Eco­nomic lessons from Din­gaan’s bloody days

Weekend Argus (Sunday Edition) - - BUSINESS - PALI LEHOHLA Dr Pali Lehohla is the for­mer Statis­ti­cian-Gen­eral and the For­mer head of Statis­tics South Africa

STATIS­TI­CIAN-Gen­eral Risenga Maluleke an­nounced that the gross do­mes­tic prod­uct third quar­ter growth re­sults quar­ter on quar­ter, came in at 2.2 per­cent and year on year was 1.1 per­cent.

This came as a re­lief to a strug­gling econ­omy that had gone into a re­ces­sion. This was es­pe­cially so be­cause man­u­fac­tur­ing came in much higher.

Ex­ports also showed a sharp in­crease, even though im­ports came in at a sim­i­lar gra­di­ent, but higher than ex­ports both in per­cent­age in­crease and in ab­so­lute rand value.

Al­though the econ­omy has walked out of re­ces­sion, the ques­tion that re­mains vexed is that in the face of growth num­bers that have re­mained co­matose for a very long time, what con­fi­dence do we have that we shall not slide back into that state? Is there an end in sight?

Let us ex­plore the sce­nario.

Prince Mh­langana, brother to King Shaka and Prince Din­gaan, was seen sharp­en­ing his spear. When Prince Din­gaan asked Mh­langana, why he was sharp­en­ing his spear, Mh­langana replied, “I am go­ing to kill a goat.”

Din­gaan was pretty scared in case the goat Mh­langana re­ferred to might be him­self.

The mat­ters of the Zulu Royal fam­ily as cap­tured in the Rivers of Blood were in a cri­sis at that time. Mk­abai, the aunt to the princes, ar­ranged a meeting by the river where Mh­langana and Din­gaan were to meet. Mh­langana was never seen again, dead or alive.

Re­serve Bank Gover­nor Kganyago in­creased the repo rate by 0.25 points from 6.5 to 6.75per­cent on Novem­ber 22. He had promised to take ac­tion once ev­i­dence sug­gested that the con­sumer price in­dex was dan­ger­ously ap­proach­ing or get­ting out of range, in­clud­ing on the ev­i­dence of what global mar­kets and at­ten­dant risks were. All the fac­tors he con­sid­ered mil­i­tated against eco­nomic prospects for South Africa and he de­cided on that ba­sis to act. So he ac­tu­ally now killed the goat.

Mh­langana and Din­gaan were pre­par­ing for the in­ter­ment of King Shaka. But the Amabutho were still in the war field, hardly know­ing what had hap­pened. Ten­sions be­tween the two heirs ap­par­ent were run­ning high. The Zulu King­dom was in a cri­sis.

Un­der any cir­cum­stance manag­ing in­fla­tion tar­get­ing is not easy, but in times of cri­sis it gets too dif­fi­cult to come out with a bal­anced and ac­cept­able so­lu­tion, es­pe­cially to con­test­ing stake­hold­ers.

If the gover­nor had known that man­u­fac­tur­ing would come out bet­ter than ex­pected, would he have in­creased in­ter­est rates?

This is given that in his state­ment he also re­ferred to the strug­gling growth num­bers.

Af­ter an­nounc­ing the repo rate, the rand per­formed bet­ter and to date has re­mained be­low the R14 mark to the US$.

But this strength­en­ing has a cou­ple of im­me­di­ate im­pli­ca­tions.

First, the cost of bor­row­ing cap­i­tal will in­crease and those man­u­fac­tur­ers who ac­cessed cap­i­tal at rea­son­ably low rates may have to look else­where for cap­i­tal or re­duce their plans for ex­pan­sion.

Sec­ond, this im­plies South

African ex­ports have be­come more ex­pen­sive for im­porters.

What is cer­tain is that South Africa is com­ing out bleed­ing to near death from the state of state cap­ture.

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