How can you thrive in South Africa’s enclave future?

This article was first published by The Common Sense.Key topics:Enclaves seen as SA’s shield against political declineSix strategies to survive a possible EFF-MK futureWealth, mobility and skills key to long-term resilience.From the Editorial Board of The Common Sense.The Common Sense has written at length about an enclave future for South Africa’s middle classes. The argument is that, unlike in many post-colonial emerging markets before it, as the South African state fails in its responsibilities, private actors come to take these over at scale. The argument is that this will continue to an infinite degree. Hence, if the state is somewhat weak, the private enclaves will become somewhat strong. If the state is extremely weak, the enclaves will become extremely strong, to the point of offering the middle classes a good future even amid high levels of macroeconomic and political turmoil.The newspaper has also argued that enclaves are a very good thing for South Africa. They will ensure that much of the country’s skills, capital, entrepreneurship, and employment base remains in the country relative to what might otherwise have been the case. Instead of being dragged down by every failure of the state, they create nodes in which pools of capital and skills may thrive even through periods of economic and political instability. As a consequence the country will have a unique degree of resilience to get through a tough patch and rebuild in the aftermath without having to repatriate a diaspora.The networked collective of those nodes may be so strong that they represent an entire emerging market, and one of the most exciting in the world at that..Read more:.South Africa’s fiscal shield stands firm amid global turmoil.These aren't just stockades amid seas of anarchy. They’ll be some really good places offering a great life and much prosperity and success and fulfilment – especially in how those nodes may in time come to fix broader society.Given the current uncertainty around President Cyril Ramaphosa’s future and the prospect that Paul Mashatile may succeed him and bring the Economic Freedom Fighters (EFF) and uMkhonto weSizwe (MK) into the government, there have been a few queries about what families should do to hedge themselves in favour of a successful enclave future. A detailed answer depends on the circumstances of each family or business, but there are six broad themes that serve as check-boxes of sorts to ensure that a person, family, or business is appropriately hedged.First, people who are likely to thrive in an enclave in the future will be very well informed about South Africa and the world. They will be able to cut through the BS, avoid B-grade analysis, and make informed choices. They’re not overly surprised to learn that not only one South African president ended his term on the run from corruption charges. They think for themselves. And when they do that they realise that the answers to their problems are not going to come from the central South African state, that neither the Democratic Alliance nor the African National Congress has the relevant nous to whip the country into shape in short order, and that, as a consequence, the old union is going to come under pressure. But they also realise that in a world of modern communications, artificial intelligence, solar power, crypto, and the like, the strength or weakness of the state matters a lot less than it might have 20, 30, or 40 years ago, and that in many respects that may even have upsides.Second, they will work for themselves or for small, dynamic companies built more on intellectual capital than fixed capital. These businesses will not be dependent on state work, cannot be brought down by one regulatory swoop, will be easy to relocate, and will be able to serve clients around the world..Read more:.South Africa bets on state property to build future wealth fund.Third, they will be financially hedged across asset classes and currencies. South Africa is only 0.5% of global GDP and is a low-growth economy. Even if it were a high-growth economy, it would be crazy to concentrate your wealth in such a small pond. Well-hedged people ensure that their money and assets are not overly exposed to South African consequences. Put simply, if the South African rand crashes, it must not drag you down with it (better if that lifts your net worth).Fourth, they will be hedged on the question of their children. It takes a lot of strain off parents to know that children have the chance to work, study, or earn an income anywhere in the world, so that if they remain in South Africa, it is by choice.Fifth, they will be geographically hedged. They cannot be pinned down to one location, either inside South Africa or globally. If they need to move, they must be able to move. Peter Godwin, in his brilliant book on the end of colonial rule in Zimbabwe, makes the point that Africa’s middle classes are like birds in a field – a boy can throw a stone at them, but they will take off and land in another corner of the field.Sixth, within South Africa, they will commit to communities that are chiefly independent from the state for services. If the state fails, they cannot allow that failure to drag them with it..Read more:.Steenhuisen: Strong leadership and smart voter choices can turn South Africa around.A good place to start assessing whether your country's strategy is robust is to test yourself against those check-boxes. If you check only one or two, the degree of risk you are running should MK and the EFF take over is high. If you tick five or six, then whether the EFF or MK takes over matters a whole lot less – and perhaps even not at all..This article was first published by The Common Sense and is republished with permission..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox every morning on weekdays. Register here.Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. 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How can you thrive in South Africa’s enclave future?

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