Violent protests deal heavy blow to South African economy | Business and Economics News

The violent protests dealt a severe blow to South Africa’s efforts to rebuild the economy in the wake of the coronavirus pandemic and pose the strongest test yet to President Cyril Ramaphosa’s authority.

The looting and social unrest that followed the imprisonment of former president Jacob Zuma dented business confidence, disrupted major trade routes and saw businesses from banks and supermarkets to petty traders shutter their doors. The army was deployed to help police quell the unrest, which killed 10 people and arrested nearly 500.

“Concern about Zuma’s arrest is being used as an excuse for opportunistic looting,” said Busisiwe Mafusu, chief executive of Business Leadership South Africa, which represents many of the country’s largest companies. “The chaos on the ground puts another nail in the coffin of our faltering economy.”

Violence erupted in the eastern province of KwaZulu-Natal after Zuma was detained on July 7 to begin a 15-month sentence for contempt of court and quickly spread to the country’s commercial hub in Gauteng. The turmoil has highlighted divisions within the ruling African National Congress and the weak control of the party.

Members of Zuma’s family have endorsed the violence on social media as has his foundation, which has repeatedly denounced his conviction. Zuma sparked indignation by complaining that the charges against him were politically motivated, and undermined Ramaphosa and dismissed allegations of graft during his rule that his successor said cost the state more than 500 billion rand ($35 billion).

What is happening is discord. It is a direct attack on the power of the state. “It is fueled by very powerful people within the ANC who are on the verge of being sidelined,” said Marie de Haas, a violence researcher at the University of KwaZulu-Natal School of Law. They are “using the language of incitement to get people to loot businesses,” she said.

On July 10, trucks were torched in KwaZulu-Natal, shutting down the N3 motorway that connects sub-Saharan Africa’s largest port in Durban to the economic hub of Johannesburg. It is also the beginning of the trucking routes used to transport goods as far north as the Democratic Republic of the Congo.

On Monday, gunshots were heard and helicopters hovered in Chatsworth on the outskirts of Durban, calling on residents to set up barricades to prevent looting of their property.

More than 200 malls were looted by mid-afternoon on Monday and retailers lost an estimated 2 billion rand, according to Mavuso.

Ramaphosa called for calm in a televised address Monday night, his second in two days, and warned that the riots posed a serious threat to food security and disrupted efforts to vaccinate people against the virus that causes Covid-19.

“What we are witnessing now is opportunistic criminal acts, with groups of people instigating chaos only as a cover for looting and theft,” he said. “The poor and marginalized will bear the brunt of the destruction that is currently underway.”

Rand weakens

The rand fell 2% to 14.5058 per dollar on Monday, the most since Feb. 25.

“We are deeply concerned about the riots, violence and risks to people and property,” said Martin Kingston, vice president of the country’s largest business group, Business Unity South Africa. “Business confidence has been significantly undermined as a result of these developments.”

The riots were fueled by years of poor government service delivery, an unemployment rate that had jumped to a record 32.6%, and severe inequality that populist politicians had taken over.

“We are facing the consequences of 15 years of decline in state capacity, effectiveness and efficiency,” said Claude Pessac, president of Eunomix Business and Economics Ltd., which advises on political risks. “This is a social explosion.”

tough decisions

Ramaphosa had to make difficult decisions. To boost investor confidence and protect the economy, he needs to show a strong response as evidenced by his deployment to the military. But the crackdown may further fuel unrest, particularly among sympathizers of Zuma and his allies.

He may have already made a mistake.

Ramaphosa has twice said that some of these acts of violence are based on “ethnic mobilization.” Zuma played in the past on the fact that he belongs to the Zulu, the largest ethnic group in South Africa, and his supporters sometimes wore 100% Zuluboy T-shirts.

The ANC had a complex relationship with the Zulu people. Before the end of apartheid, supporters of the Inkatha Freedom Party, a Zulu nationalist party, fought bloody battles with ANC supporters in KwaZulu-Natal and Gauteng.

“I would be very careful in South Africa before you would describe those lines,” said Ralph Mathekga, a political analyst and author of books on South African politics, referring to Ramaphosa’s comments. “I would be very careful to legitimize some kind of racial divide.”

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