guest column :Tafara Mtutu
SOUTH AFRICA has taken the unofficial role of Zimbabwe’s big brother over the years given its relatively better economy and extensive relationship with the country.
When Zimbabwe’s socio-economic climate tensed earlier this year, the international community called upon Sadc members to intervene and South Africa responded with a delegation that visited President Emmerson Mnangagwa.
The calls have simmered, but tangible results from the visit are yet to be realised. This begs the question: Should Zimbabwe expect material assistance from big brother South Africa?
Firstly, it should be noted that South Africa exhibits a capitalistic society. Capitalism is an ideology where the means of production is controlled by private businesses.
This means that individual citizens run the economy without government interfering in production or pricing. Instead, prices are set by the free market.
This means that value is based on supply and demand and the relationship between producers and consumers.
While there is some interference by regulatory bodies, South Africa is largely capitalistic and ranks 101st out of a total of 179 countries with an economic freedom score of 58,3 according to the World Population Review.
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In a capitalistic society, profit is king. South Africa currently benefits from Zimbabwe’s woes that mainly include (i) perennial brain drain, (ii) foreign investor exodus and (iii) chronic deindustrialisation.
According to the World Population Review, Zimbabwe is the fifth smartest country on the continent with an average IQ score of 82. South Africa’s respective score is a few notches behind at 77.
Zimbabwe’s poor socio-economic environment has forced many Zimbabweans to fully exploit their capabilities in South Africa and other stable economies around the globe.
This migration has persisted since the late 1990s and South Africa’s economy has been enjoying the benefits that come with a Zimbabwean workforce.
An improvement in Zimbabwe’s political and economic environment could prompt Zimbabweans in South Africa to flock back home. There is no place like home, after all!
South Africa’s capital markets also benefited from the high country risk profile of Zimbabwe as investors exited Zimbabwe through fungible dual-listed stocks on the Zimbabwe Stock Exchange (ZSE).
In simple terms, international investors would purchase ZSE stocks that are listed on more than one exchange (In this case, Old Mutual) and sell them on another exchange.
Old Mutual Limited’s stock was the popular choice for these international investors and South Africa’s JSE was the popular destination capital market.
Although the fungibility of such stocks has been suspended, the capital drain was quite immense in 2019, and a fresh breath of confidence in Zimbabwe could reverse the fortunes in favour of Zimbabwe.
The very low levels of capacity utilisation in Zimbabwe have also forced local companies and citizens to source their goods through international trade.
In 2019, South Africa exported goods worth US$2 billion to Zimbabwe. Furthermore, if Zimbabwe became competitive in regional markets, it could jeopardise South Africa’s exports to Namibia (US$3,6bn), Botswana (US$4,1bn), Zambia (US$2,1bn) and Mozambique (US$3,7bn).
This could be even worse when we consider the very likely possibility of Zimbabwe’s central location in southern Africa diverting trade traffic through Zimbabwe more than any other economy in the region.
Given the facts above, it becomes very difficult for one to assert that Zimbabwe can rise again without South Africa taking a significant blow that could shake it to the ground.
There is always the possibility that the two countries can draft a way forward that benefits both economies, but that remains to be seen.