South Africa Economic Update

Table of contents

South Africa’s economic growth performance and outlook has been affected by global developments such as the global recession starting in the US and escalating oil prices in the middle-east causing cost-push inflation and has been revised downwards. In fact, these challenges have moved in tandem with international economic indicator trends and are exacerbated by supply side problems, including domestic unemployment, inflation rates beyond the Reserve Bank targets of between 3 and 6%, skills shortages, a globally less-than-competitive industry, climate change and its negative impact on agriculture and water supplies and a volatile rand.

High food and energy prices have been major contributors to consumer price inflation. Increased food prices, together with a shortage of staple foods, have resulted in food stock levels being the lowest in years and therefore creating high food insecurity amongst the poorer section of our communities. In the light of these economic conditions both internally and externally this policy statement framework has been produced.

Introduction

Many experiences and authors of economic books shape my concept of inflation. I would in the light of my understanding ascribe inflation as a consequence of human indiscretion due to wants and not of needs. People always have an insatiable desire for more and more goods that are describe by many as the economic problem. When I draw up my policy framework for the performance of the economy I will address and prioritize the following issues namely price stability (control inflation), full employment, balance of payments, equitable distribution of income in order to stimulate economic growth.

Definition of inflation

Mike Moffatt defines inflation as an increase in the price of a basket of goods and services that is representative of the economy as a whole. A similar definition of inflation can be found in Economics by Parkin and Badel: Inflation is an upward movement in the average level of prices. Its opposite is deflation, a downward movement in the average level of prices. The boundary between inflation and deflation is price stability. Also according to McConnell, (2002: 146) inflation is a rise in the general level of prices.

Thus according to McConnell inflation does not mean the increase in price level of one or two items but increase in price level of goods and services in general. But Mohr and Fourie  state inflation as the continuous and considerable rise in prices in general. As what can be seen from both definitions are in general rise of prices. But Mohr and Fourie go further and define inflation as a neutral definition without specific causes. However in many instances authors will describe inflation as excessive increases in money supply, etc. Which can be causal definitions. Also Mohr and Fourie will further state that nflation is a process and also concerns continuous and considerable increases in prices in general. Therefore then, one can agree with the definition of Mohr & Fourie: Inflation is a continuous and considerable rise in prices in general.

Types of inflation

In an article “What is inflation: Five types of inflation defined” by Tom Au, Tom argues for the following types of inflation namely commodity inflation, wage inflation, monetary inflation, fiscal inflation and foreign exchange inflation. I would also argue that these types of inflation constitute the “major” types of inflation in SA.

However these types of inflation can be divided and sub-divided into smaller units and subunits. For the purpose of this writing I would consider the broad divisions as sufficient.

Commodity Inflation

Commodity products such as petroleum are in many cases a reason for an inflationary spiral. Other commodities could also contribute to this type of inflation such as other metals and other solid raw materials such as copper, coal, etc. Commodity inflation, better known as cost-push inflation, refers for example to a surge in the oil price – which obviously has nothing to do with domestic consumer demand.

It concerns prices set on global markets over which the Central Bank has no control. The petrol price that stems from the cost of a barrel of oil thereby creates a volatile escalation of prices of goods and services because the increase in cost for a barrel of oil is transferred to the cost of production and eventually to the cost of consumer products. For example last year in June 2008 the petrol price went up by 50 cents a litre after a 55-cent increase in April 2008. The price of unleaded petrol in Gauteng increased to 996 cents a litre and to 972 cents a litre at the coast.

Diesel went up 0,05 percent; sulphur went up by 71 cents, the wholesale paraffin price increased by 71 cents. Even though at that point in time the country struggled with escalating food and power prices we had another fuel price increase. The consequence of the escalating prices of petroleum and thus oil and other fuel prices caused the price of everything else to go up and thus commodity induced inflation.

Wage Inflation

It is my estimation that the type of inflation that has the largest impact on inflation is wage inflation or in other words demand-pull inflation.

Employees become aware of the rising prices and demand more money in the form of higher wages. There are numerous examples of wage strikes in South Africa. For example Barbara Slaughter reports “The longest public service strike in South African history. The dispute began on June 1, when workers from 17 unions took all-out strike action in support of a demand for a wage increase of 12 percent across the board. The strike involved 700,000 workers—professional, skilled and unskilled. It received widespread support amongst the rest of the working class in South Africa.

On June 13, 2007, hundreds of thousands of municipal workers took part in a one-day solidarity action in support of the strike. They included taxi and bus drivers, electricity and cleaning workers, and administrative workers from border posts and airports. On that day, all the major cities in South Africa were brought to a standstill because of mass demonstrations in support of the public service workers’ strike”. Eugene Puryear reports in his website about the same strike as “ Nearly one million hospital and education workers have been on strike”. This is only one example of the impact of a wage strike on the economy of the country.

How many labor hours have gone lost which impact on production and could cause a lowering in the GDP of the country. If inflation could also be defined as too much money chase to few products, then this wage strike cause a reduction on production and thus inflation.

Monetary Inflation

It can happen that the Reserve Bank governor refuses to increase the interest rates whilst the cost of living is high. Thereby causing too much money floating the economy and people maintain demand for goods whereas the supply is not sufficient for demand causing the cost of goods to rise.

There can be much confusion between cost-push and demand-pull inflation. It is noted by some business reporters like Greta Steyn that Mr. Tito Mboweni did not “recognize” the before mentioned types of inflation therefore blaming the increase in inflation to commodity inflation and asserted that inflation is caused by the foreign global economy and not domestic demand-pull inflation. Mr. Mboweni indicated that his interest rate action (increase prime rate) had already done enough to curb demand.

However he did not raise enough on interest rates implying a relatively low interest rate that causes yet a strong demand for goods and thereby not curbing inflation further. The inflation rate currently is 8. 5% at present well outside 3 – 6% target.

Fiscal Inflation

Fiscal inflation is caused when government spending exceeds revenues. Overspending cause a deficit on the balance of payments. The deficit however must be recovered by most probably the increase in income tax of public and private sectors. During the current crisis in 1996, the government introduced the GEAR strategy.

GEAR’s key element are reduced government spending, also the rate of inflation, with the view to encourage private investment, economic growth, and thereby job creation. But the government reduced the budget deficit from 4,6% in 1996 to 2,6% in 2000. The average reduction over this period is 3,1%. But when government spending drop private investment spending was expected to be 11,7% by the year 2000. However private investment average a mere 1,2%. If government does not spent and private sector default on spending the result will be unemployment, economic instability as well political vulnerability.

Under these conditions there will be civil demands for higher wages that could be inflationary. It is said by some that a war increase government spending. If this is the case then we wage war against ourselves in this country.

Foreign Exchange Inflation

Foreign exchange inflation happens when the local currency falls dramatically against other world currencies, thereby sharply raising the price of imported goods and hence the overall price level.

Inflation influencing South African Economy the most

The three most volatile types of inflation that influence the South African economy is Wage Inflation, Commodity Inflation and Foreign exchange inflation. As seen from the examples government spending has definitely slowed down in order to decrease the deficit and thus lifting the burden on tax payers to food the bill. So for the interim fiscal inflation is kept under control. The Reserve Bank by means of monetary policy is in “control” of the money supply in the economy. If you increase money supply faster i. e. lowering the prime rate, than your economy grows, you will have too much money chasing too few goods.

The price of goods will therefore increase. Thus an increase in inflation. Therefore to stabilize inflation you have to reduce the money supply and thus increase the prime-lending rate. Monetary inflation is a function of the Reserve Bank and within the control of the Governor of the Reserve Bank by means of monetary policy.

Solutions for inflation

Contractionary Fiscal Policy

If the government looks to fiscal policy to control inflation its options are

  • decrease government spending
  • raise taxes
  • some combination of the two policies.

Decrease government spending

To control demand-pull inflation the government should reduce government spending. Reduction in government spending reduces aggregate demand and thereby halts demand-pull inflation.

Raise taxes

By raising taxes the deposable income of consumers is reduced thereby decreasing aggregate demand, which is anti-inflationary.

Combination of Decrease government spending and Raising taxes

As can be expected a combination of the two may have a quicker anti-inflationary effect on consumer spending.

Monetary Policy

The monetary policy committee is given an inflation target by the government, which is between 3% and 6%.

The tool that is used by the reserve bank is to use interest rates to achieve this inflation target. Increase interest rates will help reduce the growth of aggregate demand in the economy. A reduction in aggregate demand will slow down growth and will induce a decrease in inflation rate.

Exchange rate policy

This policy is used to keep the value of the Rand high. Resulting in a favourable market for imports. The price for imported goods will be expensive and when companies apply investment spending the cost will be transferred to the consumer. This tool to reduce inflation is not very useful because it can cause a recession.

Disposing of surpluses

When the economy faces demand-pull inflation, fiscal policy should move toward a government budget surplus i. e. tax revenues in excess of government spending. But the anti-inflationary effect of the surplus depends on what the government does with it. I would suggest to the government to impound the surplus. When a surplus is impounded the government is extracting and withholding purchasing power from the economy. Thus, there is no chance that the surplus fund will create inflationary pressure to offset the anti-inflationary impact of the Contractionary fiscal policy.

According to Mohr & Fourie the second macro economic objective is full employment. However in theory full employment can be accomplished but in reality government spending and tax collection is never equal. Therefore when government is dealing with a deficit budget (government spending in excess of tax revenues) the economy is at a down turn since aggregate demand slow down and thus GDP also drops with the result of unemployment. Thus this macro economic evil must be understood in its broader sense.

In this writing I will deal with the definition for unemployment then describe the different types of unemployment, the causes of unemployment, types of SA unemployment and solutions to unemployment.

Define unemploymet

“Prior to 1994, the strict definition was used by Stats SA to estimate unemployment in South Africa, with the result that the official estimates were generally regarded as being too low. Stat SA subsequently switched to the expanded definition, but some observers (including the International Labour Office) regarded the new official estimates as being too high.

