Russian Economist Fears 'Failed State' in SA

(Article from Business Day Live)

Russian economist fears ‘failed state’ in SA

South Africa IS in danger of "tipping over" and becoming a failed state, according to Yuri Maltsev, a Soviet defector and economic adviser to former Russian president Mikhail Gorbachev.

Dr Maltsev said on Wednesday that South Africa was at a crossroads and there were dangerous signs of instability, such as the farm protests in the Western Cape, which some see as part of a political attempt to undermine the opposition Democratic Alliance.

"The African National Congress (ANC) is a monopoly, and power corrupts," Dr Maltsev said in an interview with Business Day. He was speaking at a forum organised by the Free Market Foundation.

"What worries me is this can be the point of no return … South Africa is at a crossroads and can tip over."

Dr Maltsev was referring to spreading social unrest, mounting corruption and plans by the governing ANC for more intervention of the state in the economy to alleviate poverty and create jobs.

If South Africa could choose the freedom of an open economy with less regulation, lower taxes and more flexible labour laws, it could "explode with economic growth and energy", Dr Maltsev said.

Nomura emerging markets analyst Peter Attard Montalto said labelling South Africa a "failed state" was to look at the issues of the economy in the wrong way.

"The whole point is that there hasn’t been enough of a dramatic shock to the system yet to push the government, ANC and associated interests into meaningfully doing something about the economy’s problems and providing the leadership required," he said.

"Hence we deal with ongoing underperformance without any ‘blow-up’ situation. Even the situation in the mining labour market does not seem to have been enough."

There are concerns that plans by Anglo American Platinum to cut as many as 14,000 jobs after mothballing four mining shafts will lead to a repeat of the wildcat strikes that hit the sector last year, leading to the loss of almost 50 lives.

Dr Maltsev said the election of business tycoon Cyril Ramaphosa as ANC deputy president was probably a good thing, although he did not approve of the way Mr Ramaphosa had acquired his wealth. Turning to broader issues, he said he was not worried by the growing Chinese presence in Africa as China seemed to be avoiding political influence. Africans could not afford to "pick and choose" who is investing in their economies, he said.

Dr Maltsev praised the formation of the Brics bloc, which groups Brazil, Russia, India, China and South Africa. "It’s a good idea because all the countries are on the same level of economic development," he said.

Before defecting to the US in 1989, Dr Maltsev was a member of a senior Soviet economics team that worked on Mr Gorbachev’s reforms package of perestroika.

He is now a professor of economics at Carthage College in the US state of Wisconsin.