In 1996, South Africa was a young democracy. The country was hopeful, recovering from apartheid, and looking to build a strong economy. The Rand was struggling against international currencies like the US dollar and the British pound. Many saw this as a weakness. But on a radio broadcast that year, a man said something that stuck with me: “A weaker Rand is a good thing. It attracts foreign investors and creates jobs.”
He wasn’t wrong.
The USA begins to invest in the democratic South Africa
The United States saw an opportunity and started investing heavily in South Africa. By 2004, American companies had set up shop here, creating factories and employing thousands of South Africans. Under President Thabo Mbeki, trade relations grew even stronger. For a while, the Rand recovered. It reached R5 to the dollar. But it didn’t last. The Rand began to fall again—and with it, long-term economic stability.
Still, U.S. companies stayed. They paid less for labour because the weak Rand made South African workers cheaper. They also had access to raw materials and low operating costs. So yes, jobs were created. But American companies made even bigger profits from South Africa than they gave back.
China did not want to be left behind in benefiting from the mineral resources and the resources of the country of South Africa
Then China entered the picture.
Unlike the U.S., China didn’t build anything in South Africa. No factories. No job creation. China built factories in China—and then exported the goods here. Our politicians allowed it. Suddenly, every market, every store, and every informal trader was flooded with cheap Chinese goods: paper cups, plastic containers, furniture, and toys.
We could have made those things here.
I watched this happen. I worked in a warehouse that imports Chinese goods. One day I could not believe my eyes when I saw coffee table benches being delivered into the country. I mean, how difficult can it be to make coffee table benches, paper cups and paper platters? But those are also shipped from China and if you are a local manufacturer you will not compete with their price, and consequently your firm will fall. So, local businesses couldn’t compete. One man called Nigel is said to have had 28 employees in his stoves and ovens producing factory, and they'd sell their ovens at R35000 but a Chinese made oven came and was selling at R6500, and put them out of business. That is not right.
In situations like these, one must ask themselves if Trump (Donald Trump the president of the US) is wrong or right.
Poor economic decisions making, neglecting economists' advices
This wasn’t just a market shift. It was economic sabotage, enabled by our own government. The problem wasn’t China. China played the game. The problem was that our politicians didn’t. According to Iraj Abedian of the Pan African Investment and Research, as quoted by the Sunday Times (link below) "...we are being screwed. "Not because the Chinese have been smart but because we've been snoozing and naïve."
I understand the geopolitical play here, but the problem is that our leaders acted as if we were begging China for BRIC instead of leveraging what we had. Clearly, we were bringing so much more to the table, so we deserved to carry ourselves with dignity; and we also had to make better deals with the USA too as much as we had to make better deals with China.
But they didn’t insist on production happening on South African soil. They didn’t protect local industries. They didn’t negotiate fair trade. Instead, they opened the gates and let everything [from China] in —cheap, mass-produced, foreign goods that killed our factories and took away our jobs.
This is the cost of poor trade policy. South Africa went from producing to consuming. From exporting goods to importing plastic. From job creation to mass unemployment.
All because no one in power thought ahead.
Go deeper, links here
Our South African economy seems to have been and is still balanced mostly by foreign economies, so if those economies sneeze our economy shakes or takes a dive. Here is a detailed Wikipedia timeline of the Rand, from its inception, throughout presidents, till President Jacob Zuma ➜ Wikipeadia
Here is a link to the Rand vs the then trading partners in the early years of the Rand, at Justice.gov.za website
How China has been bleeding South Africa dry, compared to the USA which has actually been somewhat seeding South Africa, here is the link to the Sunday Times
