Posted on 02/04/2002 1:56:53 AM PST by Cincinatus' Wife
JOHANNESBURG, South Africa -- Renowned for its safaris, bustling black townships and new democracy, South Africa is now earning a new, somewhat dubious distinction as one of the cheapest countries in the world.
Consider this: Big Macs cost less here than any other place on the planet -- 82 cents. You can dine on a three-course steak dinner at one of Johannesburg's top restaurants for less than $10. A bottle of vintage wine (with a cork, not a twist top) will set you back as little as $3. A ticket to a movie is $2.50.
The prices are good news only to tourists. Among South Africans, you won't hear many celebrations because what's driving down prices is the weakening South African currency, the rand. The buying power of 43 million South Africans has diminished, pushing prices of even the most basic items out of reach of many.
Once one of the world's most-respected currencies, the rand is plummeting to its lowest levels in history against the dollar, the British pound and the euro. And no one can quite explain why.
In 1990, when Nelson Mandela was freed from prison, $1 bought 2.5 rand. A dozen years later, a dollar buys nearly 12 rand. Since September, the rand has experienced one of its sharpest declines, losing 40 percent of its value against the dollar. In December, it hit a new low of 13.85 to $1, before recovering to its current level.
BIG MAC INDEX
Based on The Economist magazine's annual Big Mac index, South Africa has one of the world's most undervalued currencies. The index compares the price of the McDonald's hamburger around the world as a measure of the buying power of domestic currencies.
``The falling rand, when looked at in the context of the Big Mac index, makes South Africa arguably one of the cheapest destinations in the world in pound and dollar terms,'' said Owen Leed, chief marketing director for South African Tourism, who is hoping the less-valuable rand will draw more visitors to South Africa this year.
There is more than cheap burgers to attract visitors. At Johannesburg's exclusive Butcher Shop & Grill, where diners must book a table a week in advance and no one under 14 is allowed, a three-course meal of snails, the most expensive steak on the menu and a Caesar salad is just $9.94. Wash it all down with a bottle of merlot for another $5.60.
Prices are so low that it is not uncommon to see tourists laugh when they receive a bill here. A Johannesburg newspaper recently featured a story about foreign tourists, shocked by the favorable exchange rate, leaving huge tips at bars and restaurants.
But for South Africans who are not waiters or bartenders, the sharp and steady decline of their money has been a disaster.
FOOD COSTS UP
Imported fuel and agricultural products are driving up transportation and food costs. One of the hardest-hit items is maize meal, a cornmeal that is cooked into a thick paste called pap, a staple in most black households. The price of the meal has shot up more than 100 percent in the past year, partly due to the rand's slide. The price of bread also has increased.
``We used to buy bread for one rand a loaf. Now it's almost four rand. We can't afford it,'' says Cyprian Mathole, 47, a day worker living in Johannesburg. He said he has given up smoking to help save money.
Middle-class South Africans planning trips abroad are discovering that they cannot afford to buy dollars, pounds or euros.
Under pressure to save the ailing currency, President Thabo Mbeki is launching a commission to investigate what is causing the rand's slide.
Pressure for an investigation came from the business community, afraid the weak rand would lead to higher interest rates and inflation. In a letter to Mbeki this month, the head of the South African Chamber of Business alleged that people and organizations had used ``dubious financial methods and instruments'' to manipulate the rand for their own profit.
Economists, however, remain puzzled about what caused the currency to lose value. The last time the rand nose-dived so steeply was in 1986, when South Africa was wracked by anti-apartheid protests and nearly defaulted on its debt repayments. In contrast, South Africa has been calm and stable in recent years. By all measures, the country is financially sound, analysts say.
NERVOUSNESS
Some economists blame the problem on nervousness after the terrorist attacks of Sept. 11, the debt crisis in Argentina, currency speculators and political and economic turmoil in neighboring Zimbabwe.
Many observers say they doubt the commission will root out a culprit because there might not be one.
``If there is anything to be uncovered, they will uncover it. But it's a big if,'' said Merton Dagut, a professor of economics at the University of the Witwatersrand in Johannesburg.
``I don't think that it's criminal. It may be immoral in some sense. I think the underlying problem is that the currency is weak because confidence in the country is weak,'' Dagut said. ``You don't need a commission of inquiry to discover that.''
RACISM
In an interview last week with the Financial Mail, South Africa's main business magazine, South Africa Treasury Director-General Maria Ramos suggested something else: that South Africa, like the continent, might still be dogged by racism.
``Nobody expects African countries to do the right thing, to do well,'' she said.
``Virtually every other emerging-market economy has bigger problems, but they are not subjected to the same skepticism.''
Mbeki said the rand's sharp decline in 2001 -- a loss of 37 percent on the dollar -- had nothing to do with South Africa's economic fundamentals.