In June 1998 Stats SA reverted to using the strict definition as the official definition, although estimates based on the expanded definition are also published. ” (Mohr & Fourie, 2002:498) Statistics South Africa defines unemployment (strict definition) as those in the economically active population – (aged 15 to 65) and are either employed or seeking work, – who:

  • Have not worked during the last seven days prior to being interviewed;
  • Want to work and are available to start work within a week of the interview by Stats SA;
  • Have taken active steps to look for work or to provide themselves with self-employment in the four weeks preceding the interview.

However, the expanded definition omits requirement because many unemployed people become discouraged after several attempts to look for employment.

Different types of unemployment and the causes

The basic distinction of unemployment is between voluntary and involuntary unemployment. But the unemployment rate is expressed as the percentage of the labour force (people who are willing and able to work) that cannot find a job. Thus in reality there is only involuntary unemployment.

Those that prefer by own volition to be without work cannot be regarded as unemployed. In economy the usual distinction amongst types of unemployment is between frictional unemployment, seasonal unemployment, structural unemployment and cyclical unemployment.

Frictional unemployment

Frictional unemployment exists because of lags between workers leaving one job and taking up another and because there are times of the year when many new workers (e. g. school-leavers) enter the labour market. In these circumstances there is some delay in finding them all jobs.

Seasonal unemployment

Seasonal unemployment arises because certain occupations require workers only for part of each year e. g. picking and processing of food and vegetables and tourist regions that are busy during peak seasons.

Structural unemployment

Structural unemployment is caused by changes in the structure of an industry as a result of changes in technology or tastes. For example increasing automation in manufacturing industry, encouraged by recent developments in computer technology, has made many skills obsolete. Thus whole communities may become unemployed until new skills have been acquired.

Cyclical unemployment

Cyclical (or demand-deficiency) unemployment happens when there is a decline in the economy as a result of a lack of demand. A lack of demand curbs production and therefore management will try to cut costs by laying off workers, but only until demand increases then workers will be asked to come back.

Apart from the above mentioned causes of unemployment the following should also be mentioned In today’s economy unemployment has a variety of causes. Nevertheless some of them relate to the general level of economic activity while others are the result of a failure in the labour market in an economy to work optimally.

Mohr & Fourie indicates that South African unemployment rate in the past two decades originated from the supply side of the labour market as well as from the demand side. Supply side Every year the number of school leavers are added to the labour force. Thus the growth of the labour force exceeds the demand post by the economy. The economy can absorb only a certain amount of workers especially when the growth in GDP is not sufficient to provide in jobs for the new entrants into the labour market. When the growth in the labour force is greater than the number of the opportunities, unemployment sets in. Demand side During a slump in the economy the price level of goods is high i. e. inflation is increasing. Goods and services are expensive and leads to workers demand a higher wage. In order to cut production costs and thereby keep companies profitable workers are laid off. Thus leading to wage demand unemployment. Unemployment due to inflation – the Phillips curve Inflation does cause unemployment but it need not necessary be the case. In the short term the Phillips curve happens to be a declining curve i. e. there is a negative relationship between inflation and unemployment.

There is thus an increase in aggregate demand that usually lead to an increase in production and income and simultaneously increase in the price level of goods and services. And conversely a decrease in aggregate demand results in decrease in production and income and a simultaneously decrease in the price levels. But the level of production is positively related to the level of employment i. e. if production goes up then employment also increases (unemployment decreases). Therefore if economic activity is high unemployment is low, production is high, price levels start to increase and inflation begins to set in.

When prices become too inflated then aggregate demand starts to decrease, but decrease in price levels does not happen immediately. Therefore the continued increase in the price levels irrespective decrease in aggregate demands leads to unemployment because manufacturing of goods slow down due to the lack of demand. The Phillips curve led many economists to believe that there could be a trade off between unemployment and inflation. In other words, a lower inflation rate could be achieved by trading it off against greater unemployment. And a higher inflation rate could be achieved by trading it off with a lower inflation rate.

The abovementioned scenario explains the short-term effect depicted by the Phillip curve but the long-term effect of the Phillip curve show that unemployment and inflation are not related. In the long run when labour and capital are at full capacity, an increase in aggregate demand affect the price levels only. It is clear that this is the point where inflation increases sharply i. e. the price levels of goods and services, because of continued increase in demand, becomes so expensive that eventually demand for products drop and consequently the demand for employment also drops.

Thus unemployment sets in. Stagflation In the 1970’s inflation and unemployment increases at the same time. This phenomenon is called stagflation. This is an economic problem that is twice as serious as in the case when there is a trade off between either unemployment or inflation. When it so happens that the oil prices increase by 300%, this higher energy prices would spread through the economy, driving up production and distribution costs on a wide variety of goods.

It is quite obvious to understand that transport is most important in the supply chain of production especially in the upstream portion of the supply chain, which includes the company suppliers, the suppliers’ suppliers. But transport is also needed in the downstream portion of production, which consist of processes for distributing and delivering products to the final customers. Hence the resulting increase in the price level because of cost-push inflation. Also real output declines while price levels rise. This means a simultaneous increase in the levels of unemployment and inflation (stagflation).

Solutions to unemployment

South Africa’s unemployment rate rose to 23. 5% in the first quarter of 2009 from 21. 9% in the previous three months, Statistics SA said on Tuesday. A total of 208 000 people living in SA lost their jobs between the last quarter of 2008 and the first quarter of 2009, according to the Pretoria-based agency’s quarterly labour force survey. The survey shows that losses occurred both in the formal (88 000) and in the informal (96 000) sectors. There is thus a more than a fifth (1/5) of people unemployed.

This represents a huge cost to government and to society as a whole. Firstly I would proposed a joint government, business and labour task team to clampdown on cheap imports into SA as part of a number of measures aimed at helping local companies retain jobs and stay afloat through the global economic slowdown. These measures would aim at the following:

  • That business pledge to do everything in its power to avoid retrenchments;
  • Retraining people who face retrenchment and therefore become re-employed soon;
  • Creation of jobs through the Expanded Public Works Programme
  •  Discuss ways of lowering the cost of capital.

However a much promising strategy would be to raise the demand for domestically produced products by increasing the demand for exports. Therefore as previously mentioned we must assist export in the following ways:

  1. Assist potential exporters to find international markets, and subsidize some of these costs.
  2. Allow or engineer a depreciation of local currency against other currencies, thereby making exports more competitive.
  3. Implement import restrictions i. e. tariffs and quotas.

We could also reduce unemployment by stimulating and promoting small businesses and the informal sector. I believe that small businesses create more employment than larger business ventures.

Knowledge about the nature of income distribution is necessary for social development and thus for the distribution of resources where it is needed in order to create a fair society and better life for all who live in it. Nationally for any particular country society will because as a consequence of a free market society be stratify into various dimensions.

Thus the conclusion “knowing the nature of income distribution” amongst the different population sections. In order to accomplish this objective I will address the following aspects of income distribution amongst the different section of the population.

  1. Measurement of income distribution,
  2. General causes of differences in income distribution,
  3. Specific causes in the SA context
  4. How can it be addressed

Measurement of income distribution

Generally the Lorenz curve is often used to represent income distribution, where it shows for example the bottom 20% of all households have 10% of the otal income. A perfect equal income distribution would be one in which every person have the same income for example 20% of households have 20% of total income. This can be depicted by a line of perfect equality. By contrast, a perfectly unequal distribution would be one in which one person has all the income and everyone else has none. If the horizontal-axis or the Lorenz curve is the x-axis and the vertical axis is the y-axis then in a perfectly unequal distribution this curve will be call the “line of perfect inequality”.

The Gini coefficient is the area between the line-of perfect equality and the observed Lorenz curve, as a percentage of the area between the line of perfect equality and the line of perfect inequality.

General causes of differences in income distribution

From all the factors of production the cost of labour as part of the GDP is the most influential, simply because it involves human beings.

And human beings are the most varied and complex factor in the factors of production. In a perfect labour market all workers have the same education and training, have the same skills and earn the same wages (income). But the labour markets are not homogeneous. In fact it is imperfect and even if all the other labour markets are in equilibrium (balance between supply and demand of labour) there will be always differences in what workers earn.

Domestic demand for labour

The most important aspect of the demand for labour is that it is a derived demand. Domestically demand for labour will depend on production on goods and services. This means if production increases the demand for labour will also increase. Demand for products will influence the profitability of that product industry and thus the income and spending of that particular section of the population. Most countries have basically the same product mixture, but demand for the different products can differ sharply and thus will produce inequality in income amongst different sections of the population.

Domestic supply for labour

An increase in the wage rate will induce more people to enter the labour market and supply their services.

The market supply of labour will this have a positive slope, indicating that the quantity of labour supplied will increase as the wage rate will increase. But absorption into the labour market depends on the nature of the product market, which offer that employment. As indicated previously the product industries produce different products and therefore different demands, which will lead to different wages. The different products need different skills. Therefore the discriminating factor amongst the different products will be the different skills amongst workers and thus the difference in income amongst the various sectors.

Foreign demand and supply for labor

The Stolper-Samuelson theorem predicts that international trade influences relative factor demands and thus factor prices. The basic idea of this theorem is that trade affects prices of products which in turn affect factor prices by changing relative factor demands. Once again the demand for labour will depend on supply of products and thus supply of the appropriate labour, which in turn will influence the income for various groups of income.

Skill-based technological causes

The single most cause of change in the income distribution is technological change. A few recent papers provide direct evidence of this technological shift and link it to wage outcomes. Berman, Bound and Griliches present several case studies that document the technological changes that have occurred in industries experiencing large shifts towards more skilled workers. According to Laudon (1998:) “… over half (55 percent) of the US labour force consists of information workers and 60 percent of the GDP of the US comes from the nowledge an information sector, such as finance and publishing”. It is argued in general by many authors that skill-biased technological change is a global phenomenon. That is to say by implication that income distribution, unemployment is a consequence of jobless growth caused by technological and capital investment.

Specific causes in the S.A context

The South African context from a wage inequality perspective is a very complex subject. One is impulsively inclined to think racial discrimination when you think about inequality in any aspect in S.A. But Mohr & Fourie point out not to ascribed most or all differences in remuneration to discrimination. However many writers would provide statistical detail from STATS SA, October household surveys to prove that the inter-racial income distribution gap over the past three decades have narrowed. But this narrowed income gap can be misleading due to poor statistics and because of rising income of an elite group of black people. Meaning a large income for the upper income group will be a misleading average on income for a specific group.

