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The Bill Comes Due
South Africa Heading to Junk Status
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  • Dale Fayda

    “Some used the windfall wisely; some used the good times as a reason to postpone painful reforms and to indulge their political leaders’ tastes for populist rhetoric and corrupt practice.”

    I’m just curious – which ones used their windfalls wisely? Can anyone field this one for me and cite examples of it?

    • Ofer Imanuel

      Botswana – but they had decent government for a long time.

      • Dale Fayda

        Thanks. I’ve checked up on Botswana – not an irredeemable crap hole, like most Sub-Saharan countries, but over half of its economic activity is based on diamond mining, which is pretty much a recession-proof industry. The rest is copper, gold and nickel. Other industries are negligible, largely subsistence level for domestic consumption. Doesn’t hurt that their population is less than 2 million – makes that diamond money go a long away. Around a quarter of the population is HIV/AIDS positive, however – pretty mind-boggling for a small country with a few bucks to spend.

        • Ofer Imanuel

          Well, if you want to include countries with no meaningful commodities that made it, Singapore in the 60’s was a 3rd world country, and to some degree Israel in the 50’s.

    • JR

      Namibia is a bit of sub-Saharan success story. But I take your point….

      • Dale Fayda

        Namibia’s story appears to be similar to that of Botswana – small, centrally located population and an economy based primarily on mining of precious stones and minerals, like diamonds and gold, along with a sizable chunk of base metal mining. There are few agricultural exports and no volatile commodities like oil or natural gas to speak of.

        I guess if a country is lucky enough to have been blessed with highly localized specialty resources like gem stones and rare metals, they’re better able to weather worldwide economic downturns than countries dealing in “true commodities” like oil, gas, coal and foodstuffs.

        Many thanks for the heads-up.

    • Andrew Allison

      Not offhand, but the government of California behaves in exactly the same way.

      • f1b0nacc1

        This is a hugely important point. This isn’t a third world problem, this is a commodity-rich problem…

        • Andrew Allison

          It’s an irresponsible government problem. The “commodity” in the case of California is property tax, which represents almost one-third of revenue and fluctuates with property value. Unhappily, instead of using the good years to prepare for the bad ones, our legislature puts into place programs which assume there will be none. We do the same with water.

    • Pete

      That was my thought exactly — which commodity dependent country used its windfalls wisely?

      • CapitalHawk


      • CapitalHawk

        Unless you were referring only to developing countries. Because then the answer is, none of them.

  • Anthony

    Emerging markets (China, Brazil, South Africa, et al) are experiencing affect of 3-C bubble: credit, commodities, and construction. It’s a virtuous cycle turning into a vicious cycle. See Barron’s interview with Rupal Bhansali.

  • from the Sinai

    It’s a myth that being a commodities exporter is a curse, and salvation comes only from transitioning to manufacturing or, better yet, financial services. Two of the largest commodities exporters are the US and Canada. SA is suffering from plain ‘ol bad government, as are we.

  • Jacksonian_Libertarian

    Leftist Government always does this, as Margaret Thatcher said “Socialism is Great until you run out of other people’s money”.

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