Venezuela – Stock Image
Venezuela – Stock Image
The South American country of Venezuela is facing a complete financial meltdown, with inflation expected to top 1 000 000% by year-end. Where did it all go wrong, and what does this have to do with South Africa?
The current crisis facing Venezuela cannot be understated. It’s regarded as the worst economic catastrophe ever recorded in Latin America, and can be compared to Zimbabwe’s Mugabe-era meltdown within the global context.
While Zimbabwe was plunged further down the rabbit hole of financial doom, it was never regarded as on the wealthiest nations in the world. This is what makes the Venezuelan saga so much worse: it used to be the richest country in South America.
In fact, according to an article published by 702 Talk Radio, Venezuela once rivalled Norway with regards to income per capita. Now, 10% of the total population has fled the country amidst a socioeconomic calamity, leaving those left behind short on jobs, food, water and healthcare.
How did it all go so wrong, and how does this serve as a warning to South Africa?
Hugo Chávez was elected president of Venezuela in 1998. The military man, who spearheaded an unsuccessful coup, won his presidential crown by leading a fierce populist campaign with a penchant for socialist propaganda.
Chávez promised nationalisation of major local industries and made good on his vows right up until his death in 2013.
First, Chávez nationalized Venezuela’s vast and lucrative oil fields – kicking global corporations out of the country.
Secondly, the leader extended his expropriation plans to sectors including aluminium, cement, gold, iron, steel, farming, transportation, electricity, food production, banking, paper and the media. In fact, according to ABC news, the number of private companies in industry has dropped from 14,000 in 1998 to well below 9,000 in 2018.
Thirdly, as a knock-on effect of a flailing economy, violent crime skyrocketed under Chávez’s rule, deterring any possible investment opportunities, and straining local resources.
Obviously, there are parallels between Chávez and other South African leaders. Land expropriation without compensation is a page straight out of Chávez’s populist handbook.
Lest we forget what Economic Freedom Fighters’ Commander and Chief had to say about the former Venezuelan head of state:
“The wealth of Venezuela, particularly oil, was returned to the ownership of the people as a whole… The standard of education and health in Venezuela has radically improved and stabilised with guaranteed access for all people of Venezuela to quality free education and healthcare.”
Malema, mourned deeply the day Chávez died, issuing a statement saying:
“I join millions of progressive individuals… in sending my heartfelt condolences to the people of Venezuela for losing a fearless, politically determined and ideologically steadfast leader in President Hugo Chavez.”
Nicolás Maduro Moros took over the presidential reins from his mentor, Chávez. The current president followed in Chávez’s footsteps, intensifying anti-elitist rhetoric as a means to remain popular.
Maduro has ruled by decree for the majority of his presidency – allowing him to change Constitutional laws swiftly and unopposed.
His tenure as president has coincided with a decline in Venezuela’s socioeconomic status, with crime, inflation, poverty and hunger increasing.
Maduro effectively aligned himself with the nation’s highest courts and military structures, which have managed to secure his position of power, despite public movements calling for his recall.
Still, Maduro clings to power as the national crumbles around him. Sanctions placed on the nation’s leader, who has been described as a textbook dictator, have further intensified his anti-capitalist and anti-American agenda.
South Africa and Venezuela are intimately connected. A South African diplomat to the South American country even offered military assistance in the fight against capitalist Americans.
IOL recently reported on international relations between the two countries, during Venezuela’s Foreign Minister, Jorge Arreaza’s, visit to the country.
His South African counterpart, Lindiwe Sisulu, issued a statement regarding relations saying:
“South Africa and Venezuela have solid and cordial relations based on mutual respect.
The visit of Minister Arreaza has therefore renewed our bond of friendship and cooperation and in this regard, I received from Minister Arreaza, a briefing on the developments in Venezuela on wide ranging matters, including the elections held recently as well as the regional socio-political dynamics.”
Local politicians have praised Venezuela for its progressive and firm approach to industrial reform, hailing the nation’s socialist policies as a blueprint for radical economic transformation.
As reported by the Rand Daily Mail in 2017, the term ‘white monopoly capital’, introduced by former president Jacob Zuma, has set a dangerous precedent of public deflection. Just like Chávez’s anti-capitalist rhetoric, it has been used to further a personal political agenda.
While President Cyril Ramaphosa is regarded as a consummate business, keen on attracting foreign investment in South Africa, both his allies and detractors have shown their disregard for global markets.
Chávez, just like Mugabe, made this same mistake. Both despots laughed in the face of global sanctions and declining foreign investor confidence. Their short-sightedness would cripple their respective nations.
As the ANC makes further moves towards large-scale nationalisation of land and industries, one has to wonder whether they’ve taken note of Venezuela’s peril.
What’s especially worrying is the probable coalition between South Africa’s ruling party and the EFF, especially on the issue of expropriation of land without compensation.
South Africa should heed the warning demonstrated by Venezuela’s socioeconomic nightmare – the populist path of nationalisation is fraught with financial landmines, and should be navigated with the utmost care and foresight, lest it blows off the limbs of an uneasy nation.