With South Africa’s poor economy showing slight improvement and a major credit decision looming, the new government of President Cyril Ramaphosa would be expected to chart a careful and conservative approach. However, its new leaders are turning to two measures that have historically triggered utter disaster for African nations: land expropriation without compensation and the even more dangerous plan to simply print more money and give it to the poor. I have long admitted to have a Chicago School bias from my undergraduate days, but this does not seem promising for this struggling country.
The new South African former finance minister Nhlanhla Nene reportedly is planning to reduce the number of poor people in his country: print new money and simply give it to them. The former finance minister to President Jacob Zuma offered his simplistic plan in the simplest of terms: “South Africans continuing to be poor when we can print more money to ensure that everybody has it. Our people are poor because there is a shortage of money in the country.”
[This quote has appeared in a couple of South African news sites but I have not been able to find it or further explanations in other media. I am still trying to confirm the details]
It is certainly true that being poor often means being without money. However, printing more money can trigger the scourge of the Third World–runaway inflation. That relationship was vividly shown in Venezuela, which is an oil-rich country run into the ground by the moronic socialist governments of Chavez and Maduro. Inflation is now over 4,000 percent.
Like printing money, land seizure is always popular at first. However, the “land reforms” of Zimbabwe under President Robert Mugabe led to utter disaster and starvation for his country, which remains a disaster to this day. Nevertheless, Ramaphosa is pledging expropriation of land without compensation. The move has set off a panic among lenders and banks. Investors are now less likely to invest in a country that will be following the course of Zimbabwe and undermining the security of land holdings. Moreover, South African banks are heavily invested in agriculture so Ramaphosa may have brilliantly found a way to not only chase away investors, decrease investment in agriculture, but also undermine the viability of his own banking system. That is a trifecta that is not easy to do without really trying.
An economic policy based on printing free money for the poor and seizing land is nothing new to Africa. They are sirens of disaster that call to every government seeking easy solutions to difficult economic problems.