Education and training

Education is a responsibility of the government in so far as the provision of infrastructure i. e. training of teachers, building of schools, providing a well-structured curriculum and learning materials. But attending to the regularly attendance of learners is the responsibility of the parents. As previously indicated a great shortcoming in the labour market is that of skills. School system adopted the OBE Curriculum to make the school system more relevant to the economic conditions domestically and more competitive to the global economy. But the implementation of OBE implies the teacher/learner ratio of at least 1:25 whereas in reality it is on average 1:40, making the school system ineffective.

Democracy also created a liberal education system, which undermines the discipline, which also is necessary for successful education. Therefore government spending on the school system should improve in order to address this shortcoming in the education system so that the skills needed to curb unemployment are provided.

The Skills Development

Act, 97 of 1998 aims to develop the skills of the labour force by increasing investment in education and training in the labour market and to address the skills shortages.

Affirmative action

The composition of the population is not uniform with respect to race relations and cultural issues.

To allow these issues of race and culture to take its own course is a recipe for disaster therefore government intervention to engineer a system that addresses the economic inequalities. Because unemployment, poverty, poor education and low social status work into the hands of social issues such as racism and cultural incompatibilities. To alleviate poverty, unemployment, poor education, a new system of affirmative action must be implemented in order to get a more equitable distribution of positions in the labour market i. e. targets to create gender equality, racial equality and cultural equality by means of affirmative action.

Basic condition of employment

This act, The Basic Condition of Employment Act, 75 of 1997 is to advance economic development and social justice by establishing and enforcing basic conditions of employment.

An imbalance in a nation’s balance of payments in which payments made by the country exceed payments received by the country. This is also termed an unfavorable balance of payments. It’s considered unfavorable because more currency is flowing out of the country than is flowing in. Such an unequal flow of currency will reduce the supply of money in the nation and subsequently cause an increase in the exchange rate relative to the currencies of other nations.

This then has implications for inflation, unemployment, production, and other facets of the domestic economy. A balance of trade deficit is often the source of a balance of payments deficit, but other payments can turn a balance of trade deficit into a balance of payments surplus. The two main components of the balance of payments are the current account and the financial account. Therefore the two basic deficits that can occur in the balance of payment are a deficit on the current account and a deficit on the financial account. When there is a deficit on the current account then imports exceeds exports and when there is a net capital inflow that exceeds net capital outflow then there is a deficit on the financial account. The question however is how will the deficits be financed.

Deficit on the current account of the balance of payment

  • Action to reduce a substantial current account deficit involves increasing exports or decreasing imports. This can be accomplished i. e. to promote exports in the following ways.
  • Keep domestic cost of production in check e. g. the demand for higher wages must be controlled. The relationship of the governments with labour unions must be of good standing so that policy can be worked out by government and unions for agreements to keep wage demands and inflation in check.
  • Assist potential exporters to find international markets, and subsidize some of these costs.
  • Allow or engineer a depreciation of local currency against other currencies, thereby making exports more competitive.
  • Implement import restrictions i. e. tariffs and quotas. Adjusting government spending to favour domestic suppliers is also effective. Less obvious but more effective methods to reduce a current account deficit include measures that increase domestic savings, including a reduction in borrowing by the international government. When the country experiences a financial account surplus it can use such surplus to finance the deficit on the current account. This means there is a net inflow of foreign capital.

Deficit of the financial account of the balance of payment

An imbalance in a nation’s balance of payments financial account in which payments made by the domestic country for purchasing foreign assets exceed payments received by the country for selling domestic assets. In other words, investment by the domestic economy in foreign assets is less than foreign investment in domestic assets. This is generally not a desirable situation for a domestic economy. However, in the turbulent world of international economics, a financial account deficit is often balanced by a current account surplus, which is generally considered a desirable situation. If, however, the current account does not balance out the financial account, then a financial account deficit contributes to a balance of payments deficit.

Actions to reduce a substantial financial account deficit involves increasing foreign direct investements

The following actions have already been taken:

  • Proctor & Gamble invest R200 million in new SA plant. With annual revenue of more than US$ 83 billion, Proctor & Gamble is considered the world’s largest consumer goods manufacturing company. The investment in South Africa is considered to be a huge psychological victory for SA, says Business Day, in light of the current economic crisis.
  • New trade infrastructure programme to boost business in Africa International financiers and developed nations have committed $1. billion to a new trade development programme that will open up business opportunities in eight African countries, including South Africa.
  • Mergers and acquisitions (M) in 2009 South Africa is expected to fare better than most countries when it comes to mergers and acquisitions (M) in 2009 with the region being well shielded from the turbulent global economy, according to merger market’s South African M&A Round-up for 2008.
  • 2010 Soccer World Cup South Africa is holding the 2010 Soccer World Cup, which is a tremendous boost for foreign direct investment and employment and also for future ventures.

In this manner we must promote foreign direct investment in South Africa to create a surplus on the financial account of the balance of payment.

Global recession

The Global economy is currently in a recession, as we are made aware by many economists right over the world. There are declines in growth rates in many countries in both developed and developing countries.

Causes of global recession

“In 2008–2009 much of the industrialized world entered into a deep recession sparked by a financial crisis that had its origins in:

  • Reckless lending practices involving the origination and distribution of mortgage debt in the United States.
  • Sub-prime loans losses in 2007 exposed other risky loans and over-inflated asset prices. With the losses mounting, a panic developed in inter-bank lending.
  • The precarious financial situation was made more difficult by a sharp increase in oil and food prices.
  • The exorbitant rise in asset prices and associated boom in economic demand is considered a result of the extended period of easily available credit, inadequate regulation and oversight, or increasing inequality.
  • As share and housing prices declined many large and well established investment and commercial banks in the United States and Europe suffered huge losses and even faced bankruptcy, resulting in massive public financial assistance.
  • A global recession has resulted in a sharp drop in international trade, rising unemployment and slumping commodity prices. Social unrest and political changes have appeared in the wake of the crisis. ”

How far has S.A weathered the recession

Prudent regulation of the financial sector may have partially shielded the South African economy from the vagaries of the global financial turbulence until now. At the same time, it is the combination of fiscal austerity and prudent regulation, among the hallmarks of GEAR, which have so far helped cushion the country’s economy from the global economic turmoil. The financial services sector, despite its integration in the global economy, has so far remained resilient. The same applies to the agriculture and construction sectors, which continue to witness growth.

What can be done to weather the recession

A likely immediate outcome of the current crisis is a cut or a series of cuts in interest rates by the South African Reserve Bank, which has raised them by five percentage points since July 2006. As household debt balloons locally, economists forecast further rate cuts up to 300 basis points. The hope is that rate cuts will spur consumer spending again and thereby increase aggregate demand and aggregate production. Thus increasing employment and decreasing unemployment. But interest rate cuts alone will not be adequate to revitalize the economy.

According to Neva Makgetla, the lead economist for research and information at the Development Bank of Southern Africa, job losses are a certainty in South Africa, but the scale will depend on the nature of the global recession.

Fiscal policy

An appropriate government intervention would be to focus more systematically on creating employment opportunities on a larger scale. That requires measures to strengthen the efficiency of the economy overall, especially through enhanced infrastructure. It also requires more consistent institutional support and resourcing for employment-creating activities such as agriculture, manufacturing, personal and private services and construction.

Inflation

Keep domestic cost of production in check e. g. the demand for higher wages must be controlled.

The relationship of the governments with labour unions must be of good standing so that policy can be worked out by government and unions for agreements to keep wage demands and inflation in check.

Exports/Imports

  1. Assist potential exporters to find international markets, and subsidize some of these costs.
  2. Allow or engineer a depreciation of local currency against other currencies, thereby making exports more competitive.
  3. Implement import restrictions i. e. tariffs and quotas. South Africa should streamline immigration and taxation policies to create a more attractive environment for foreign investors as an intervention in the current crisis. This would lay the groundwork for future growth.

While the taxation issue is debatable, some analysts believe that the current taxation regime is actually pro-business; the immigration system is generally seen as cumbersome and makes it difficult for skilled foreign nationals to settle in South Africa legally. However, over the past five years, the Department of Home Affairs has been addressing this issue partly by issuing quota permits to categories of skilled foreign nationals even before they got employed.

Conclusion

The economic forecast for South Africa is that the global recession may not have such a big impact on our domestic economic affairs and that we should survive the current economic turmoil provided that we keep inflation in check, foreign direct investment be promoted and stimulate exports.

On the political front we hope that the transition from Mbeki government to a Zuma leadership will have a positive impact on the economy as a whole. Greater political discussion pursuing an economic perspective might stem political instability as far as wage negotiations is concerned. The stabilization of the cost of labour on the GDP will be a tremendous boost to the economy. It is my hope that the spirit of new leadership will create a new dimension in the development and stimulation of the economy of this country South Africa.

