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No going back!

By Richard Cluver

When one considers the 6 000-year history of human civilisation, Capitalism – the idea that the economic system should reside in private ownership of the means of production – is comparatively new and, like Democracy, it has been constantly under threat from political groupings which demonstrably see it as a threat to their own power.

Yet no other system mankind has devised has come close to Capitalism’s ability to liberate the masses from the drudgery of poverty. When, operating hand in glove with modern Democratic ideals which are founded on the basis of equal opportunity for every citizen, it has been the basis of what became known as The Western Dream: that through thrift and hard work, everyone who desired it could become wealthy.

Perhaps even more importantly for society as a whole – because the pursuit of private wealth is demonstrably far from average – it has nevertheless inevitably generated employment for others which has in turn enriched entire communities! Accordingly, given the miserable failure of the ANC’s 31-year Socialist-led initiative to try and eliminate racial wealth disparity in South Africa Indeed; given that ANC-style redistributive socialism has actually dramatically worsened unemployment and social poverty, there is a compelling argument to allow capitalism a freer hand.

But what exactly is unrestrained Capitalism? Many think that the so-called ‘Father of modern Capitalism, Adam Smith, believed in giving markets free rein with no government intervention. Actually, only half of that statement is really true. While Smith did list ‘… the duties of the Sovereign as protecting society with military force, “establishing an exact administration of justice” to protect citizens from injustice, and finally the maintenance of public institutions and public works,’ he also detailed at length how the use of taxation should be employed, for example, towards government interventions aimed at offering equal education for all and the protection of business against foreign competition.

So, what Smith conceived is probably something very close to the systems which so enriched Western nations in the second half of the 20^th Century. That is, when Capitalism’s excesses are intelligently constrained by the Rule of Law and the best interests of society as a whole but otherwise allowed to function at optimum levels, i.e. when unconstrained by political interference, Capitalism has time and again shown itself to be probably the best means mankind has ever derived to achieve the ideal of a constantly improving life for everyone.

As such one would have assumed that Democratically-controlled Capitalism should be embraced as the foundation stone of every political party genuinely seeking a leadership role in the modern world. But sadly that is far from the truth. Totalitarianism – the idea that an elite few can better govern than the masses who through consensus and a communal search for collective prosperity have designed what we call democracy – has regularly sought to enslave humanity.

History has shown us time and again that when individual freedom is lost, private ownership of assets simultaneously goes out of the window with it. If you doubt that fact, just consider that the three largest groupings of refugees seeking entry into the West come from Afghanistan, Syria and the Sudan; repressive and war-torn regimes where citizens enjoy few individual rights…and their women even less!

Ask the refugees why they both abandoned everything but the shirts on their backs in order to daily risk their own lives in the hope of gaining entry into Western democracies? Few of them would, I wager, have a good word to say about Totalitarianism. Every one of those wretched souls whose bodies daily wash up on Mediterranean shores was, without doubt, clinging to the belief that Western Christian Democracy was their best hope for the future.

Despite this, there are alarming signs that Totalitarianism is making a strong come-back throughout the Western World where right-wing politicians have in recent months been steadily winning at the polls. Closer to home, in South Africa capitalism has frequently been proclaimed to be a Western concept which is at odds with traditional governance models. Black politicians in South Africa, and particularly in KZN where I live, have frequently harked back to the ways of their forebears with a marked sense of nostalgia.

Indeed, the landslide provincial victory of Jacob Zuma’s MK Party at the last election had its roots in exactly that way of thought.

Locally on TV, national polls indicated that the June 2023 premiering of Shaka iLembe was watched by 3.6-million viewers who clearly relished its portrayal of the absolute power – and notwithstanding the incredible brutality which Shaka embodied for his people at the time – they seemingly enjoyed the re-creation of an era when Zulu power trounced the British army; then the world’s greatest military power. Indeed, there has been a widespread view that men like Shaka embodied an enviable form of male virility which, through conquest, “was stolen from the modern generation!”  

The TV series actually achieved the highest-ever ratings for a Multichoice-produced drama series and, in September 2024, Shaka Ilembe became the most nominated drama series in SAFTA history, with 17 nominations.

Growing up in Natal among Zulus who embraced me as one of their own, and from my very earliest days schooled this white child in their language and customs, I knew a very different, gentle and caring people whose principle of Ubuntu defined so much of who they were….and mostly remain. So why would Zuma’s promise of a return to tribal law have appealed to so many in Natal and why the fascination with the Shaka period in Zulu history? Has it been misunderstood? Has it been cloaked in an undeserved romanticism?

