SA economy stands to lose from xenophobic violence

From Mthulisi Sibanda in Johannesburg

The perpetrators of the recent round of
deadly xenophobic attacks may have shot themselves in the foot owing to
the implications this kind of hostility could have on a South African
economy that is experiencing its worst challenges in years.

These consequences could be largely felt in Nigeria, Africa’s biggest
economy, where enraged citizens are demanding their government to take
drastic action against South African companies operating in the West
African country.

However, Nigeria’s economy could also suffer immensely if the two rival
countries impose sanctions against each other.

“Both countries know the implications of invoking economic sanctions on
each other,” argued analyst, Olalekan Waheed Adigun.

Adigun pointed out even though there were many South African businesses
in Nigeria, most of their workforce are Nigerians.

“Apart from that, if Nigeria decides to nationalise these investments
and South Africa does the same, both sides will lose heavily,” he
warned.

His sentiments come after weeks of tensions between Africa’s two
superpowers and economic giants following a spate of recent xenophobic
violence in South Africa that claimed 12 lives.

Some South African companies in Nigeria suffered retaliatory attacks.

Nigeria, which has about 20 000 of its nationals living in South Africa,
has arguably been the country's most outspoken about the attacks, which
re-ignited a diplomatic standoff.

The government of President Muhammadu Buhari boycotted the World
Economic Forum (WEF) on Africa held in South Africa last month.

Vice President Yemi Osinbajo had been scheduled to attend on September
5.

“The Buhari administration’s decision to boycott WEF in Cape Town may
have gone unnoticed by many Nigerians because not too many of them see
it as directly connected to them (measures against South Africa),”
Adigun said.

Nomalungelo Gina, the South African Deputy Minister of Trade and
Industry, urged local communities and business owners to recognise how
attacks targeted at small business operators from other countries would
hinder efforts of growing the struggling South African economy.

“We depend on exports and imports with other countries to grow our
economy.  We will not succeed if we fight people from the rest of the
continent. Violence has a knock-on effect on brand South Africa and will
limit our economic opportunities in the long run,” she said.

Gina was speaking at the annual Small and Medium and Micro-Sized
Enterprises (SMME) seminar and exhibition in the town of Richards Bay in
KwaZulu-Natal Province.

Gina warned that it was critical to note that the recurrent violence
would curtail trade and economic opportunities for South Africa with the
continent and the world.

Most of the attacks in South Africa have been against foreign-owned
SMMEs, mainly black people.

This is despite the sector playing a prominent role in employment
creation in a country that is battling high levels of joblessness and
subdued growth.

It is estimated that small businesses contribute 30 percent to South
Africa’s gross domestic product (GDP).

SMMEs in the country also absorb more than 70 percent of the employed
population.

“As a nation contending with high levels of unemployment, the growth of
the SMME sector is a critical vehicle to job creation,” Gina said.

She noted many countries in Europe had succeeded in creating and
maintaining jobs, growing their economies and social stability through
nurturing SMMEs.

“It can only be through synergies within small businesses and
sub-contracting opportunities with big corporates that growth can be
achieved,” Gina said.

- CAJ News

 

 

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