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  8. Au Tom. The Daily Reckoning: What is inflation: Five Types of Inflation defined, 15 June 2007, http://www. dailyreckoning. com. au/what-is-inflation/? /2007/06/15/, Read on 15/05/09
  9. Moffatt Mike: What is Inflation – Your Inflation Questions Answered, http://economics. about. com/od/helpforeconomicsstudents/f/inflation. htm, Read on 15/05/09
  10. Newser: In the News. co. za: Petrol Price to go up by 50 cents, 3 June 2008, http://www. inthenews. co. a/2008/06/03/petrol-price-to-go-up-by-50-cents/, Read on 14/05/09
  11. Proctor & Gamble invest R200 million in new SA plant; 11 March 2009 New trade infrastructure programme to boost business in Africa; 7 April 2009 Mergers and acquisitions (M & A) in 2009; 20 January 2009 http://www. sagoodnews. co. za/trade_investment/proctor_gamble_invest_r200_mln_in_new_sa_plant. html , Read on 15/05/09
  12. Puryear Eugene: One million South African workers strike, Tuesday, 26 June 2007 http://www. pslweb. org/site/News2? page=NewsArticle&id=6917&news_iv_ctrl=1781, Read on 13/05/09
  13. SAPA: SA Unemployment Rises, 5 May 2009, http://www. fin24. om/articles/default/display_article. aspx? ArticleId=1518-25_2511351
  14. Slaughter Barbara: South Africa: COSATU calls off public service strike, 14 July 2007, http://www. wsws. org/articles/2007/jul2007/safr-j14. shtml, Read on 13/05/09
  15. Stats SA: Quarterly Labour For Survey, Quarter 1, 2009
  16. Wikipedia, the free encyclopedia: Income Dsitribution, http:/en. wikipedia. org/wiki/Income_Dsitribution: Read on 16/05/09
  17. Wikipedia, the free encyclopedia: Late 2000 Recession, http://en. wikipedia. org/wiki/Economic_crisis_of_2008#cite_note-1 , Read on 15/05/09
  18. http://economics. about. com/od/helpforeconomicsstudents/f/inflation. tm
  19. Micheal Parkin, Robin Bade,4th Edition Foundation of Economics 2008 New York Addison Wesley
  20. http://www. dailyreckoning. com. au/what-is-inflation/? /2007/06/15/
  21. http://www. inthenews. co. za/2008/06/03/petrol-price-to-go-up-by-50-cents/
  22. http://www. wsws. org/articles/2007/jul2007/safr-j14. html
  23. http://www. pslweb. org/site/News2? page=NewsArticle&id=6917&news_iv_ctrl=1781
  24. Stats SA: Quarterly Labour For Survey, Quarter 1, 2009
  25. Laudon Kenneth C and Laudon Jane P., 2007,
  26. http:/en. wikipedia. org/wiki/Income_Dsitribution: 16/05/09
  27. David G. Blanchflower & Mathew J. Slaughter, The Causes and consequences of income equality
  28. http://en. wikipedia. org/wiki/Economic_crisis_of_2008#cite_note-1

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The South Africa Overview Economics Essay

Table of contents

The authorities of South Africa is a Republic and the overall population is 50 million. The service sector is the major sector in South Africa with 65 part in the state ‘s GDP. The major import beginnings associated with South Africa are China, Germany, USA and Japan and the major export market are China, USA, Japan and Germany.

Main beginnings of foreign exchange of South Africa

Platinum ( 14 % ) , gold ( 8 % ) , coal ( 5.5 % ) , autos ( 3.5 % )

Main disbursals of foreign exchange

Petrochemicals ( 12 % ) , auto constituents ( 10 % ) , crude oil ( 4 % )

Energy state of affairs

South Africa has a big coal and mineral ( Pt, manganese, chrome, gold, U ) militias. Despite a well-developed man-made fuel production, 90 % of oil has to be imported.

South Africa and the World

South Africa is ranked 31st harmonizing to GDP and 129th harmonizing to Human Development Index and the major sectors are Agriculture, Technology, Textiles and Chemicals harmonizing to diary by Thomas White- Global Investing Co.

Political state of affairs: Reasonably stable

Head of state/government: President Jacob Zuma ( since May 2009 )

South Africa runs by a democratically elected parliament and the major resistance portion there is Democratic Alliance. National Assembly and National Council of Provinces are the two chief parliaments with National Assembly being the more powerful and responsible.

South Africa was ranked 34 harmonizing to World Bank in 2010 and 2nd on the African continent. Restrictions to make concern in South Africa are really limited and the market is besides really crystalline. South Africa ‘s concern substructure is good established with good rail, route and airdrome substructure, advanced IT systems and good communicating web.

The state is unfastened to foreign direct investing with both corporate concern and private persons.

Property ownership and taxation

The statute law which mentioned that foreign companies may non be able to borrow more than tierce of the purchase monetary value of any belongings if the company ‘s major stockholders are registered outside of South Africa, is no longer applicable. The new statute law effected from 1st January 2011.

There are no limitations on ownership of commercial belongingss. However, the statute law for private persons purchasing belongings in South Africa remains the same and non-residents can merely measure up for a place loan of up to 50 % of the value of the belongings

World Trade Organization ( WTO ) : South Africa is a member of the World Trade Organization.

Southern African Customs Union ( SACU ) : South Africa has been a member of the Southern African Customs Union and the members of SACU include Namibia, Botswana, Swaziland, Lesotho. The understanding footings of SACU province that members use the South African duty as the common external duty and goods are traded free of responsibilities and quotas between member provinces

Southern African Development Community ( SADC ) : -South Africa has besides been a member of the Southern African Development Community and the members include Angola, Botswana, Democratic Republic of the Congo, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, Swaziland, Tanzania, Zambia, Zimbabwe. SADC has committed itself to the creative activity of a free trade country ( FTA ) by subscribing a protocol on trade at SADC Summit in 1996.

Bilateral trade agreements

South Africa has bilateral trade understandings with the undermentioned states or groups of states:

Nyasaland: A bilateral understanding between South Africa and Malawi, provided the discriminatory rates of responsibility, discounts and ordinances on certain goods traded between the two states. Due to the understanding signed between them, goods that belonged to Malawian beginning can easy come in South Africa duty-free. The goods of South Africa that enters Malawi, receive the most-favored-nation rate of responsibility.

Rhodesia: A bilateral understanding between South Africa and Zimbabwe provided for discriminatory rates of responsibility, discounts and quotas on certain goods traded between them and some new footings were added to it in the twelvemonth 1996. The footings included decreased duties and quota degrees on fabric imports into South Africa. The farther possibility of the understanding is that, the extension would be to other sectors such as agricultural.

Mocambique: The bilateral understanding between the two of them have been chiefly for modulating mine labour, railroad and port affairs, and trade. The understanding has non been a really utile one and hence a really few figure of Mozambian goods receive duty penchant from South Africa.

Citations: South Africa provides for protection for points that are listed on the endangered species list. It ‘s a party to Convention on International Trade in Endangered Species of Wild Fauna and Flora ( CITES ) .

European Union: -The European Union and South Africa signed a Free Trade Agreement ( FTA ) in 1999. The understanding will be phased in over a 10 to twelve twelvemonth period and will basically liberalise 86 % of South Africa ‘s imports from the EU and approximately 95 % of EU imports from South Africa. The overall understanding meets WTO demands of 90 % coverage.

The papers required in importing are a commercial bill, measure of cargo, insurance paperss and packing list.

The import responsibility rates range from zero to 30 % with a few exclusions, vesture industry, fabrics industry and motor industry merchandises.

The ratings of imported goods for VAT is based on the f.o.b value plus 14 % of the value already considered with extra imposts responsibility.

The merchandises which are prohibited for import in South Africa are drugs and narcotics, adult or obnoxious stuffs, works, seeds, bulbs, natural cotton, uncooked meat/poultry, beeswax, honey, bees and their larvae or eggs, used beehive contraptions, , ammo, dry ice, furniture, unwrought gold, untrimmed diamonds, pelts.

India and South Africa

Due to the bilateral dealings between theARepublic of India and the Republic of South Africa strong strategic, cultural and economic ties have been there since the terminal of apartheid in South Africa in 1994.

India and South Africa besides portion an extended energy partnership. In 2010, India imported 1.4 million metric tons of South African coal in February, doing it the largest buyer of coal from the state.

Background

There is a major resident Indian community in South Africa. Mohandas Karamchand Gandhi had commenced his political-legal calling in South Africa in the 1890s and 1900s, experimenting with civil noncompliance, to better the quality of life of the Indians life at that place. During theA 2003 Cricket World Cup a statue of him was unveiled inA Pietermaritzburg by Sourav Ganguly, the captain of theA Indian national cricket squad.

In 1994 both states established diplomatic dealingss after the terminal of apartheid.

Indian authorities awarded South African leader Nelson Mandela the Mahatma Gandhi Peace Prize. Both states have besides promoted featuring ties, with the Indian national cricket team and the South Africa national cricket team often interchanging visits and take parting in cricket tourneies hosted by either state.

In 2005-06 the Bilateral trade grew exponentially from USDA 3 million in 1992-93 to USD 4 billion, and the two authoritiess have targeted increasing bilateral trade to USD 12 billion by 2010.A Gold bullion constitute tierce of India ‘s imports from South Africa, while India gloss and processes diamonds from South African mines. South Africa has promoted subscribing aA free trade agreement with India and theASouthern Africa Customs Union ( SACU ) , which includes Botswana, A Lesotho, A Namibia andASwaziland along with South Africa.

Bharti Airtel was scheduled to acquire MTNA to do one of the universe ‘s largest telecommunications companies, and besides touted as measure in South-South cooperation. The South African authorities of Jacob Zuma, nevertheless rejected trade on the evidences that MTN would non be as South African any longer amid concerns of dual-listing on the Indian and South African stock exchanges.

Military cooperation, trading weaponries and joint exercisings and plans to develop forces have been developed by India and South Africa.

India and South Africa signed an understanding withA Brazil, known as the Brasilia Declaration On June 6, 2003. The declaration called for extended three-party cooperation on strategic, cultural and commercial affairs.A A The three states have besides expanded military cooperation and conducted joint naval exercisings in 2008.

India and South Africa Exploring Trade Agreement

The trade between two states continues to see strong growing as on Aug. 31 – India and South Africa are looking into subscribing a comprehensive bilateral trade understanding.

India ‘s Commerce and Industry Minister Anand Sharma said “ We are traveling to analyze a Comprehensive Economic Partnership Agreement between India and South Africa, as the state is a strategic spouse, ” while at the “ India Show ” in Johannesburg.

Bilateral trade between the two has been increasing steadily over the last few old ages, with trade figures lifting from US $ 7.5 billion in the 2008-2009 financial twelvemonth to US $ 7.9 billion over 2009-2010. Both states agreed to seek and hit the US $ 10 billion milepost by 2011-2012 While South African President Jacob Zuma was in New Delhi this past June, but that may hold underestimated the trade potency between the two states as bilateral trade has already reached US $ 2.7 billion through the first one-fourth.

