load shedding eskom rand

Photo: Pixabay

How will the Zimbabwe situation affect South Africa?

They’re a dictator down, with a government in waiting. What does it all mean for us?

load shedding eskom rand

Photo: Pixabay

Just across the border, revolution is in the air. Robert Mugabe’s 37-year reign has come to an abrupt halt, after firing a Vice President who just so happened to have the entire backing of the armed forces.

In a day of permanent, groundbreaking change, it’s become clear that the face of Zimbabwean politics has changed forever. A large majority of people, both local and across the world, will be glad to see the back of Bob. But what does it all mean for us?

How will the Zimbabwe ‘coup’ affect South Africa?

Economic migrants from Zimbabwe

South Africa is Zimbabwe’s biggest trading partner. So what is bad news for them, is also bad news for us. The first thing that we’d need to consider would be the impact of economic migrants.

This ‘non-coup’ is no guaranteed success. If Zimbabwe’s economic future was uncertain before, it’s totally in the dark now. Although many citizens are of the belief that ‘any regime is better than a Mugabe regime’, global markets don’t care for reputation.

The problem with any removal of a leader via military force is that it cannot escape what it really is. Despite the Zimbabwean army claiming otherwise, this has been a military coup to all intents and purposes. And what happens to countries who coup?

Their new governments struggle to find legitimacy. Both The African Union and 15-member strong Southern African Development Community are on record as saying they won’t recognise a party that gains power through a coup d’etat.

That lack of recognition makes trade, future growth and the economy extremely vulnerable. This will create more economic migrants, turning to South Africa for a better future. However, it’s not like we could be considered a viable option in this scenario.

What will Zimbabwe do to the rand?

Junk status, a recession, a R50bn tax hole and a government captured by external forces. 2017 has been a shit-show for South Africa. Any uncertainty across the border does have the potential to knock our economy, according to RMB’s currency Economist John Cairns.

“Remember that the great blowout of 2001 was at least partly because of — or at least blamed on — Zimbabwe”

“We have already heard stories of Zimbabweans rushing to take their money out of the country, and a full blown coup would lead to a further rush of refugees.

“On a longer-term basis, South Africa could benefit from an economic and political change in Zimbabwe, but for now the risks are probably that the troubles add mildly to rand pressure.”

South African banks are already withdrawing Zim staff

Nedbank workers in Harare have already begun sending staff back to Mzansi. South Africans employed in Zimbabwe now face doubtful future, whilst the nation tries to find its feet. Despite what may be a better outlook on Zim’s political future, money is already being drawn out of the country by investors, and undermining the financial reserves.

There’s Good news! There could be long-term gains for SA

However, it’s not necessarily a terrible thing. It may have an adverse short term effect, but some economists feel that a more democratic Zimbabwe paves the way for a stronger South Africa, too. According to economist Mike Schussler, it’s never a bad thing to have rich neighbours…

“Zimbabwe previously had the second-biggest economy in our region… At the end of the 1990s, research showed the country’s economy was slightly bigger than the economy of Durban; now it is a quarter of that size. When a country’s neighbours get richer, that country often will feel the impact of that.”

It all comes down to potential. Can the men who served so loyally under Robert Mugabe eradicate his mistakes? South Africa balances on a knife-edge, waiting for Zimbabwe’s next move. We wait to see the world react: Will their de facto government gain legitimacy? Will people find confidence in a Mugabeless state?

We’re going to have to take the rough with the smooth if we want to find out.