Cost of Russian crisis continues to rise
Mustafa Sönmez - Hürriyet Daily News, March/07/2016 After Turkey shot down a Russian war plane along…
MUSTAFA SÖNMEZ /September 28 /2013
When you are reading this article, its author will be in Cape Town on the 5th day of his South Africa visit. Cape Town is one of the three capitals of the South Africa Republic, as you know. The city’s population is around 3.5 million. It’s a beautiful global city, where African, Dutch and English cultures are harmonized very well at the most distant end of the African continent to Europe.
I’ll try now to elaborate on the similarities and the differences between South Africa and Turkey, as they have many things in common economically, and are heading in the same direction on a highway.
Turkey and South Africa
They are both in the same league: The emerging world. Both of them are trying to attract more foreign capital and they are being compared based on their “fragile” economic indicators, mainly their high current account deficits and external debt levels. Both of them were very relieved after the U.S. Federal Reserve (Fed) postponed the ending of its huge bond buying program. Before I accepted an invitation from the Consulate General of South Africa, I checked the CDSs of the two countries: The CDS of Turkey decreased from 224 to 217 on Sept. 20, after the Fed announced its postponement decision, and South Africa’s decreased to 213 from 237.
South Africa is the most developed country in the continent with a national income of around $600 billion and a population of 51 million. Its income per capita is a bit lower than Turkey’s, around four-fifths. The income per capita was announced at $11,500 in 2012 in South Africa. The agricultural sector is not very flourishing in the arid South African land. Only 9 percent of the population cultivates land, and the share of the sector does not constitute more than 3 percent of national income. The principal source of income is mining-oriented industries and the services sector.
However, unemployment and the income gap in the country are huge and still have a long way to go. The growth rate is around 3-4 percent. After the country’s economy shrank 1.5 percent during the 2009 crisis, it bounced back with a period of growth, currently having reached around the 3 percent mark.
South Africa has been suffering from low levels of domestic savings, just like Turkey, so the country heavily relies on foreign capital. Trying to attract more foreign capital, the country uses a number of strategies, including privatization. Privatization and liberalization have both been made a state policy since 1996 by the government at the time, the ANC government. The biggest privatization move since then has been the railways and ports. The accelerated and shared growth initiative for South Africa, known as AsgiSA, has been active since July 2005, requiring the privatization of a number of public assets. There are still many public assets waiting to be privatized.
South Africa is trying to handle the economy with hot money and debt rather than attracting foreign direct investment, just like Turkey does. The annual trading volume of the Johannesburg stock exchange is around $1.3 trillion. Foreigners put their hot money on stocks and government bonds, as is the case in Turkey. South Africa’s budget deficit is around 5 percent. The country aims to close the gap, thus attracting more foreign capital. South Africa seeks to reach its fiscal discipline target, to reduce its spending and to increase its income by way of privatization.
South Africa has been a member of the BRIC club since 2010. China, in particular, being the prominent buyer of South Africa’s mines, can be easily seen as South Africa’s main trading partner, both in imports and exports. The BRICS is a new horizon for South Africa, which has customs union agreements with some countries in the African continent and also various commercial deals with the United States and Brazil. The country expects to raise the foreign investments that it needs, expand its economy and reduce its current account deficit by developing its foreign trade, thanks to this rising block. Parallel to this, it expects to reduce unemployment and create jobs for the population, 32 percent of which lives under the poverty threshold.
South Africa is the world’s leader in precious metals and mines and mine processing. It has 80 percent of manganese resources in the world, 68 percent of chrome, 56 percent of metals in platinum group and 35 percent of gold reserves. South Africa is the largest platinum and chrome producer and the second largest gold producer in the world. Despite its gold exports, which made 50 percent of the world’s total exports in the 1980s, fell today, it has still importance.
Even though the mines in South Africa have the world’s most advanced and profound mining technology, their productivity is falling and strikes often take place. The gold amount in one ton decreased from 4.6 grams in 1999 to 4.5 grams in 2000, data show. So, some big mining companies shut down and the sector relatively shrank. Now, the metals in the platinum group make up the major part of exports, surpassing gold exports. South Africa is home to the fifth largest diamond industry in the world, as local De Beers is the largest diamond producer and controls the world’s diamond supply and distribution from its headquarters in London. Anglo Gold, Implats and Iscor are the other big mining companies. Mines have an important place in the country in terms of raising employment and providing foreign exchange input. The mining sector made a 10 percent contribution to the country’s added value in 2009 and created employment for 1 million persons.
The tourism sector in South Africa started to develop along with the period of change in the 1990s. South Africa has many advantages in tourism because it has a convenient climate, natural beaches, mountains, natural parks, wild animals and many common languages are spoken such as English. Also, tourist numbers increased in South Africa due to the decline in tourist numbers in the Arab countries that have been experiencing uprisings since 2011.
While South Africa aims to reach an annual growth rate of 6 percent by 2014, tourism is one of the focused sectors in framework of the Accelerated and Shared Growth Initiative for South Africa (AsgiSA). Around 10 million tourists visit South Africa a year and its annual tourism income is nearly $10 billion. The tourism sector makes around 8 percent of national income.