Warning about violence and unrest in South Africa

[Nat Quinn]

Warning about violence and unrest in South Africa

 

Award-winning economist Dawie Roodt is concerned about violence and unrest in South Africa amidst a political transition period.

Roodt said South Africa has very high levels of unemployment, rising poverty, and a growing number of people who go to bed hungry.

There are also around 28 million people who rely on the government’s social grants every month to survive.

“These grants are becoming less valuable because of high inflation. That means the social grants’ value is declining in real terms,” he said.

South Africa’s society is already very polarised, and the uncertainty surrounding the elections creates a volatile mix.

Some political leaders’ unrealistic promises and divisive rhetoric to gain votes add fuel to the fire.

He referenced Gauteng Premier Panyaza Lesufi’s promise that if the ANC wins the elections, everyone could immediately go to private hospitals.

“Imagine a hundred people going to a private hospital, and there is a confrontation with private security. There are many other examples,” Roodt said.

“All these factors put pressure on the society, and I am very concerned about the possibility of violence,” Roodt said.

He said in a worst-case scenario, there could be a repeat of the violence and looting experienced in KwaZulu Natal and Gauteng in July 2021.

“There can be a spark that sets the whole thing in motion. That is what I am concerned about,” he said.

“The unrest can pick up momentum because of the underlying factors, like unemployment and poverty. These forces can drive violence in South Africa.”

Market turbulence ahead of the elections

South Africa’s financial markets are struggling because of uncertainty surrounding the outcome of the elections.

Roodt predicts the ruling party will likely lose its outright majority, which means a coalition government must be formed.

While trying to put a coalition government together, there is great uncertainty, which affects the markets.

“We can see the uncertainty at all levels, including the currency exchange rate, capital markets, and equity markets,” he said.

“It is clear that the financial markets are concerned about the outcome of the 2024 general election.”

Roodt’s comments align with research around the issue, including the North-West University’s Business School’s Q1 2024 Policy Uncertainty Index (PUI).

The index showed that policy uncertainty rose in the first quarter of this year, affecting business confidence and weighing on investors and the markets.

It said the upcoming elections have led to heightened uncertainty as the ruling ANC could lose its majority for the first time since it took power.

The report said, “The prevailing uncertainties around the pending South African election and its outcome have contributed to business confidence being brittle in 1Q 2024.”

“The uncertain political outlook is now also weighing on investors and the markets as to possible election outcomes.”

The report highlighted the link between the policy uncertainty index and economic outcomes in South Africa.

“Empirically, it shows that when economic policy uncertainty is strongly present in the environment, it indeed lowers investment, employment, and output,” it found.

 

source:Warning about violence and unrest in South Africa – Daily Investor

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