Reality vs. Socialism

Since the ANC got into power in South Africa two decades ago, the majority of the population is, legally speaking, no longer held back as second-class citizens. There were many of us who wished South Africa well on that symbolic day when Nelson Mandela took office as the country’s first black president.

Since then, the ANC has failed miserably. From practically every measurable economic angle, South Africa is in worse shape today than it was under Apartheid. This is terrible for many reasons, one being that nobody should have any reason to wish for a return to the days of oppression just because they had bread and peace back then. But instead of creating a truly free South Africa where everyone could pursue prosperity on the free markets of Capitalism, the ANC has built one of the most corrupt welfare states in the world. For my analysis of the ANC failure, see these three articles:

South Africa’s Stubborn Socialists

Socialism Fails at Socialism

ANC: Man Up or Destroy South Africa?

Perhaps it was naive to believe that the ANC would ever do anything different than what they have done. After all, their leaders during Apartheid were trained, funded and schooled by radical Swedish socialists like Olof Palme, Pierre Schori and Sten Andersson. (There have been unsubstantiated speculations that the 1986 assassination of Prime Minister Palme was the work of Operation Longreach, a project by South African military intelligence, and that the motive was his unrelenting support for the ANC.) But if it is naive to believe that even a fervent socialist some day will see the light and become a friend of freedom, then maybe it is not that bad after all to be a bit naive.

In fact, reality offers socialists ample opportunities to learn. The latest example from South Africa is the botched plans to attract new car manufacturing investments to the country. Business Day reports:

Strikes and a turbulent labour situation may have cost South Africa the chance to manufacture the new Datsun. This was one of only four countries which the Japanese motor giant had identified as a market in which to relaunch a brand that disappeared years ago.

This is a major failure by the South African government. To see why, let me walk you through a background story. Nissan bought Datsun more than three decades ago. Back in the ’70s Datsun cars were very popular in many Western markets for their combination of durability, affordability and performance. Since then Nissan has gone through some turbulent ups and downs, with the initially successful launch of premium brand Infiniti in North America, a launch that led to cars like the excellent Q45 and right-sized, well appointed QX4.

However, past the Millennium Recession Nissan were not very good stewards of their success. They turned Infiniti into some tech geek outfit and their cars began losing their soul. An exception: the third generation M45, a performance-luxury combination on par with its German competitors.

With Infiniti losing ground to primarily Lexus, BMW, AUDI and Mercedes, Nissan saw margins decline from its vast North American operations. The same happened in Australia and many other markets around the world. It needed a revival plan, but instead of focusing on reinventing its products Nissan threw itself into the arms of French crap-car maker Renault. The government-appointed bizocrats in charge of Renault have since transformed most Nissan-branded cars into weird modes of not entirely reliable transportation. A couple of notable exceptions, the hugely capable Xterra and the perennial Frontier, can’t fend off the impression that Nissan has lost its way completely. Infiniti has succumbed to accounting dictates and geeky electronic engineering, now building cars that are more transportation pods than automobiles. (A Kia is more attractive these days than an Infiniti. A Kia!)

This long background story is important, because it explains why Nissan is re-launching its Datsun brand. It wants to regain a foothold in the global auto market with vehicles that reflect its now distant past: cars that are simple, reliable, affordable and fun. The new Datsun brand is primarily aimed at non-Western markets where consumer purchasing power is not very strong but cars are increasingly a part of every family’s life.

South Africa is a good example of a market where Datsun can become strong. With Africa becoming the new growth continent it would make perfect sense to build Datsun cars in South Africa. All the more reason to mourn the stupidity of the South African government in botching the deal.

Business Day again:

Speaking to Business Times in Chennai, India, this week at the launch of the new Datsun GO model, Datsun’s global head, Vincent Cobee, said that labour uncertainty was one reason why Datsun would now produce the new version of the iconic brand in India and then export it to South Africa. Sources say Nissan representatives and suppliers held high-level talks with the Department of Trade and Industry in November. They expressed concern about the impact of the strikes on foreign investment, and emphasised that the subsidies intended to expand the vehicle market would not work if labour remained unreliable.