Sharma said “ It ( the US $ 10 billion trade mark ) is good below possible. I think it is accomplishable by 2011. Then we can look at higher rates ” . “ The chances are illimitable. South African corporations are coming to India with optimism. ”

Sharma besides said that he hopes to wrap up a limited free trade understanding between India and the Southern African Customs Union ( SACU ) every bit shortly as possible. The SACU is made up of Botswana, Lesotho, Namibia, South Africa and Swaziland. The 5th unit of ammunition of negotiations over duty decreases and other barriers to merchandise Union representatives will go to New Delhi following month.

India-SACU ( Southern African Customs Union ) Framework Agreement

South Africa is the largest, most diverse and most sophisticated state in Africa with a Gross Domestic Product ( GDP ) three times that of Nigeria or Egypt. South Africa ‘s economic substructure dominates Africa though it covers less than 4 % of the continent and accommodates less than 6 % of its population. South Africa provides more than half of the electricity end product of Africa, moves more tunnage through its ports, has more air conveyance installations than all the other states of Southern, Central and East Africa together. The figure of motor vehicles at about 5 million in that state is more than half of those in the remainder of Africa. South Africa has besides the advantage of a developed and systematic banking system.

With a common usage duty policy, South Africa along with Lesotho, Swaziland, Botswana and Namibia has formed the Southern African Customs Union ( SACU ) . Since most of the imported goods enter the sub-region through South African ports, a system of usage gross sharing is in topographic point. South Africa and India are members of the Indian Ocean Rim Association for Regional Cooperation. South Africa is a member of the World Trade Organisation and has besides finalised a free trade and development understanding with European that provides for gradual liberalization of the two manner trade between South Africa and European Union.

The degree of bilateral trade between India and South Africa is rather low at nowadays. South Africa is non a major export finish for India ; neither is the latter calculation in the list of chief merchandising spouses of South Africa. Less than one per cent of India ‘s exports go to South Africa. However, in the last few old ages bilateral trade has recorded a double-digit growing rate between the states.

Following this meeting, Indian Institute of Foreign Trade ( IIFT ) was assigned to carry on a desktop survey for determining the feasibleness of come ining into a Discriminatory Trade Agreement ( PTA ) /Free Trade Agreement ( FTA ) between India and South Africa. The survey concluded that more than 50 % of India ‘s exports are subjected to a duty of less than 10 % in South Africa and merely 33 % are confronting a duty rate of more than 20 % . On the other manus, 55 % of imports from South Africa face high duties of more than 20 % in India. Merely 34 % of imports from South Africa are subjected to moo duty of 10 % and below. The leaden mean duties in India and South Africa are 22.89 % and 16.35 % severally.

The survey concluded that even though the duty rates are more in India, the gross loss that would ensue from bilateral riddance of duty is greater in South Africa. The gross loss in South Africa is projected to be 1.4 times the gross loss in India. The survey besides suggested that as South Africa has a reasonably big import market, an Agreement with South Africa Prima facie is of importance because of its geographical location and rank of sub-regional trade understandings.

Subsequently on, South Africa sought verification whether they can include other spouses of SACU for negociating a Comprehensive Trade Agreement. This suggestion was examined by Ministry of External Affairs in audience and the authorization was given to negociate with SACU as a group and non South Africa separately.

FDI Scenario in South Africa

Harmonizing to the 2012 World Investment Report by the UN Conference on Trade and Development ( UNCTAD ) , South Africa led the sub-region as foreign direct investing ( FDI ) inflows into sub-Saharan Africa jumped by 25 % in 2011.

The study, released in Geneva, Switzerland on Thursday, shows that FDI inflows to sub-Saharan Africa soared from US $ 29.5-billion in 2010 to $ 36.9-billion in 2011, a degree comparable to the extremum of $ 37.3-billion achieved in 2008, prior to the oncoming of the planetary fiscal crisis.

FDI to South Africa rebounded from $ 1.23-billion in 2010 to $ 5.81-billion, doing South Africa the second-biggest FDI finish on the continent in 2011 after Nigeria, which procured $ 8.92-billion in FDI.

Oil, gas manufacturers still dominant

Ghana ( $ 3.22-billion ) , Congo ( $ 2.93-billion ) , and Algeria ( $ 2.57-billion ) completed the top five African FDI finishs by Unctad ‘s calculation, underlining the laterality of oil- or gas-producing states – South Africa being the exclusive exclusion.

Another important African oil manufacturer, Angola, besides received important investing influxs, harmonizing to Unctad, “ but divestment and repatriated net incomes by multinational corporations rendered net influxs negative ” .

The one-year study found, Continuing addition in trade good monetary values and a comparatively positive economic mentality for sub-Saharan Africa were among the factors lending to the turnaround.

For Africa as a whole, entire FDI influxs declined. However, this was due to a bead in FDI to North Africa, with influxs to traditional strong performing artists Egypt and Libya coming to a arrest as consequence of drawn-out political and societal instability in those states.

Improved investor perceptual experiences

Unctad said, Overall the continent ‘s FDI chances for 2012 were promising, “ as strong economic growing, current economic reforms and high trade good monetary values have improved investor perceptual experiences of the continent. ”

South Africa ‘s FDI inflows for 2011 accounted for 13.6 % of Africa ‘s entire as per Unctad ‘s figures, while amounting to 31.8 % of the state ‘s gross domestic merchandise ( GDP ) in 2011 – up from 9.9 % in 1995.

Jorge Maia, research caput at South Africa ‘s Industrial Development Corporation, who presented Unctad ‘s study locally, said the state ‘s investing policy government was “ rather broad compared to other states ”

“ South Africa is non merely rich in natural resources, it besides has really good substructure comparative to its equals and really good proficient accomplishments, ” Business Day reported Maia as stating.

Leon Myburgh, sub-Saharan Africa strategian at Citigroup, told Business Day that Africa was executing good in most developed markets and some emerging markets besides.

“ Give its comparatively low rate of development, there are high chances for investing across the continent, either for new concern or substructure, ” Myburgh told Business Day. “ These are being exploited and will go on to be exploited in approaching old ages.

Economic Engines

Agribusiness is good organized though a really minor subscriber to the overall GDP. Large piece of lands of land, together with a long 1875 stat mi coastline, foster the production of a broad scope of Marine and agricultural merchandises. Africa has a double agricultural economic system catering to both commercial and subsistence based production. Maize, wheat, sugar cane, oats, and helianthus are the state ‘s major agricultural merchandises. South Africa ‘s agricultural sector boasts some clear competitory advantages. First, the state ‘s turning season is reverse than that of Europe, offering complementary market chances. It besides has good developed cold concatenation installations and ports. A resource rich state, South Africa boasts an copiousness of mineral resources. In fact, the wealth of the state has been built on these resources. It holds about 90 % of the Pt metals on Earth, 80 % of the manganese, 73 % of the chrome, 45 % of the V and 41 % of the gold. The excavation industry is the biggest employer, with around 460,000 employees and another 400,000 employed by the providers of goods and services to the industry.

Gold production, which one time formed the anchor of the economic system, has lost its lustre in recent old ages. In 2007, China displaced South Africa as the universe ‘s largest gold manufacturer. 95 % of South Africa ‘s gold mines are belowground operations, making deepness of over 3.8 kilometers. With worsening class, increased deepness of excavation and excavation costs, and a slide in gilded monetary value in the 1990s, production fell. As one of the universe ‘s largest manufacturers of gold, South Africa is more susceptible to slouch in monetary value because its deep degree mines are the highest cost manufacturers in the universe. However, the sector should see a resurgence in the current twelvemonth, on the dorsum of lifting gold monetary values. However, South Africa ‘s excavation sector continues to be the top FDI receiver for the state.

South Africa ‘s vehicle production is going a flourishing industry every bit good. It is the 2nd largest country in the fabrication sector and the fastest growth. Almost every planetary car major, has its operations based in South Africa.

Other major industries in South Africa are chemicals fabricating, metals processing and pharmaceuticals. South Africa hosts a figure of superior quality infirmaries and well-trained medical staff which has helped enticement investings into the pharmaceutical sector. The fertiliser industry besides looks assuring due to the state ‘s large-scale diversified agricultural sector. Expansion in the Information and Communications Technology and electronics industry has besides been phenomenal, with the mean growing of the state exceling the universe norm. Yet, all is non cheery in Eden. The fabric industry has taken a hit due to increasing competition from Chinese goods. The South Africans have responded with new advanced fabric merchandises contending back. The production of improved parachute cloth, technically knitted cloth used in bomb disposal, fire deceleration kits and specialised medical fabrics are doing their grade in niche markets.

The services sector is the major subscriber to the GDP. It comprises of fiscal services, touristry, retail gross revenues and telecommunications. South Africa possesses a robust and mature fiscal services sector, which is comparable to the best in the universe. The state ‘s banking sector has a good representation of foreign Bankss and offers modern services like a countrywide web of ATMs and Internet banking services. Mzansi, South Africa ‘s advanced new low-priced banking strategy provides banking services to more than 3.3-million low-income earners – a huge and turning market antecedently untapped by the fiscal sector.

Johannesburg Stock Exchange

The Johannesburg Stock Exchange is the lone stock exchange in the state and the 16th largest in the universe with 400 listed companies. Keeping the differentiation as the fourth-largest emerging market finish for investings, the exchange mopped up $ 9.4 billion in 2005, up from $ 1.5 billion a decennary before.

South Africa ‘s vesture sector has been in a province of convulsion and diminution for the last five old ages. The continued growing in imports ( peculiarly from lower-cost manufacturers such as China ) and the strengthening of the South African rand ( R ) against the United States dollar are the two factors blamed for the diminution in local production.

However, if makers were honorable with themselves, they would see that the jobs run deeper than external issues. The industry is enduring from old ages of disregard in the countries of engineering and accomplishments.

This has made the sector mostly uncompetitive.

Whilst the Government is turn toing these issues through a Customised Sector Programme ( CSP ) and more late through the Textile and Clothing Industry Development Programme ( TCIDP ) , harmonizing to critics this steps are viewed as being excessively small excessively late and the sector is non expected to do any dramatic recovery in the short term.

