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President Jacob Zuma and Russian President Vladimir Putin have developed what experts have seen as a cozy relationship in recent years. Apart from talk that Zuma has already promised Putin a nuclear deal that could potentially cripple the South African economy, Zuma and Putin also have similar ideological perspectives. Writing for the Financial Times earlier this month, Christopher Hartwell – who is the President of the Centre for Social and Economic Research in Warsaw, Poland – said that Putin was credited with a dissertation in 1997 which prescribed “harnessing the power of industry for the glory of the state”. Does this ring a bell? Of course, both Russia and South Africa, in previous years, could rely on their rich natural resources to boost their economies but the world has fast been shifting focus to exporting technologies and the information age. Subsequently, Zuma is embroiled in the wrong friendship as Shawn Hagedorn argues in this piece. – Gareth van Zyl
By Shawn Hagedorn*
Considering President Zuma’s partnering prospects from Russian President Putin’s perspective helps to explain SA’s complicated, and largely dysfunctional, economic and foreign policies.
Neither Putin nor Zuma should be underestimated in terms of political cunning. Yet both men have worldviews and economic notions which are irreconcilable with today’s key trends and success factors.
BRIC nations appeal to Zuma as many western nations are openly critical of cronyism. However, none of the BRIC nations are a good strategic partner candidate for SA, least of all Russia.
As innovations accelerate and technologies routinely defy borders, economic success requires ever greater international integration. Zuma and Putin’s patronage networks preclude the fervent commitment to competitiveness that such integration requires.
Putin has said the breakup of the Soviet Union was among the greatest geopolitical catastrophes of the 20th century. Imagine a British leader similarly bemoaning the downfall of the British empire.
Putin wants to re-establish an empire in opposition to the West. This is blatantly undoable economically. Nor is there a sane military path. China isn’t going to meaningfully re-align with Russia. The shrewdest move China has made in its two thousand year history was its break with Moscow.
Putin isn’t looking to gain favourable access to natural resources. Instead, Russia appears to be seeking influence through controlling much of SA’s electricity production and as a patronage co-paymaster. In a 21st century twisted salute to traditional colonial strategies, this project is to be funded through tapping National Treasury’s borrowing capacity.
SA’s ruling party sees the West as a source of investment capital. Asia’s amazing successes trace back to seeing westerners as customers. Japan led Asia by becoming an export superpower supported by profound geopolitical tailwinds.
In sharp contrast to the rest of the world, the US economy benefited from the Second World War. Its subsequent governments then responded to the Cold War by fostering growth through trade with its allies, particularly in Europe and Asia. Soon after its Putin-like leader, Mao, died, China pivoted decisively toward the West to access the purchasing power that China’s upliftment required.
Having a resource base is useful if it funds investments leading to exporting value-added goods and services. The US and China managed such transitions. Russia and SA are stuck as the global economy shifts decisively toward services and information-led growth.
Alternatives to extractions are gaining momentum. Last week the world’s most valuable company, Apple, vowed to use only recycled materials.
The price of oil and gas will vacillate but, as with coal today, technological advances will lead to the value of many such deposits becoming economically unharvestable. Economists use the term “stranded assets”.
Putin’s geopolitical manoeuvres are undermining Russia’s top economic objective: to develop export sectors beyond resource extraction. His annexation of Crimea was a hasty response to unanticipated events.
Seeking leverage to have sanctions removed, he sought to improve his international relevance by applying his expertise in exploiting divisions and weaknesses. Hence Russia’s sudden involvement in Syria.
Then, early this month, US President Trump’s turning decisively against Putin in Syria was broadly applauded internationally. Putin had been counting on dividends from relationships with Syria, Trump, and SA.
The long-term trajectory of Russia’s economy has taken a huge knock. As in SA, this reflects the declining importance of commodity endowments and an unwillingness to integrate adequately in the global economy through adding value to goods and services. Corruption, economic mismanagement, and alienating western powers are also proving very damaging to both countries.
Selling technological expertise is prudent for a country as over-reliant on resource exports as Russia. Yet selling nuclear plants is a weak form of diversification as technological advances and public opinion favour renewable forms of energy.
Within about three years, SA will almost certainly achieve the dubious milestone of a decade with flat per capita income growth. As its prospects for adequate long-term growth unravel, the case for SA investing in nuclear reactors becomes ever more suspect. To justify new nuclear plants strictly as replacements for aged facilities, is to aggressively deny a meaningful role for renewable energy.
When Putin and Zuma hatched their plans, SA’s public was far less aware of the dimensions and implications of Zuma’s patronage machine. Putin might believe that South Africans can be forced to relinquish constitutional protections and expectations of rising prosperity – and he might be right. But he no doubt was surprised when he learned just how destructive SA’s patronage system is.
SA’s economy is now seriously hobbled and at risk of being crippled for a generation or more. To quickly conclude a controversial mega commitment as SA’s financial wherewithal slides, risks harsh political repercussions.
SA’s 1994 regime change led to sanctions giving way to fanfare. Last year, SA joined anti western nations such as Cuba, North Korea, and Russia whose citizens are barred, by the US, from visiting friends on US military bases. This attracts little attention, unlike the recent challenge by the International Criminal Court regarding the Sudanese president’s SA visit. SA’s reputation is being sullied. The Zuma-Putin alignment isn’t helping.
The global economy is hurtling into the future with the benefits accruing firstly to those with the most advanced and updated skills. Less developed countries and less skilled workers need to progress through selling value-added goods and services to those with higher skills and incomes. There is no way around this. What Zuma and Putin offer each other is a mirror image. It reflects the twisted ways of thinking they share.
- Shawn Hagedorn is an independent strategy adviser.
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