``This development brought sharply to the fore the need for all of us, as South Africans, to act together to promote our national interests and avoid acting in any manner that would undermine our common future,'' Mbeki said.
The Mbeki government's approach to curbing the AIDS pandemic has been widely criticized, especially since Mbeki has questioned the causal link between HIV and AIDS.
``Our continent is then seen as being synonymous with AIDS ... this challenge must be met seriously,'' he said.
Snip….
Mbeki called for a crackdown on one of the highest crime rates in the world, with 21,000 murders in 2000 alone. [End Excerpt]
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Zimbabwean army will only accept Mugabe victory--New Laws Give President Mugabe Sweeping Powers (Election laws) Illegal to criticize Mugabe
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In Nairobi, Tax Tiff Takes Racial Turn Kenya:-- Mayor of capital tells whites to pay fees or poor may take over their land. But residents say the city is corrupt and have put the funds in escrow. -- By DAVAN MAHARAJ, TIMES STAFF WRITER
Excerpt] NAIROBI, Kenya -- The Zimbabwe-style seizures of white-owned farms and homes haven't begun here--at least not yet.
But Nairobi Mayor Dick Waweru recently warned white residents of the city's richest neighborhoods that their homes could be invaded by slum dwellers unless they pay outstanding land taxes.
"It's either do or die," he told a news conference. Using the Swahili word for whites, he added, "We must get our money by all means [or] wazungus will have to pack up and go." So far, there has been no denouncement of Waweru's remarks by the government of Kenyan President Daniel Arap Moi, but the mayor's attack has rattled the nerves of white residents, who say Waweru is trying to stir up a race war so he can fatten city coffers.
Waweru's remarks last Saturday marked the latest volley in a running battle involving taxation and government accountability in this capital city.
Angered by the poor condition of roads, the lack of garbage collection and the absence of basic municipal services, residents of the Karen neighborhood--named after Baroness Karen Blixen, the Danish author of "Out of Africa"--began withholding their property taxes a few years ago to force politicians to account for the tens of millions of dollars that pass through City Hall each year. [End Excerpt]
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Thursday January 17 4:10 PM ET Zimbabwe Violence Up, S.Africa Plans for Refugees-- Southern African states have resisted Western pressure to read the riot act to Zimbabwe, taking their lead from South Africa's policy of ``quiet diplomacy.''
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****AFRICA WATCH****
I think robnoel has an idea, let's ask him.
...Today, 22 years after Mugabe took office as a conciliator, he has polarized his country with his struggle to stay in power. In the past decade, as he and his party have lost support over the declining economy and rampant corruption, Mugabe and his supporters have defended their positions increasingly through violence and intimidation, scholars and independent political analysts say. At 77, Mugabe is seeking a new six-year term as president in elections next month, and pre-election violence, a fixture of politics here for many years, is running higher than usual.
Human-rights groups say Mugabe's ruling party, the Zimbabwe African National Union,has launched a campaign of intimidation, beatings and murder against the opposition Movement for Democratic Change. Independent newspapers catalog daily attacks against the opposition, and they carry photographs of opposition members of parliament who have been abducted and beaten by gangs linked to the ruling party. [End Excerpt]
Yeah, that might put a damper on tourism.
That's true, it has nothing to do with "economic fundamentals", given that SA sits on more natural resource wealth than probably any other place than Saudi Arabia. One of my business partners and his family emigrated here from SA, and recently went back to visit family (December 2001). Random acts of black-on-white violence are increasing constantly. The country is probably about will soon be as unsafe for whites as Somalia. ANYONE with a white skin who stays in South Africa is an idiot.
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Well, in South Africa, the problem IS racism---but the racism is "black-on-white" violence.
The food is cheap, but it's the $200/day bodyguard fee that you have to pay while you vacation, safely, that adds up.
I love it. This clown is in charge of a country and has no idea why the currency has lost 80% of its value in 12 years. Could if have anything to do with rampant crime, poor productivity, a terrible business climate, or the fact that people and money are pouring out of his country like crazy.
I am sure that this commission will come up with the 'correct' policies to deal with this problem. Higher taxes and exchange controls are right around the corner. Then, just expropriate all the wealth that is left, if there is any.
"White" southern Africa used to be the bright light on the dark continent. That light will be out in a few years and sub sahara Africa will desend into a cycle of poverty, disease, famine, and barbarity that this world has never seen.
But black on white or black on "not-black-enough" racism doesn't get much visibility. The LIBERAL media doesn't find it newsworthy.
Bump!
It's getting there fast. I wonder what Whoopie G. and the rest of her Hollywood crowd think of their fine anti-Apartheid campaign.
"Of course that is just my opinion and I could be wrong." - Dennis Miler
No commission needed ... Stop printing currency - the rand is supposed to backed by gold.
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