The inability of the local industry to fulfill demand for vesture from retail merchants offers an chance for developing state exporters to provide a broad scope of merchandises to the South African market. In 2009, vesture imports, excepting imports from Member States of the Southern African Customs Union ( SACU ) , amounted to US $ 966.6 million. If the figures from SACU are added to this, entire vesture imports in 2009 amounted to US $ 1.1 billion. Harmonizing to Comtrade informations, this would do South Africa the universe ‘s 25th largest importer of vesture.

Over the period 2005 to 2009, vesture imports rose well by every bit much as 42 % . Whilst this addition reflects the diminution in the domestic fabrication sector, it besides indicates the perkiness of the market for consumer goods in South Africa. This perkiness is partially due to the go oning growing of a strong in-between category with entree to larger disposable incomes.

The vesture points most in demand

In 2009, Women ‘s and miss ‘s jackets, frocks, skirts, pants, trunks non knitted ( HS 6204 ) , work forces ‘s and male childs ‘ jackets, pants, trunks non knitted ( HS 6203 ) , knitted jerseies ( HS 6109 ) , knitted New Jerseies and cardigans ( HS 6110 ) , and woven work forces ‘s or male childs ‘ shirts ( HS 6205 ) accounted for 50 % of vesture imports. These are the class with the highest demand.

The merchandise class that showed the highest growing ( albeit sometimes off a low base ) from 2005 to 2009 are work forces ‘s and male child ‘s greatcoats, parkas, air current deceivers and similar articles, knitted ) ; adult females ‘s and miss ‘ greatcoats, parkas, air current deceivers and similar articles ; knitted work forces ‘s and male childs ‘ vests and other waistcoats, underpants, Jockey shorts, pajama, and similar articles ; adult females ‘s hose ( which rose by every bit much as 165 % ) ; and ties, bow ties and cravats. These offer possible niche markets for competitory manufacturers.

China and the remainder of Asia are the largest providers of imports by far

At present, over 70 % of vesture imports in South Africa come from Asia, with China entirely lending 59 % of entire vesture imports in 2009. This reflects the nature of the South African market for dressing which is chiefly geared towards the price reduction terminal ; for this market buying determinations are based on monetary value.

Botswana performed highly good in South Africa over the five old ages to 2009, spread outing its supplies by a monolithic 261 % to their current degree. The state now provides 14 % of South Africa ‘s vesture imports. India remains in 3rd place despite a diminution of 2 % in imports over the five-year period. Mauritius is the 4th largest provider and imports from this state have performed highly good, registering a 476 % addition over the period.

However, there have been positive signals to exporters in Africa by cardinal alterations in the form of sourcing.

In 2005, China accounted for 70 % of all vesture imports ; Asia itself accounted for over 80 % of entire imports. Local retail merchants and importers were forced to diversity their provider base due to infliction of quotas on selected vesture imports from China for a period of two old ages from January 2007.

South Africa has a market for large-size vesture that companies in Asia by and large do non hold the capacity to provide. A vesture company with the ability to serve this market section could happen good chances.

It besides has a market for companies that are able to work with little minimal orders. Companies of Asia frequently work with minimal order sizes that are far larger than the volumes little and average sized operators in South Africa are able to put.

The market for “ green ” cloths is turning strongly. Good chances are at that place for companies bring forthing garments from organic cotton or bamboo fiber in South Africa.

In add-on, there are the markets for particular goods which the South African vesture industry does non hold the capacity to bring forth. These include points like cushioned jackets, insouciant woven tops and undersides with embellishment-generally anything that requires sophisticated lavation and coating. All these merchandises are imported. The market for babe wear and kids ‘s wear, for which there is limited local fabrication capacity, is besides mature for the picking.

Targeting retail merchants straight is the best attack to the market

Approaching the market of South African can sometimes be hard. Retailers, importers and agents tend to purchase from tested and sure beginnings, doing entry into the market a challenge for new providers. A direct attack to retail merchants is frequently the most effectual manner of capturing their attending. It would be wise for companies with strong design abilities to aim retail merchants in their selling runs as a manner of doing their companies known.

South Africa offers a platform for making retail merchants through International Apparel, Textile, Footwear and Machinery Fair, held yearly in Cape Town. All the big purchasers and agents gather the carnival. A figure of states choose to put up state marquees at this just. Such marquees work good as they non merely market specific companies but the capableness of the single state as a whole.

The retail sector of South African follows the European market really closely and purchasers will look foremost and first at the fashionability of the merchandise lines proposed by new providers before inquiring inquiries on volumes, bringing and monetary value. Hence Samples or snap presented to retail merchants ever need to be in the latest manners.

South Africa has stringent labeling demands. All imported vesture must transport labels with the undermentioned information: state of beginning, attention instructions, fiber content. Press has late criticized companies that do non use labeling demands strictly. As a consequence, the governments are now clamping down on vesture bearing labels that fail to run into demands.

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Edutor, Pearson Partner to Provide Digital Textbooks to Students in South Africa

Over 11000 students across 13 campuses at CTI Education Group (CTI) and Midrand Graduate Institute (MGI) will receive digital textbooks on their tablets. Edutor Technologies, a pioneer in tablet based education in India, has announced a partnership with global education company Pearson, to provide digital textbooks to students in South Africa. This will offer students access to all there requisite textbooks at any time and any location, without internet access.

Edutor comes with the experience of working with 70 academic institutions across India and reaching over 40,000 students. Ram Gollamudi, Chief Executive Officer of Edutor Technologies said, “Pearson and CTI/MGI are leading the way in digital education in South Africa. Edutor is delighted to empower them to deliver superior learning experiences to students in South Africa by providing a cost-efficient and scalable platform to deploy. Our experience in India shows that device based learning is a game changer and can go a long way towards making learning engaging, interactive and immersive for students. We look forward to working with Pearson in scaling it further to impact a much larger student body.”

Edutor offers schools and students the ‘Ignitor’ platform; a unique multi-model digital textbook distribution platform. It is a solution that converts tablets into an educational device and then ‘augments’ the learning experience of the students. This partnership with Pearson ensures that all the relevant content is available on demand, within the device.

Nirvani Dhevcharran, CTO of Pearson, South Africa Division remarked, “The Ignitor technology platform has helped us successfully implement our digital textbook strategy at CTI/MGI and deliver next generation learning experiences on devices to students. This will help students carry and access their textbooks anytime, anywhere.”

This is one of the largest deployments of digital textbooks on tablets by Pearson anywhere in the world. The devices come with an integrated epub3/pdf reader with built-in annotations and note taking.. The content has been made available from the first day, to help instructors and students start learning without any loss of time.

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To the Indians Who Died in South Africa

T S Eliot’s poem ‘To the Indians who Died in Africa’ is an interesting Eliot piece. It is not often you read a poem by Eliot which refrains from striking the grand pose. He tended to invoke the giant issues of human soul every time he penned a poem, except of course, when he wrote those cat poems. But this is a puzzlingly small-aimed poem. A bit advise not grand wisdom, I guess. That this poem in imbued in the war and empire atmosphere is obvious. What he has to say to the Indians is funnily passive, “Look, it is ok if you die absurdly in a foreign country’.

It is noteworthy how Eliot deploys rhetoric to persuade the reader that it is indeed true that there was a common purpose among the Indian and the English soldiers. It appears to me that in the first two stanzas the speaker   evokes the image of the ‘normal scene’ so that we see how different it is for one to die in a foreign country. Then of course he goes on to assert that this need no more be seen as unusual or as tragic. He seems to suggest that the place where a man meets his destiny is his destination. He associates destiny with the inevitable culmination of one’s life as well as one’s efforts.

He suggests that the divide between home and exile is illusory; that the opposition between ‘our’ and ‘your’ is not real. Every country will have such places where ‘foreigners’ are buried (whether it is the English midlands or some village in Punjab – ‘Five Rivers’). He emphasises that the common purpose really erases the differences that notions of ‘home’ and ‘exile’ foster; the divide that notions of national difference highlight. The death of an Indian soldier in Africa fighting Germany and defending England may appear absurd.

But the speaker points out that the Indian and the English soldiers are united in a common purpose. As for greater meaning in such lives and deaths, he says it is to be seen only after ‘final judgment’. To the Indians Who Died in Africa * T. S. Eliot A man’s destination is his own village, His own fire, and his wife’s cooking; To sit in front of his own door at sunset And see his grandson, and his neighbour’s grandson Playing in the dust together. Scarred but secure, he has many memories Which return at the hour of conversation, (The warm or the cool hour, according to the climate)

Of foreign men, who fought in foreign places, Foreign to each other. A man’s destination is not his destiny, Every country is home to one man And exile to another. Where a man dies bravely At one with his destiny, that soil is his. Let his village remember. This was not your land, or ours: but a village in the Midlands, And one in the Five Rivers, may have the same graveyard. Let those who go home tell the same story of you: Of action with a common purpose, action None the less fruitful if neither you nor we Know, until the judgement after death, What is the fruit of action.

Eliot, T. S. “To the Indians Who Died in Africa. ” Collected Poems 1909-1962 This is what Narayan Chandran has to say about this poem: It is intriguing that T. S. Eliot has repeatedly drawn upon Indic sources, especially the Bhagavad-Gita and its philosophy of disinterested action, while writing on war and world affairs through the 1940s. Eliot’s Occasional Verses, particularly “To the Indians who Died in Africa,” betray the poet’s imperialist biases, unlike much of his poetry, in which they do not seem to surface visibly as in his prose writings and conversations.

Couched in the language and imagery of the Gita, Eliot seems to tell the Indians that their action is its own reward; the irony hardens as we recall historical facts and situations that drove hapless Indians to support the Allied war effort in many theaters outside India. The essay also looks at two other British writers on Indian themes, Kipling and Forster, whose texts seem to cast an interesting sidelight on “action,” whose punning resonance Eliot seems to relish in writing his war poems. Eliot, evidently, had little use for the philosophy he quoted back to the distressed Indians.

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Historical Overview of South Africa’s Industrial Relations

South Africa reflects a diverse country, rich in history and encourages “ubuntu”. This philosophy encompasses the spirit of community which summarises the extent to which everyone is connected to one another. However controversial issues were prevalent during South Africa’s industrial relations history. Issues which stood out were Apartheid; which segregated the South African society by race and class, as well as political and labour conflict were also highly controversial issues during the past. South Africa’s industrial relations history and workers rights is complex.

