Canada has a saying that describes its relationship with the United States: “How do you sleep with an elephant? Carefully.” Much the same can be said about South Africa’s neighbours in southern Africa, particularly recently.
Not only has South Africa’s labour turmoil impacted heavily on its immediate neighbours and other countries in the region, but its loss of international confidence has also affected them negatively.
In addition, South Africa’s worsening growth prospects linked to the state of the global economy has knock-on repercussions in the region. At the same time, domestic South African political developments have spilt over, illustrating just how dependent the region is on the “Giant of the South”.
In a previous Bulletin, we reported on the negative impact that labour unrest and strikes in South Africa have on its neighbours, bringing hardship to millions of people throughout the Southern African Development Community (SADC) and badly hurting their economies.
A case in point was the negative impact of the recent strike by road freight workers on the economies and people of landlocked SADC countries including Swaziland, Lesotho, Botswana, Namibia and Mozambique. Even countries as far away as the Democratic Republic of Congo, Malawi and Zambia felt the impact.
Likewise with the unrest and ongoing strikes at South Africa’s mines. Not only do many migrant workers from neighbouring countries get drawn into the turmoil, but it also cuts off the flow of much-needed revenue to these countries in the form of repatriated wages. Not only are workers’ families harshly affected, but many of the countries rely heavily on revenue earned from these wages.
In Swaziland, South African pressures are compounded by growing and intensifying opposition to the absolute monarch, King Mswati III.
With Swaziland’s economy in dire straits, South Africa was among those countries promising bail-out aid on condition of economic and political reforms. The reforms did not materialise and the World Bank, International Monetary Fund (IMF) and others cancelled promised aid. South Africa kept its options open, but is still awaiting reforms.
Last week, at its third International Solidarity Conference, the African National Congress resolved to support the unbanning of political parties in Swaziland, promising “liberation for the people”.
The ANC’s alliance partner, the Congress of South African Trade Unions (Cosatu), has previously threatened to interfere in the country’s domestic political affairs.
More devastating for Swaziland, and other countries in the region, are planned changes to South Africa’s immigration laws, which will end the flow of migrant workers to South Africa's mines.
Swaziland’s Minister of Labour and Social Security, Lutfo Dlamini, recently told The Times of Swaziland that it would profoundly affect Swaziland and other countries in the region. The number of Swazis employed at South Africa’s mines has already dropped from 30% to 12% of all employed Swazis. A further 5 000 Swazi workers currently employed on the mines could soon be affected.
Meanwhile, the recent downgrading of the credit rating of South African banks could impact negatively on their subsidiaries in neighbouring countries.
This has caused concern in Namibia over the effect on local subsidiaries of Standard Bank, FirstRand and Nedbank. None of these subsidiary banks has independent credit ratings. If they wanted to borrow outside of Namibia and South Africa, the cost of borrowing would increase due to that which is happening in South Africa.
The same applies to other countries in the region where subsidiaries of the South African banks operate.
On the labour front, some commentators have compared an ongoing wildcat strike by Namibian teachers with the illegal strike by Lonmin miners at Marikana. There have been suggestions that the Namibian teachers are inspired by the events in South Africa where a settlement reached by Lonmin with the illegal strikers soon led to copycat strikes across the mining industry.
In its recently released Regional Economic Outlook (REO) report for southern Africa, the IMF says the anticipated slowdown in the South African economy this year will restrain growth in a number of neighbouring countries.
In the case of Botswana, the IMF says the single biggest risk arising from the South African slowdown is a reduction in the revenues of the Southern African Customs Union (SACU). Botswana is expected to receive around R14 billion this year as its share of SACU revenues. It is the single biggest contributor to Botswana’s national revenues, ahead of taxes and mining royalties. But the IMF has warned that SACU members may not receive their anticipated shares, as South Africa is being hit by multiple problems linked to the eurozone crisis and domestic labour instability.
South Africa accounts for an estimated 9.7% of Botswanan exports annually, and is the source of nearly 80% of its imports.
The IMF anticipates economic growth in Botswana of 3.8% this year and 4.1% next year, compared to 2.6 and 3% respectively in South Africa.
In the case of Lesotho, its dependence on South Africa for survival has worsened as it grapples with food shortages caused by abnormal weather shocks including flash floods and a drought over the past two years.
Following Lesotho’s declaration of an emergency in August, a visit to South Africa by Prime Minister Tom Thabane last month, and a call for international assistance by the United Nations, South Africa pledged to assist Lesotho.
The full amount and details of the assistance is not known. By August, Lesotho had received just US$8.4m of the required US$38.5m in foreign assistance and was banking on South Africa to make good on its promise.