Let’s start by recognising that Ubuntu is widely understood as an ancient Nguni word meaning ‘humanity to others’ which always reminds one of the centrality of their culture around the idea that ‘I am what I am because of who we all are’. So how then does one square that experience with the reality that the man Zulus now most honour in their history is popularly understood to have murdered 7 000 of his people in one frenzy of ritual slaughter following the death of his mother Nandi…indeed, why the veneration of a man who ritually-slaughtered his subjects as a breakfast cabaret? How can that rival the Xhosa folk hero Nelson Mandela who by his lifetime struggle against Apartheid became a world icon of human tolerance when he unreservedly forgave his torturers?

Is this a tribal rivalry issue and do modern folk, with real understanding, genuinely yearn for a return to the system of tribal rule with which Jacob Zuma regularly reminds us he would, if his MK party won control of South Africa, re-write our constitution in order to enthrone it as the central tenant of South African jurisprudence?

I for one doubt whether the average Zulu woman would be quite as enthusiastic as their men because it implies a willingness to return to, and submit, to a level of male-dominated servitude that most of the world – except in places like Afghanistan and Sudan – has long forgotten.

To understand what Zuma’s idea of Tribal Rule is all about, we need to start by recognising that the principal reason why, 200 years ago, White settlers were able to, unchallenged, establish a colony around the bay of Durban, and quickly extend their influence over the entire territory south of the Tugela River was because it was unclaimed land at that time.

Simply stated, Natal was at that time an empty wilderness…and Durban a yellow-fever and malaria-infested swamp which was simply of no interest to the regional ruler of the time: Shaka whose capital lay some 250 kilometres to the north.

History tells us that the few blacks encountered by Francis Farewell and his colleagues when they were setting up their trading base at The Point were, virtually to a man, refugees intent upon putting as much distance as they could between themselves and Shaka’s main stamping ground at KwaBulawayo, Shaka’s first capital on the banks of the Mhodi river in what is today the Babanango district. 

Their mass exodus was the product of what has become known to the Zulu people as the Mfecane, a word which does not translate well into English, but roughly implies “scattering, crushing, forced dispersal, and forced migration.”

The Mfecane is a widely debated topic, and original academic theories posit that it was a result of Zulu expansion in the time of Shaka, but that theory has been frequently challenged, and evidence suggests that this time of strife started at the end of the 18th century, that is long before Shaka became king. There was wholesale slaughter and genocide during this period as the region erupted into war, and initial theories put the death toll at between one and two million people.

Natal was thus, when the first settlers arrived, an effective cordon sanitaire between the Zulu Kingdom north of the Tugela River and Faku’s Mpondo Kingdom which was located in what is now the north-east section of the Eastern Cape south of the Umtamvuna River which forms the border between KwaZulu-Natal and Transkei. Indeed, half a century later when the then proprietor of The Natal Mercury, John Robinson, undertook an eight-month tour “…down the South Coast to the Mzimmkulu river,” he noted that despite settlers’ growing concern that they were being numerically swamped by the numbers of black refugees from Zululand fleeing the brutality of Shaka’s and subsequently Dingaan’s reign of terror “…the belt of coastline was almost uninhabited, a few colonists only being located at considerable distances apart….So sparse is the population that for two days whilst travelling through Alexandra County I failed to meet a single human being, white or black,”wrote Robinson.

Then Resident Magistrate of Alexandra County, James Giles, recorded that between 1870 and 1875 the settler population in the area of his responsibility had grown from 43 to 120 while in August 1873, that the “…African population had grown to 19,000.”

Verification of tribespeople population numbers in Natal as a whole can be deduced from “Poll Tax” statistics which, at 14 shillings per hut in 1876, yielded £60,000 a year. By implication there was a total of 85 714 huts, each containing a wife and her children.

Indeed, as a direct result of the exodus from Zululand, by the 1870s the numbers of Africans in Natal had so increased that the Hut Tax, introduced by Natal’s first Secretary for Native Affairs, Theophilus Shepstone, for the purpose of attending to the welfare of blacks who had been allocated land in what is today recognised as the Ngonyama Trust, was contributing 75 percent of all revenue in Natal.

Defending the tax while appearing before the 1881-1883 Cape Native Laws and Customs Commission, Shepstone argued that, ‘I think the Hut Tax is a good foundation for revenue: In Natal it produces £60,000 a year; it is besides a tax on polygamists because if a man has 20 wives he has 20 huts and pays a tax on each.’