Therefore it is necessary to view South Africa’s industrial relations in terms of an industrial evolution and economic overview in order to fully grasp it effectively. As understanding South Africa’s industrial historical significance is crucial as it ultimately shaped the labour laws which currently exist. This essay will investigate the historical overview of South Africa’s industrial relations highlighting the most significant events which occurred within South Africa’s industrial history, in particular, the hey-day of the Apartheid era (1949-1973).

The focus on this particular period will demonstrate the significance and impact it had on labour legislation and the industrial relations system in South Africa at that time. The National Party (NP), a new party within the South African government in 1948, institutionalised Apartheid as a central plank of South African government policy(Van Den Bergh& van Niekerk, 2009:55). Yet in the same year the Universal Declaration of Human Rights was formed by the United Nations General Assembly.

Even though South Africa was a United Nations member they continued to pursue their newly institutionalised government policy, Apartheid. The international community made efforts to persuade the South African government to adhere to the Universal Declaration of Human Rights but their efforts were ignored. During the Apartheid era the National Party used its repressive legislation to legally enforce racial segregation. This was an attempt to protect the minority which existed in South Africa, white South Africans. Government had to find ways to handle the conflict.

During the early days of Apartheid there was generally dissatisfaction among South Africans of all races. This was mainly due to the fact that jobs were scarce, and there was a high influx of black people in urban areas which caused unrest in the townships (Bendix, 2010:68). Therefore the Commission argued that if black people were able to have party representation it would ultimately lead to equality amongst races within South Africa. However this went completely against what the government believed. If government followed through with what the commission recommended it would be putting the white superiority at risk. The impact the Botha Commission had on labour legislation in South Africa The government ignored the Botha Commissions recommendations which included freedom of association and trade union rights. Therefore government passed two labour legislations to give effect to the Botha Commission. Firstly, to reinforce the governments Apartheid policy the Industrial Conciliation Act was passed. The Act was the final part to the government’s racially exclusive industrial system. The Act established racial divisions amongst workers which meant that there could not be trade unions which represented a variety of races.

In addition trade unions with a variety of races had to divide their members by race then locate them in different trade unions according to their race. Furthermore certain work was reserved exclusively for workers of a particular race. This was known as job reservation. This meant labour market was being manipulated in such as a way that advanced white people in order to maintain their supremacy. Secondly, government went against the recommendation that stated that black workers should be allowed regulation of rights. Government believed that this would encourage black trade unions.

Therefore they implemented the Native Labour of disputes Act No. 48 of 1953. Later the Act was name changed to the Bantu Labour of Disputes Act. This Act ultimately aimed at prohibiting strike action by black workers. It repealed the War Measure 145; which banned black workers from taking part in strike action. In this way black workers had no way to resist the demands laid down by employers.

The State is referred to as a self-governing political entity. In this case the South African State consisted of the National Party. The State facilitates the employment relationship between employers and employees. The state is also regarded as the employer. In this case the state had to improve the economy as job was scarce. The government had to use the recommendations of the Botha Commission to improve the labour relations situation at that time. The Commission’s recommended that if black workers were granted representation of black workers in trade unions equality amongst races would take place.

South Africa’s exclusion from the British Commonwealth 1961 marked the first diplomatic defeat against the Apartheid government. The government justified their actions by the possibility of black violence that could have sparked. South Africa was later sanctioned. The event was the reason public meetings were banned after that dreadful day, the 24th March 1960.

Conflict could not be resolved during this period by bargaining. Drastic measures were taken by international countries as they tried to stop the Apartheid regime. The Apartheid Government was exploiting the black workers and black people in general. The incidents that took place at Sharpeville were an example of how crimes against humanity were being made. The changes government made regarding who the employers can hire and where employers could work demonstrated the drastic steps taken by the government to keep their power and continue racial segregation.

In 1973 bodies were being established which aimed for promotion of black workers interests. However the momentum towards dispention was mainly due to the Natal Strikes 1973. During 1973 an estimated 61 000 African and Indian workers in Natal took it upon themselves to go on strike. The strike took place in various industries and ultimately the industry was brought to a standstill. The strike began at the Coronation Brick which spread to the textile industry and later other industries as well as the Durban municipality. The strikes were purely coordinated by the workers themselves and not by any formal organisations.

The workers were generally unsatisfied with their wages. This was mainly due to the fact that inflation was rapidly increasing at that time. The significance of the Natal strikes 1973 The strikes were significant as it marked the first time workers embarked on such a large scale strike without the coordination of any formal organisations. Therefore this event demonstrated the actual power the workers possessed as a united force. This power meant that they could apply pressure on government on labour issues, such as employer-employee relations and minimum wages.

Once the strikes ended black workers organised themselves into trade unions. These unions were separate from the trade unions which existed at the time. The trade unions which existed were mainly dominated by white workers. Therefore the newly formed black unions were referred to as “independent trade unions”. Although the strikes were illegal according to the labour legislation at the time, there were no arrests made. The large number of workers that participated in the strike action made it difficult for employers as well as the police to punish them for their illegal strikes. The impact the Natal strikes had on labour legislation in South Africa Due to the Natal strikes black workers new found power led to them being recognised as a force to be reckoned with. Therefore government responded by passing the Bantu Regulations Act of 1973. The Act was passed to regulate the procedures for establishing labour committees and disputes amongst employers and employees. This was crucial for government as the joint power of the workers put pressure on government and employers to accommodate them.

During the Apartheid era the National Party government used repressive legislation to legally enforce racial segregation. This was an attempt to protect the minority which existed in South Africa, white South Africans. There were key events during Apartheid such as the establishment of the Botha Commission, Sharpeville Massacre and the Natal strikes of 1973. Within the time periods these key events occurred white workers prospered under the rule of the National Party government whereas non-white workers were excluded. The government used the labour force to further racially divide South Africans.

Therefore equality amongst the races did not exist which was their aim. However tension escalated within the country. As a result, strike action and protests soon persisted and government had to find ways to handle the conflict. Hence the use of labour laws as controls mechanisms by government. As Apartheid reached its boiling point the economy suffered and the government had to start considering the inevitable, democracy.

Researching the labour history made it abundantly clear that clear that there needs to be understanding of the country’s history, in particular the labour history, not for hatred, but to avoid repetition of the imbalances of the Apartheid era. In contrast with the Apartheid government, the present government has made large strides in creating a country which exudes freedom, equality and non-discrimination. The research conducted not only gave me the opportunity to broaden my knowledge of labour history and improving my researching skills, but it gave me a new appreciation for the county’s government, laws and labour legislations.

Sometimes it is easy to criticise the government, yet no thought is spared for those political figures, leaders and employees that fought for what ultimately exist today, in particular the labour laws which aim at protecting the employee. Focusing on the Apartheid era (1949-1973) I have come to understand that the labour market had fallen prey to the Apartheid government, and that we are still experiencing the effects of the Apartheid government’s actions. Labour legislations in today’s time are aimed at eradicating the imbalances of the past.

Therefore as a potential Human Resource Manager understanding the realities of what occurred and how it impacted the labour market in the past remains of curial importance. The National Party wanted supremacy yet they did not realise their actions would have major consequences. I view this as an example of how power used for greed and personal gain has tremendous consequences for all parties involved. Therefore as I have learnt these mistakes made in the past demonstrates how it can be used constructively as a point of reference when dealing with labour legislations to avoid the mistakes which were previously made by the Apartheid government.

Although we do not face the same repressive laws as in Apartheid we should always aim Researching the past has made it clear that our diversity needs to be embraced, not frowned upon because we need to be united and not divided as we were in the Apartheid era. Although we do not face the same repressive laws as in Apartheid we should always make sure our diversity is represented in our labour laws. Most importantly not being able to understand our past labour history we will not fully understand why they exist.

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Mfecane Debates

Has the mfecane a future? In recent times historians known as “Africanists” revived the topic of the mfecane in the early 1960s and it was well exploited and was also used to justify certain aspects of Apatheid. The word ‘mfecane’ is a characterised product of the South African liberal history that is used by the Apartheid regime state to legitimate South Africa’s racially and unequal land division. In the 1970s the mfecane has become the most widely used terms in south African history and historical literature . inding the original meaning of mfecane could somehow be merely impossible reason being from on angle the mfecane was the Nguni diaspora which from the early 1820s which took Nguni raiding communities such as Ndebele, the Ngoni and Gaza and over more southern regional parts of south-central Africa which reach as far as Lake Tanzania. Astonishingly some of the selective use or the actual invention of evidence has produced the myth of an internally-induced process known as the black-on-black destruction centring on Shaka Zulu.

A re-evaluating from the ‘battles’ of Dithakong and Mbolompo suggests very different ideas and enables us to decipher the motives of subsequent historiographical amnesias and knowledge. After about 1810 the black peoples of southern Africa were caught between intensifying and converging imperialistic thrusts: one to supply the Cape Colony with labour; another, at Delagoa Bay, to supply slaves particularly to the Brazilian sugar plantations. The flight of the Ngwane from the Mzinyathi inland to the Caledon was, it is argued, a response to slaving.

But they ran directly into the colonial raiding-grounds north of the Orange. The (missionary-led) raid on the still unidentified ‘Mantatees’ (not a reference to MaNtatisi) at Dithakong in 1823 was one of innumerable Griqua raids for slaves to counter a shortage of labour among the Cape settlers after the British expansionist wars of 1811 to 1820. Similar Griqua raids forced the Ngwane south from the Caledon into the Transkei. Here, at Mbolompo in 1828, the Ngwane were attacked yet again, this time by a British army seeking ‘free’ labour after the reorganisation of the Cape’s labour-procurement system in July 1828.

The British claim that they were parrying a Zulu invasion is exposed as propaganda, and the connexions between the campaign and the white-instigated murder of Shaka are shown. In short, the African societies did not generate the regional violence on their own. Rather, were caught within the European net and were soon transformed over lengthen periods in reaction to the attentions of external plunderers. The core misrepresentations and false understandings of ‘the mfecane’ are thereby revealed; the term, and the concept, should be abandoned.

