand to remain sustainable through a protest wave and thereafter, and having excellent broader community relations to manage crises when they happen, and knowing what you will do if the power fails or cell phone masts go down. Farmers working with taxi bosses on security matters is a great example of communities beginning to understand what may lie ahead and what must be done to address it. So, too, the Umhlanga residents with their citizen-manned checkpoints … and, at one point, a bagpiper to lift the mood. The examples are all over.
That was not necessary after 1994, but it will become necessary now and these are all functions that you yourself will have to execute – there will be no police force to call, no ambulance service at the end of a telephone line, no food in the shops for many days perhaps, no easy fuel availability, cell phone transmission interrupted, social-media disabled….
Beyond such basics, your community will need to start taking charge of schools, local healthcare, skills training, water and road maintenance, your own electricity, and security.
If you build a Plan B around all four quadrants you will give yourself equal odds of becoming robust enough to get though the instability that lies ahead for South Africa and doing so in relatively good shape.
On the balance of probabilities, I still think that the ANC, in its present guise (it could be captured by so many varied factions in the future), will lose control of the country and that its defeat will be more violent than I had earlier thought. Gear yourself for that and get your expectations right, as well as your analysis of what is happening, so that you can understand cause and effect. The analysis is not difficult. We have been doing it with precision for years and it is easy to access.
More than anything, the approach we describe above to become robust reflects a mindset to say that, if you are in South Africa for the long haul, you must set yourself up now with one singular objective: to survive for longer than the ANC will survive, and with the right plan that is doable. The aftermath of that will reveal which fork we are going to take between a new administration in Pretoria or the break-up of the Union.
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