Financial expert Dawie Roodt has explained the chain of events he believes will see South Africa follow the same path Zimbabwe has.
Roodt wrote in a column for the Huffington Post this week how South Africa’s economic woes will eventually lead to state looting of taxpayers, then savers, and eventually investors.
Where South Africa will get its money from
Given that there is a R50bn tax hole South Africa needs to fill, the state may already be moving onto those with money invested in the country (those with pensions are a particularly vulnerable target). The economist explained that SA looks likely to follow trends set by other states who have drained their reserves:
“In short, once the state’s finances reach a certain level of sustainability, a typical pattern is for a state to first steal from its taxpayers until it runs out of taxpayers, then to steal from its savers until it runs out of savers and then, depending on other things, the country repents and gets its house in order at an initial and very dear political and economic price.”
“But if it persists in its sinful ways, it enters a weak growth trajectory with continuous tax evasion, road blocks, political uncertainty and protest marches. Or, in a bad scenario, dictatorships, states of emergencies and so on. Or, in a very bad scenario, a total collapse of the state — à la Somalia and, probably soon, Zimbabwe.”
Dawie Roodt warns of ‘Zimbabwe style’ inflation
He’s already suspicious that South Africa isn’t legitimately repaying its debt. He worries that this country may begin to print more money in a bid to solve a cash crisis, leading to hyperinflation as seen across the border in 2007.
“The most popular way by far, however, for the state to get rid of its debt is to pretend to repay it.It works like this: the independence of the central bank is somehow compromised (sounds familiar?) and the central bank then allows inflation to accelerate, which reduces state debt in real terms.
An extreme version of this approach is also quite popular, where the central bank under control of the state starts printing money like there is no tomorrow; Germany after World War One, Zimbabwe 10 years ago, and Venezuela right now.”
Roodt has faced accusations of drumming up hysteria. But his comparisons between SA and other failed states seem somewhat corroborative. No doubt, Zimbabwe would’ve appreciated a warning like this a decade ago.
-The South African
This report does not necessarily reflect the opinion of SA news.