Observations of KZN

Being in KwaZulu-Natal is a reminder that the union of South Africa should not be taken for granted. The march of Zulu nationalism was arguably only interrupted by British colonial rule and the apartheid and ANC administrations thereafter. Both the latter were strong nationalist governments with broad footprints and initially strong economies. As the ANC loses its grip, and without anything strong and nationalist waiting in the wings, the union may fragment. Data backs that up.

Some time back the Social Research Foundation tested public support for secession. In KwaZulu-Natal almost half of people said going it alone was perhaps a good idea.

The Thinking of the Rich

Spending time on investment seminars with high-net-worth South Africans has been very interesting over the past fifteen to twenty years. Way back there was great confidence that South Africa would be just fine and that worrying about political and economic crises and their implications was unnecessary and pessimistic. Then after Mr Zuma took command there was great horror that the centre would not hold and much pessimism that South Africa would collapse into chaos and anarchy and that it might be time to flee.

Thereafter was brief a period of optimism that Mr Ramaphosa might turn it all around (although not sufficient to see the wealthy bring back their money) which quickly collapsed into disappointment and new waves of fear. However of late that seems to have changed.

As South Africa’s enclave trends have become clearer the middle classes seem to realise that there may be a great future in the country regardless of what the administration in Pretoria gets up to.

The Enclave Trend

The enclave trend refers to what has happened wherever the South African state retreats. Instead of chaos and anarchy private actors are stepping in to take over what the state might once have done. Nowhere is this more apparent than in policing. In 1994 there were around 370 people in the country for ever policeman. Today that number is around 450. Also in 1994 there were around 350 people in country for every private security officer. Today that number is near 100. The private security industry now deals with the crises in the heat of the moment with the police playing an increasingly administrative role filling out the paperwork in the aftermath.

If the state can surrender its monopoly on the use of force in society to the private sector there is little that it fails to do that it won’t surrender. The middle classes may be sensing the same.

China Wows

China hosted a vastly impressive global forum last week which we reported on in these pages. The Shanghai Co-operation Organization Plus summit in Tianjin in China was a case study of how to do global power projection and diplomacy. Utterly professional. President Xi spoke of a new global order. Both Putin and Modi attended. You couldn’t escape the impression that it was a powerful statement directed at Washington.

Travelling through South Africa’s airports ahead of the November G20 the banners and branding already look a bit tatty and neglected. With South Africa’s vast geo-strategic assets it is disappointing that its diplomats do tatty diplomacy.

Gqeberha

Port Elizabeth is a city of great potential. It is also looking a bit tatty and neglected but you get the sense that under a better administration it could quickly come right. Its real asset is its location on the Western Cape frontier. The Western Cape has seen a vast flow of skills and capital out of the north of the country and as a consequence its crowded and expensive – especially property. Port Elizabeth could rival the lifestyle of any Western Cape town or city.

Cape Town Wows

Cape Town’s suburbs and city centre look just amazing. City managers tell us there is no magic to that. Balance the books, hire the best people, work very hard, and don’t loot the coffers. That is all it takes.

Visiting investors always remark how the place blows them away. There is nothing like it. Many now look to have homes in the Western Cape or to spend holidays and Christmas there. If you are earning in forex its restaurants are cheap and property a bargain.

We think that regardless of what happens in the north of South Africa the Western Cape is set to be one of the great global emerging markets of the next 20 years. Secession is too hot an issue to be the vehicle. The approach should rather be just to rely less on Pretoria. A wandering albatross says the province may look to strike an alternative trade deal with the Americans. That would be a big step and a good one.