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South Africa Takes Stock as Strikes Fade

South African government officials gingerly express hope that the worst of the crisis is over as the national union of mineworkers announces a deal over wages and miners continue to go back to work.

The FT reports:

Pravin Gordhan, South Africa’s finance minister, predicted on Thursday that the crisis in the country’s mining sector was past its worst, but said months of wildcat strikes had contributed to R5bn ($575m) in losses at the Treasury and dented growth.

But note the link between the government and the mining industry; the estimated treasury loss from the strikes is enormous, about half of total value of production lost: R10.1 billion.

This illustrates South Africa’s situation very clearly. The government creams off a substantial chunk of mining profits, making it essentially a co-investor with the private firms who own the mines.

In theory, this money is then spent on programs and policies that help the rest of the country build a better more prosperous future.

In practice, cronyism and corruption ensure that much of that money ends up in the pockets of wealthy and well connected South Africans—the ANC leadership is as committed to feathering its own nest as the Communist Party leadership in China.

It isn’t just the big boys who benefit. Civil servants get comfy salaries and there are more slots for them thanks to the money that rolls in from the mines.

Even if the government were totally honest and competent, it would be hard to redistribute this money productively. Development economists are not a lot better than any other kind of economist at coming up with surefire policies, and even the most well intentioned programs to raise living standards and accelerate growth over the last sixty years fail at least as often as they succeed.

But the government in South Africa isn’t particularly honest or competent, and while it does better than, say, Nigeria at using natural resource wealth in some kind of nationally constructive way, it isn’t getting enough good results fast enough to keep the lid on popular unrest.

Over time, the performance of South Africa’s governing system seems to be slowly declining in many ways rather than getting better; cronyism is gaining on competence in the race to shape the effectiveness of the state.

Perhaps these strikes will be a wake up call that energizes South Africa’s elites to raise their game. We would like to think that will happen. But the resource curse is cunning and strong.

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