South African Reserve Bank Governor Lesetja Kganyago recently warned that a dangerous wave of populism was sweeping the globe, and how it could affect South Africa.
As covered by Fin24, Kganyago stated that as a result, countries like Zimbabwe, Peru, and Venezuela were paying the price – which is economic collapse and dire circumstances for citizens.
Zimbabwe, for example, is facing its worst economic crisis in a decade, with prices soaring, limits on bread purchases, and long queues for fuel.
“We cannot just say the populist path will end in disaster. It will. But we still have to point out another path. You cannot just be against populism – you need to be for something too. We need to talk about how we are going to get back to real and sustainable growth in South Africa,” said Kganyago.
He added that South Africa’s social challenges meant “leaders needed to be extra careful” about what they said and did.
This warning was seemingly aimed at leaders like the EFF’s Julius Malema, who has praised Venezuela as a model South Africa could emulate.
In 2010, Malema led a youth delegation to the country to study its economic model.
Malema, both as an ANC and EFF member, has also stated that Venezuela is a successful example of nationalisation – and South Africa could learn lessons from it.
South Africa’s government also maintains diplomatic relations with Venezuela, despite the country being under a heavy blockade by the United States.
What Venezuela is really like
Venezuela’s economic problems are a result of its current socialist government, which came into power in 1999 and has ruled since.
Since then the country’s government has nationalised several industries – a prospect which has been discussed by South African politicians at length.
The nationalisation has seen the country’s oil industry – which generates 95% of the government’s revenue – cement industry, steel mills, rice processing industry, and supermarkets taken over by the government.
This has not worked out at all for Venezuela, and people are either leaving the country or living in desperate conditions.
According to the BBC, 2.3 million people have left the country since 2014 and it is suffering a massive brain drain.
Many have gone to the US, Columbia, and Spain.
Inflation is set to reach 1,000,000% by the end of 2018, and day-to-day life is affected as a result. The inflation rate as of July 2018 was 83,000%.
The result – prices of items have been doubling every 26 days on average and more people being unable to afford basic goods.
Those who can afford goods also no longer pay cash for small purchases like a cup of coffee, instead opting for electronic transfers as the amounts are in the hundreds of thousands.
Affording foreign purchase is also difficult, and 1 US dollar is equal to 248,000 Venezuelan Bolivars.
This is not working
In August, Forbes reported that Venezuelan President Nicolas Maduro stated that “socialism” and “closed-door economies” were not working, adding that “the production models we’ve tried so far have failed”.
Forbes described Venezuela’s economy as a disaster.
The admittance to failure is not much comfort for those in the country, however.
Bloomberg reported this week that suicides are rising rapidly in a “hopeless Venezuela”
“The desperate act is becoming ordinary in a population plagued by hyperinflation, hunger, and mass emigration,” said Bloomberg.
The video below from the BBC, posted earlier in 2018, shows how Venezuelans live and are forced to beg to survive.
The dire situation in Venezuela has also caused political instability, and in August an assassination attempt was made on Maduro’s life.
Drones were reportedly packed with explosive and aimed at the President, who managed to escape unharmed.
A video of the attack is below.