Quiet, considered policy always wins over international big-boy spats
We arrived at the farm on Friday night, to find our HDMI cable for the television was faulty. Usually only mildly irritating, this weekend was different — it was the Super 18 final. Panic ensued. South Africans are sport crazy — and so we should be as it is one of the few things we do with common purpose.
More than 30 years ago, our big trading partners, the US, Europe and Japan, imposed economic sanctions on SA to topple the apartheid regime. It was a proactive disinvestment campaign enforced by federal legislation in the US. I was involved in a number of the forced-exit deals, which had a deadline of December 31 1986.
The effect was serious, with more than R25bn leaving the country. Now, there will be an even greater outflow if Moody’s joins the other ratings agencies and downgrades SA’s debt to junk. This time, though, it will be our own fault. We don’t have an investible plan.
There can be no debate that economic sanctions against SA hastened the demise of apartheid and brought us to the negotiating table, just in time to avoid a far worse fate. Ordinary people felt little of the effect on their everyday lives, but it was visible and certainly had an effect on sport. We were left out in the cold — and we felt it. Much more so the talented sportsmen and women who were denied the opportunity to play on the world stage. We were simply forbidden to field a national side.
The word “sanction” has two opposite meanings: to punish or to approve.
In a rare act of submitting to the will of the people, US President Donald Trump begrudgingly signed into law further broad sanctions against Russia to keep Congress happy, a rare enough feat nowadays. Trump fancies himself as (well, everything, really) a negotiator and he’d rather have solved the Russia issue by himself.
It’s all about those suspicious (and ever so irritating) campaign communications that were alleged to have taken place between who knows from Russia and one of the Trump family, who, as best I can gather, have all moved into the White House, in-laws included.
Sanctions have their place, particularly in the face of gross human rights violations. But I don’t think Putin gives a damn. In the end, this may just increase Russia-China trade.
Superpowers cannot realistically impose sanctions on one another anymore.
It’s a global economy and most trade originates in the ether, which is sovereignsource agnostic — or can be.
Second, big boys can’t fight without both getting hurt. So, I think it’s just a show of bravado and mostly a snub of Trump, whose election was unquestionably a mistake.
In these global spats, no one wins. Maybe the threat of war is necessary to keep up the economic engines driven by defence budgets.
A Third World War? I doubt it. North Korea versus the US? Ridiculous. China against the West? Why would it?
On reflection, it is the countries that have minded their own economies, according to some long-term determined plan, that have fared best in the end. Policy trumps petulance.
China, which not long ago invited foreign investors into its state-owned enterprises, is now making damn sure the net capital flows remain in its favour. Clever money has to be watched, but their gateway isn’t a wall and it isn’t sovereign based — it’s deal-specific.
Japan always seems to mind its own business, looking inwards first to formulate economic policy. Japan is also issue-specific. In foreign policy, for instance, when the country needs foreign labour, it lowers the entry hurdle.
Japan’s foreign population is still only about 2%, compared with the US, UK and Germany, which are in the low teens.
We should also focus at home. Of course, we have to care about what the ratings agencies and the IMF and other score-keepers say, because it affects risk perceptions, which affects our cost of capital.
Beyond scorecards, though, capital invests in plans. Sensible long-term plans with favourable currency risk-adjusted internal rates of return and positive net present values. Nothing more or less will do. Capital has choice.