The targets of the violence are illegal immigrant laborers from neighboring African countries like; Zimbabwe, Mozambique, Malawi etc. There are around 5 million illegal immigrants in South Africa; of which an estimated 3 million come from Zimbabwe.
"They took our jobs, our houses and our women..." - thats what the perpetrators of the violence say
The reasons for the attacks according to the perpetrators of the xenophobic attacks:
- The immigrants caused a housing shortage by increasing the aggregate-demand for low-income housing (in an environment where there is constrained supply of low income housing), and, are fueling corruption in the allocation of recently built low income housing units.
- The immigrants bid unskilled-level occupational wages down; by flooding South Africa with the supply of low-skilled labor (in an environment where demand of low-skilled labor is growing slowly) a.k.a : 'They took our jobs'.
- The immigrants contributed to the increased incidences of negative social vices e.g. prostitution, rape and highly organized crime.
I foretold all these events in January and people are wondering how I knew: I kept my eyes open and the warning signs were too bold. The time line I predicted was accurate, however I underestimated the scale of the events...
"If the South African economy were a listed company with publicly traded stock, I would be short-selling it..." - thats what I say
The current wave of xenophobic attacks will definitely affect the South African economy negatively.
The extent of the adverse economic effects is largely dependent on:
- How rapidly the attacks spread & how long they continue to persist
- How well the South African government manages to contain the attacks + how well the South African government addresses the underlying causes of the attacks.
Generally speaking, the following negative economic effects might be observed:
- Decreased productivity: especially in mining and construction industries in South Africa; as they heavily rely on low-cost immigrant labor (that would have been displaced by the attacks). Supply-side disruptions (of South African construction labor markets), may impede progress thats being made on 'World Cup 2010' related construction projects. Supply-side disruptions (of South African construction labor markets), may also limit the South African government's ability to address the low-income housing shortage i.e there will be a construction worker labor shortage that negatively impacts progress on low-income housing development projects: This may fuel more social unrest i.e. more xenophobic attacks (as the low-income housing shortage catalyzed the initial wave of xenophobic attacks).
- Increased foreign investment outflows and decreased foreign investment inflows; as foreign investors generally shy away from investing in (and or withdraw capital out of) regions that are perceived to be highly politically volatile i.e. where the political risk / risk of social unrest is high. Investor confidence in the South African economy will nose-dive (how rapidly? I don't know). This may impede economic growth and development in South Africa.
One man's crisis is another man's cash cow...
South Africa is one of the world's biggest gold producers and the world's largest platinum producer.
Widespread xenophobic attacks would; 1) Cut the supply of labor to South African mines, resulting in production delays and/or reduced production 2) Increase the per unit cost of production of gold and platinum group minerals, as a reduced supply of labor (where demand remains constant) would spark a rise in general mine-worker wages.
Otherwise stated: The price of gold may soar to new heights because of these disturbances. To investors in gold investment vehicles, this is means $$ !