Unions in South Africa are closely tied to the ANC. This is the case in every country where socialist parties are strong – they have a political branch that goes after legislative power and a union branch that organizes labor, uses the member masses as a political tool and funds party operations by means of membership dues. This is the case all over Europe, especially in Sweden, the country whose socialist leaders mentored ANC politicians for decades, and it is certainly the case in South Africa, too.

This means that it is foolish to believe that the ANC has nothing to do with strikes and labor market unrest. South Africa’s economy has been doing poorly in recent years, with high inflation and high unemployment. On top of that the ANC has done its best to tax and regulate the productive sector of the economy to a point where it no longer provides a fully reliable tax base for all the entitlement programs that a socialist welfare state always offers.

As a result, political tensions have grown within the ANC conglomerate, and the ANC has lost a fair amount of credibility among its black voter base. To divert focus from the failed promises of the ANC’s political branch, its leadership has launched a campaign of labor unrest.

To an outside observer this may seem illogical, especially Americans who have only scant ideas of what socialist activism really looks like. However, it is perfectly logical to anyone who has seen close-up how Europe’s socialist political machines operate.

Unrest on the labor market is aimed at pinning the blame for low wages, high unemployment and high inflation on the evil capitalists who have the audacity to build businesses and create jobs for people. There is no doubt in my mind that the ANC has deliberately allowed labor-market unrest to proliferate for precisely this reason, in hopes that it will allow them to perpetuate their hold on political power.

Too bad, then, that the chickens decided to come home to roost. Business Day again:

This is yet further evidence of how the labour standoff is costing South Africa much-needed foreign investment. It comes while the world’s top three platinum producers are being battered by strikes costing nearly R200m a day, according to the Chamber of Mines. Last month, members of the Association of Mineworkers and Construction Union downed tools at Anglo American Platinum, Impala Platinum and Lonmin, demanding that pay be more than doubled. Nissan’s decision comes months after German manufacturer BMW scrapped plans to build an additional model in South Africa for worldwide export after a crippling strike that cost the industry an estimated R20bn.

How many times must a man look up before he can see they sky…

Although the Cosatu-affiliated Metal and Allied Workers Union announced on September 11 last year that it had obtained a three-year agreement of 10%, 8.5% and 8.5% increases, the deterrent effect on new vehicle investors meant it was something of a pyrrhic victory.

Of course it is a pyrrhic victory. You cannot have labor costs rise at those rates year in and year out unless that same labor force is upping productivity by matching numbers. That could happen in Japan or China; it could happen in Thailand or India, and it is happening here in the United States (where, for example, Hyundai has shown the way to excellent productivity in automotive manufacturing).

The way these wage contracts were forced upon the South African auto industry is eerily reminiscent of how the United Auto Workers here in America brought down the Big Three in the ’90s and 2000s. You would expect that socialists in South Africa had learned from that lesson.

But no…

Business Day again:

Nissan said in 2010 it planned to sell its new Datsun in Russia, India, Indonesia and South Africa, targeting people with new-found disposable income. ’’We know that every three years there are negotiations in South Africa in the motor industry,” said Cobee. ’’But it was the duration and strength of the strike that was cause for concern.” The timing of the strike, Cobee said diplomatically, was ‘’not ideal”. The company will still launch its new Datsun GO brand -a five-door entry-launch hatch -in South Africa during the fourth quarter this year, but the vehicles will probably be built at the Renault-Nissan plant in Chennai, India. It has hired 700 extra workers and created an extra shift to build the new cars.

Maybe they should call the car Sayonara in South Africa, especially since Nissan has found other countries to build its low-cost cars:

Cobee said that South Africa’s opportunity to compete against the big four car manufacturing countries — Mexico, China, India and Morocco — would disappear unless it fixed the problem. ’’In China, the car industry has the backing of the government. In India, the private sector funds it. But in South Africa it is not clear who is laying the foundation to make that country the desired choice in Africa to serve Africa,” he said. ’’This is a massive opportunity for South Africa. If it is missed, it will not come back.” Nissan already has plants elsewhere in Africa — Algeria, Morocco and Egypt, with a new one opening in Nigeria next month.

And, directly to the point:

While the local labour force becomes increasingly unreliable, these countries are fast-replacing South Africa as viable alternatives.

How many times must reality poke a socialist in the side before he wakes up?

One comment