how Russia can use the experience of South Africa
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Introduction of sentencing in South Africa
“The Republic of South Africa is extremely important for the decision of the UN General Assembly in 1962. It was a classic export-oriented developing country: South Africa accounted for more than half of all gold exports, about 30% of diamond exports and a large amount of platinum, plus rare earth metals and coal, ”says the presenter.
UN member countries introduced a decree against the resolution of South Africa, which took a course on the inspector of apartheid – racial segregation of the black population, and thus discovered a change in the regime of the state. Within the framework of international conferences, the export of weapons is widespread. From the beginning of the 1970s to the onset of the 1980s, the average annual growth of the South African economy did not exceed 2%. In 1986, the United States imposed a ban on financial ties with South Africa, then many foreign companies left the country. The economy of the republic quickly reoriented itself: the supply of coal to Asia increased. In addition, coal trade with European countries continued through intermediaries.
Parallels between South Africa and Russia
This year, Russia became the first country in the world to take effect against self-elimination. Against this background, economists often compare Russia with South Africa, which lived under surveillance for more than 25 years.
“South Africa continued to export gold, a lot of gold. Due to the unstable situation in the world, its prices were, so to speak, at higher frequencies. It also looks like Russia. Oil, which last year was very comfortable for Russia, now makes up a small part of our export earnings. The parallels are obvious even to non-economists,” Kozhukhar said.
Before making a decision, actively look at the South African market. The convenient location of the country in terms of logistics, cheap labor, English as the state language – all this attracts attention. Once the decision was made, foreign companies were reluctantly considered out of the country and were often licensed to operate. True, this period did not last long.
“The South African rand, like the Russian ruble, was a commodity currency. It is historically weak against the dollar by about 10% every year. After the decision was made, at the moment there was a devaluation of the national currency of South Africa. However, then the authorities took measures to counteract the outflow of capital – again something familiar, right? – says the presenter. As a result of the predominance of exports over imports, the dollar exchange rate against the rand began to fall. The stability of expectations is supported by a trade surplus.
The strong rate of the rand began to harm exporters. Attempts to conduct settlements in an alternative currency were not successful.
Bypass collected
According to Georgy Ostapkovich, director of the HSE ISSEK Center for Market Research, a couple of years later, Iran, Taiwan and the Chinese Service of South Africa discussed. “The country sold wine through Bulgaria, diamonds through Asia, and bought technology, for example, from Taiwan. Yes, South Africa earned less and spent more because of gray schemes, the search for intermediary countries and other tricks. But the fundamental economy continued to grow on gold-diamond-coal yeast,” Kozhukhar concludes.
Consequences of the decision
In the first year of collection, the Republic of South Africa’s GDP fell by 8-9%, says Ostapkovic. The income of the population has dropped significantly. The sanctions exacerbated the situation in the labor market, tense due to racial segregation. For the state of South Africa, spending on security and social benefits has increased. The state budget was replenished by increasing taxes for citizens and businesses.
“The second slow-acting blow to the economy of South Africa was the course towards import substitution (such a native, familiar word to a Russian person). The more sources of imports of technological equipment have already been exhausted, the stronger the pressure on itself in the republic. By the way, it was not possible to do this, ”the presenter said. This led to a shortage of parts and a slowdown in the development of military and civil aviation. The country has lost its technological advantage among African countries.
Best of all, they coped with the sanctions of large companies that absorb the production of outgoing Western enterprises and each other. By the mid-1980s, the country’s Congress had split several large conglomerates. However, they did not benefit the economy.
From the first days of the growth of the banking system. Local banks received the assets of foreign organizations at a favorable price, there was no competition. Two giants – Standard Bank and First Rand – grew by 20-50% per year. “Yes, by the way, the property market in South Africa has not died, but it has greatly enlarged and simplified, it has ceased to overtake inflation,” adds Kozhukhar.
As economics Alexander Isakov, chief economist for Russia and CEE at Bloomberg Economics, the main negative effect is a decrease in competition in the market. The position of South African users has strengthened.
“Ultimately, the bet on import substitution and the domestic market did not justify itself. Isolation from external competition led to an increase in prices for production resources. Local companies were getting bigger, small business did not develop due to social problems, segregation and tax burden. All this accelerated inflation and slowed down the pace of economic growth, ”comments the presenter. Economic growth did not recover after the restrictions were lifted and resumed only in the 2000s.
How can Russia use the experience of South Africa?
The situation in South Africa shows that it is impossible to completely isolate a major exporter. Kozhukhar explains: “The economy is inert and often has a margin of safety. Business adapts even in conditions of total restrictions. However, that’s where the positive ends.” Even under the expected debt scenarios, Russia will slowly return to growth, with possible GDP stagnation. Import substitution of everything at the request of South Africa is impossible, so it is important to establish parallel imports and technology development.
“The departure of Western companies is an unacceptable choice for participation in competitions, for example, government employees. Private business reacts much more quickly and quickly than a large corporation,” Kozhukhar believes.
The economic situation in Russia may be affected by the decline in oil prices. “Obviously, next year we will certainly face the fact that the price at which Russian oil is sold will be somewhat lower than this year. We assume that it will be at the level of $70-72 per barrel,” forecasts Aleksey Gromov, chief director of the Energy Space Institute of Energy and Finance, candidate of geographical sciences.
Some economists and political scientists believe that it was the decline in gold prices in the late 1980s and technological degradation that caused apartheid to fall. South Africa, unlike other African countries, managed to abolish power without a military coup. So far, the country has not returned to pre-sanction economic growth rates.
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