A closely related, though different, mfecane centres on the perspectives on the Zululanders and the figured mindset of Shaka. many of those in Zulu cultures and trditionalised South Africans has come to a conclusion become a revolutionary process internal to Nguni society which leads to the development of the ibutho and the tributary mode of production. Shaka is seen as a heroic figure providing a positive historical example in South African history and created a sense of self-respect for black citizens in South Africa today.

But inside these wider definitions another mfecane there are more specifically referring to the impact of Nguni raiders (the Nedbele, Hlubi and Ngwane) on the Sotho west of the Drakensberg. The mfecane encompassed many great fields of African self-destruction which extended from the Limpopo all the way to Orange. It has allegedly depopulated vast areas of what had become the Orange Free State, the Transvaal and, with the aid of the Zulu, Natal, which thus lay empty for white expansion. At the time many Africans dispersed and survivors clustered together and within a period of time formed enclave states of Lesotho, Swaziland and Botswana.

A term known as the ‘general distribution of white and Bantu landownership’ in South Africa was soon established. On these African-created foundations rose the Bantustans or Homelands of twentieth-century Southern Africa. Contradictions coexist within mfecane theories with contrasts sand the definitions of timing. As an era of history the latter 1trans-orangian’ mfecane begins in about 1820 and ends in either 1828 with the departure of the Ngwane, or it had ended in the early mid-1830s with the arrival of the French missionaries and later followed by the Boers.

The Zulu-centred mfecane on the other hand begins with the career of Dingiswayo at the end of the eighteenth century and continues until the end of the Zulu kingdom which ended in 1879. Sub continental mfecane does continue until the 1890s. In short, I would say there is no one definition of the mfecane. It can be referred to people, to an era or to a process of internal development. It could be destructive, constructive; anti-African; pro-African; geographically narrow, or sub continental. Not all of these ontradictions can be resolved as a whole, but there is a need for answers and its existence requires an explanation, since their origins of the mfecane are by now very much buried in the heart of South African historiography. Firstly, my mission of this essay is attend to the origins of the mfecane, how it started and give brief overviews and backgrounds between those who played a very important role in the era of Shaka Zulu and the period of the mfecane. My intentions are also to unravel the development within the mfecane as it has been handed down in South African historiography.

Many writers have had a hand in creating the mfecane. The poor taste of the dish derives from the poor quality of the initial ingredients. In the second part, I suggest some lines of attack on the pillars of mfecane mythology, and leave it to the reader to decide whether the concept is worth salvaging. Julian Cobbing known best as a being against the mfecane and the critical analysis of south African history, he also had he’s own point of the subjects of who the important characters like Shaka Zulu had and the effects, whether he did or did not control the southern part of Africa or whether he played a minor role in the mfecane era.

The the evolution between the ibutho amongst the Ngune, the wars between Zulu and the Ndwandwe traditions, and the rise of the Zulu kingdom are half a century after Bryant, had made integral to the mfecane. Shaka becomes a hero and Mzilikazi a creative state-builder. ‘The movement as awhole’ has also expanded to bring in Swaziland and the career of Mswati,Gazaland and the careers of the Soshangane and Mzila, as well as the Ngonistates of Mbelwa and Mpezeni. The validity of both these conceptual and the geographical expansions with their linkage to the original concepts of the mfecane has so far still remained unremarked.

As to the linkage of the mfecane to ‘an understanding of the contemporary Situation of the’ Omer-Cooper’s analysis is (unsurprisingly)subjective. It is also highly contradictory. In the one direction, ‘the traditions towards the Mfecane have retained their fascination because they provide a bulwark of self-respect, a shield against the cripplingof inferiority, encouraged by the structure of white dominated society. ‘ Whereas in the other, ‘the battles and massacres of the Mfecane being accounted for the general distribution of white andBantu landownership [in South Africa today]. This is the latter that a few Africans would claim and accept. Omer-Cooper’s two claims for the mfecane have in turn underpinnedwo incompatible to the mfecane traditions in the 1970s. The more liberal part of the various traditions is located mainly within in Europe, the United States and inThe South African English-speaking universities. There are list historians of Africa who have adopted ideas of Omer-Cooperof the mfecane as a positive revolutionary idea.

Before 1966,and the publication of Zulu Aftermath general text books on African History had not yet Pick up the mfecane. By 1970 it was being integrating virtually all of them. July’s over simplifications are typical. ‘The driving force,’ he wrote, ‘was land hunger caused by population pressure among migrating cattle keepers and the vehicle was the military outburst known as the Zulu Mfecane. ‘ In 1969 Leonard Thompson discussed a concept known as the difaqane in the influential Oxford History of South Africa. W. F. Lye has built an academic career on the mfecane.

He wavers between Ellenberger’s older version in which Matiwane and Mzilikazi are denigrated and the newer one in which they are talented state-builders. R. Kent Rasmussen in an analysis of the early Ndebele state describes the state as an unambiguously positive manner. In the 1960s and 1970s the mfecane was updated. Inside South Africa it was adapted to explain the origins, if not the Creation of the black homelands and societies, at a time when South Africans badlyNeeded all the help they could get in justifying this processes both to an international audience and to their own up and upcoming generations.

At the same time, bizarrely, historians mainly outside South Africa,not having noticed the use in which the mfecane was being put south of the Limpopo and hitched the mfecane to an alternative history that is stressed the glories of the Africa’s past and attempted to provide for Africans self-respect, defences against European suggestions that the African past was sterile, barbaric and static. Racist interpretations have been shielded from view by the Africanist one. The result must surely bewilder any student who attempts to definite mfecane with any concise coherence.

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Taxation of Ill Gotten Gains in South Africa

It has recently been reported in the press that SARS has lodged a claim for R183 million in income tax against the estate of the slain mining magnate, Brett Kebble in respect of the R2 billion allegedly stolen by him from the mining companies of which he was a director. It is further reported that the Master of the High Court has rejected the claim on the grounds that the amounts on which SARS sought to levy tax constituted money stolen by Kebble, and that stolen money is not subject to income tax. It has been reported that SARS is to take the Master?s decision in this regard on review.

Why the issue is being contested on the basis of review, as distinct from the ordinary process of assessment followed by objection and appeal, is not clear. A review is concerned only with the regularity of the process by which a decision was reached, not with the correctness of the decision itself. A moot point of tax law The Kebble case raises an interesting and unresolved tax issue and, in view of the large sum at stake, it may be a case that will go all the way to the Supreme Court of Appeal and bring long-overdue certainty to the law.

The Income Tax Act No. 58 of 1962 (the Act) is of no assistance in determining the issue. Section 23(o) states that payments that are illegal in terms of Chapter 2 of the Prevention and Combating of Corrupt Activities Act No. 12 of 2004 or that constitute a fine or penalty for any unlawful activity carried out in the Republic (or in any other country if that activity would be unlawful if carried out in the Republic) are not deductible for income tax purposes.

There is, however, nothing in the Act to say that the recipient of corrupt or illegal payments is (or is not) subject to income tax on such amounts, and this issue must, therefore, be resolved by the application of common law, that is to say, in terms of principles laid down by the courts. In COT v G [1981] (43 SATC 159) the Appellate Division of Zimbabwe held that a person who steals money does not “receive” it in the sense contemplated in the definition of “gross income” in the Act, because he does not acquire the money “on his own behalf and for his own benefit”.

If this is correct, then the question of whether or not such an amount “is income” does not arise, since it is only once an amount has been received or accrued that the issue arises as to whether it is income or capital. However, the correctness of this decision is suspect. Certainly, from the thief?s perspective, the reason why he stole the money was precisely to acquire it “for his own benefit” and the interpretation that the judge accorded this phrase is, with respect, legalistic, artificial and unsupported by authority.

In ITC 1789 (67 SATC 205), where the taxpayer in question had solicited millions of rand from a multitude of investors in a fraudulent and unlawful scheme, the court held that those moneys had been “received” as contemplated in the definition of ?gross income?. If both of these decisions are good law, it would mean that (as was held in ITC 1789) a person who systematically cheats others out of money is subject to income tax on his booty, but that (as was held in G v COT) a person who actually steals money in a systematic way is not taxable.

This, it is submitted, is a preposterous and untenable distinction. The true issue was whether the amounts were “income” It is submitted that both these cases ought to have been decided on the basis of whether, in the particular circumstances, the amounts in question had the character of “income” in the hands of the felon, rather than on the issue of whether or not the moneys had been “received” by him. Beneficial receipt was surely self-evident in both cases.

It can hardly be seriously contended that a thief or confidence trickster does not intend to acquire the victim?s money for his own benefit, and treat it as his own. The issue of whether money that has been stolen or is otherwise tainted with illegality is “income” in the hands of the recipient and is therefore subject to income tax, raises many thorny issues, never to date fully addressed let alone resolved by our courts.

Some of the aspects of the issue as to whether illegal receipts are taxable as income are ? •Illegal receipts range from those that are tainted with a mere technical illegality, such as those derived from trading without a licence, to morally reprehensible receipts such as the proceeds of drug-dealing or a fee paid to a hit-man for carrying out an assassination. In the tax context, do the same principles apply to every kind of illegal receipt? •If SARS were to take a slice of an illegal receipt, would this not make the State complicit in the illegality? If income tax were to be imposed on the recipient of stolen money, this would reduce the funds available to repay the rightful owner. It needs to be remembered that, in law, ownership of the money has passed to the thief, and all that the owner has is a claim in personam against the thief for repayment. If the thief has spent the money and is unable to repay it, the victim is merely a concurrent creditor in the thief?s insolvent estate. SARS, by contrast, has a preferential claim, in terms of the Insolvency Act, for any taxes due.

If income tax were payable on the stolen money, it is thus conceivable that SARS would recover all or some of the tax, but that the victim would not get his money back. This, it is submitted, is an unpalatable result. Should SARS get involved at all? There is a strong argument that, where illegal payments are concerned ? certainly in regard to stolen money ? it would be preferable for tax law to stand aloof, attach no tax consequences to the receipt of the money, and let the whole matter be decided in terms of criminal law. However, in view of the uncertainty in the law on this point, SARS can hardly be faulted for asserting a claim.

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