Wednesday, 7 October 2015

China's stranglehold

BRICS - the acronym originally coined by Goldman Sachs, isn't exactly food for the imagination. Even so the moniker stuck and as the laws of gravity dictate and as the epithet suggests, like a stone has settled nicely at the bottom of the economic quagmire.

The original BRIC, for those of you who don't know, defined the broad association of the four major emerging economies; Brazil, Russia, India and China. In 2010 the plural was added with the addition of South Africa and since those heady days and the euphoria of that headline we haven't come up for air even once.

In 2007 the China-owned ICBC bought 20% of Standard Bank, South Africa's largest bank by assets & earnings. At that time it was the ICBC's largest investment outside of China. By inference it was also the perfect window into Africa; where local knowledge & expertise was acquired for not much more than 30 pieces of silver... Oh captain, my captain.

Simultaneously China continued to accumulate Africa's primary resources / commodities by all means legal.. - either by entreaty, trade-treaty or by IOU and we loved them for it. So enthralled were we that we filled boatloads of Africa's future at prices-past whilst the puppet-master piped the economic tune. Elsewhere EMEA and other 1st-world professionals / experts plied the Chinese with intellectual capital as fast as Switzerland could absorb the short-term Judas-change. China's only contribution was artificially-cheap labour & an enforced / exploitative work-ethic. Made in Italy was really Slapped-up in China and for a while consumers noted a disparity in quality. As a consequence China upped the ante. Quality became the focal point. Soon goods usually made by hand, with scrupulous attention to detail and by processes handed-down from craftsmen to craftsmen, were no better than China's / [Germany-sold]  mass-produced-machine-product. Craftsmen all around the globe perished on China's ambition to own the shelves & her propensity to exploit her own people. Mainstream media fobbed off these inevitable consequences as a spin-off of GLOBALISATION and derided the craftsmen for their tardiness and inefficiencies.

Back in South Africa China's easterly vacuum accounted for both our intellectual property & our hard-commodities. Trees were felled to make Chinese-built, Chinese-staffed & Chinese-supplied thoroughfares usually into the hinterland where more trees were shelled and more holes dug. That the infrastructure has subsequently begun to disintegrate is a discussion for another time. Shipping lanes were gridlocked with the outflow. Around about then ships, hitherto empty, started returning to South Africa fully laden with Made in China. 

Made in China carried a State-subsidised price tag & almost always significantly lower than the prices of similar goods Made in South Africa. Local product competed for a while, usually on loyalty, but in time-honoured fashion, consumers eventually felt compelled to take advantage of the foreign boon. Domestic industry suffered; the Textile-Sector first to mothball their looms. Ordinary, hard-working generations of South Africans were subsequently made redundant and became integral to the burgeoning unemployment statistic. Breadwinners became welfare-dependents and their own school-going dependents, expelled by circumstance to earn a crust. Perversely domestic commodities were ruthlessly wrenched from African soil and shipped unrelentingly East.

Next to go was the domestic white-goods industry. Tariff-free goods Made in China and subsequently dumped in the retail outlets, confounded strategic rationale. Inevitably there were more redundancies; more unemployment - more desperation; more crime. Consumers, bloated on cheap fridges & kettles, pointed accusatory fingers at the Executive for doing less than their crime-mandates had promised. The domestic currency slipped against the basket - and the unraveling began in earnest. Other domestic sectors, drowning in this sea of Chinese goods, adapted as best they could and by the only means open to them - redundancies. Staff-cuts, across the board,was a humanitarian tsunami that struck the core of South Africa's psyche. The rand deteriorated further. Goods became more expensive to import & in the absence of a domestic industry, we had no other choice. As a consequence we started to import inflation and around about then growth began to deflate. Our interest rates remained low - inflation targets notwithstanding. Lacking the economic backbone of a strong domestic industry and an employed workforce, South Africa's ability to stave off the inevitable became academic at best. Ratings agencies sat up and noticed. The rand deteriorated further. The financial-garrote pulled tighter.

In recent times the once-prosperous mining sector, wholly premised on Chinese-demand, has finally succumbed to fear-induced staff-cuts, the severity of which few people truly comprehend. China's structural over-capacity negates demand, even temporarily and South Africa's reliance on a single basket for all her eggs is a childhood lesson long unlearnt. More redundancies, less consumer-spending; more lay-offs, more bad-debt; bank failure - collapsed rand and so on. Perversely South Africa's recent cap-in-hand visit to Beijing is a suicidal injustice bloated by systemic incompetence. Who knew we could be this pathetic?

At last we find ourselves at the crossroads of desperation and yet the solution is as obvious as the day burns hottest in Africa. Reinstate national pride by protecting local industry; impose multiple import-tariffs on foreign-manufactured goods and negate China's exploitative reliance on her poverty-controlled people. Let's make knives & forks; stop the export of raw product and value-add our commodities in local industry.  Get our people back to work and back in school! Education is an investment for the future. We are a proud nation; a skilled nation and I don't see why we've allowed ourselves to become the economic slaves of a country which less than a century ago lived a rural life, largely uninterrupted by aspiration and an ambition to rule the world. Who's laughing at whom, exactly?

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