Headwinds are buffeting South Africa.
The country that nearly tripled its GDP since the end of apartheid almost 20 years ago, from $136 billion to $385 billion, has seen that growth erode, thanks to various issues it has failed to resolve. Its position in the BRICS as a symbol of emerging market growth has been hit by a succession of blows, culminating in an October punctuated by bad news.
The International Monetary Fund started off the month by downgrading its growth forecast and warning that South Africa was heading for a crisis if it didn’t implement reforms, and quickly. Unemployment has not fallen since the country left apartheid behind; officially, the rate is 25%, but unofficially it’s more like 35%, when those who have abandoned the quest for work are factored in. Youth unemployment is around 50%, as it is in some Eurozone countries such as Spain.
If such high unemployment isn’t bad enough, the country is seeing upheavals in its labor market as workers resort to strikes in their quest for better pay and benefits. Mining has made the most headlines, as gold and platinum miners last year struck Lonmin and Anglo American Platinum, among others; violence erupted and several deaths resulted.
But miners were far from the only workers to try to better their condition; manufacturing, construction, automotive, and aviation sectors were also hit by walkouts and work stoppages, and even the public sector was not immune to labor unrest.
Seven different automakers, from BMW to Toyota, were hit by strikes, which, according to the National Association of Automobile Manufacturers of South Africa (NAAMSA), cost the industry at least 20 billion rand ($2 billion). BMW, after a four-week strike that shuttered its only plant in the country and caused it to miss supply targets on some export contracts, decided to stop a previously planned expansion in South Africa. Karl Cloete, deputy general secretary of the National Union of Metalworkers of South Africa, in a statement characterized BMW’s decision as “political and economic blackmail.”
Other foreign investors may follow BMW’s lead, and slow or eliminate altogether the money they put into the country. According to the Organization for Economic Cooperation and Development, in 2012 South Africa was the beneficiary of some $4.6 billion in direct foreign investment (DFI) and, according to the Reserve Bank, $5.5 billion in portfolio inflows from outside the country. However, as foreign investors see South Africa’s problems as greater risks, that could change.