In this context it is very important to note that Black polygamy, which was of course at the heart of the Zulu baby-farming economy, was considered by Natal’s staunchly protestant white settlers as a religious affront which would in time prove to be one of the pillars of complaint within the Anglican Church which ultimately led to Bishop John William Colenso’s ex-communication. Running counter to the core theology of Anglicans of the period, Colenso’s wrote in The Natal Mercury of 25 December 1856 that God was for everyone, “…. including the nonbelieving Zulu people, who are part of the British Empire.”

So out of step with contemporary views that he would ultimately be labeled a heretic because of his tolerance of the practice of polygamy, Colenso was to later explain that he took on this view, “… more out of practical considerations, hoping that there would be a gradual move away from such indigenous practices,” but at the same time “… hoping for my flock to continue their road to being Christianized rather than remaining as infidels!”

I do not want to digress too far from the central issue of what might constitute the ideal economic system for a future South Africa, but it is important to the context of our political evolution to recognise that the broad belief of settlers and the British administration in the late 1800s was that the Zulu people were indigenous rather than simply earlier immigrants themselves, that their religious beliefs were centred upon heathen ancestor worship rather than monotheism very similar to their own Judeo-Christian belief system, i.e. a single God identified as Nkulunkulu and, most importantly, an economic system which was undoubtedly Capitalist in character. Indeed, the Nguni peoples probably better understood Capitalism than the White settlers who were in the main refugees from Britain’s aristocratic domination and its imposition of the ‘Land Enclosure Acts’ which had, between 1604 and 1914 enclosed 6.8-million acres of commonage which had in turn forced millions of commoners into urban poverty.

But to return to Natal’s early history, the consequence was that as the new English colony grew, ever-greater numbers of Zulus who were fleeing Shaka’s reign of terror, accordingly sought the safety of living as tenants alongside White settlements. This wholesale immigration was such that it became the subject of significant disquiet among settlers who, though hungering for labour on their farms, felt threatened by the overwhelming numbers of blacks who had come to live in their midst.

As recorded by arguably Natal’s foremost historian in his magnum study Theophilus Shepstone and the Forging of Natal, author Jeff Guy noted that almost the single dominant theme of political debate at that time was how to persuade the Zulu people to take employment on settler farms. But few Zulus were interested because their economic system made them entirely self-sufficient.

Indeed, when pressed for an explanation of why so few were prepared to offer their labour in return for money, the vast majority would reply that they had no need for the white man’s money. Such was the Zulu economy and lifestyle that they had no need for servitude.

So how was this Zulu economy structured that it, in the view of white settlers, allowed for “black indolence and immorality?” Actually, one should restate that comment to insert the words, ‘Male Zulu,’ ahead of the label ‘Economy’ for in truth it was a system which indeed favoured male indolence and extreme female servitude to a degree which few modern women would likely be prepared to put up with. Crudely put, the traditional Zulu economy was based upon baby-farming and its currency was cattle.

A typical Zulu homestead, known to tribespeople as an umuzi or isibaya, would consist of a ring of traditional beehive huts housing the wives with, at its centre, a cattle kraal and the male patriarch’s hut. The cattle kraal was always located at the centre of the umuzi because the animals were the homestead’s ‘gold’ – its most valued asset, rivaled only by the husband himself who, living beside his cattle, enjoyed a lifestyle of considerable leisure while being waited upon by his many wives.

Notably, it was only when young warriors had acquitted themselves well in battle that they were considered mature enough to take the customary isicoco or head ring, establish their own homestead and start buying wives via the system of lobolo. They were by definition at least middle-aged when they were finally permitted to set up homesteads.

What, furthermore, is one to make of the traditional annual Reed Dance when girls aged 16 gathered from throughout Zululand to dance in the skimpiest of attire before the King and his assembled chiefs and indunas? Though it was clothed in ritual history, critics would surely argue that the annual event was nothing more than a cattle show of the nation’s young maidens. Why otherwise was it necessarily confined only to proven virgins?

Meanwhile, the Imbhata – those who had completed their service in Shaka’s regiments and taken on the head-ring – had only one remaining responsibility thereafter; to keep their ever-growing harem of ‘wives’ in a constant state of pregnancy because the more daughters they produced the more they could be sold for lobolo, the bride price which by custom was set at 11 cows for the daughter of a commoner and a hundred or more for the daughter of a chief.

Male children were, of course, the ultimate dividend because, upon their constantly-swelling numbers depended the Zulu people’s military dominance over much of the African sub-continent

Each wife would have her cultivated vegetable patch which she and her daughters industriously worked while the male children were responsible for the care of the cattle until they were old enough to win honour – and political alliances – by serving as warriors in King Shaka’s army. And their ultimate reward if they survived a decade or two in Shaka’s regiments: was to be waited on hand in foot for the rest of their lives; small wonder why some modern males might hanker for a return to such an era!

It was thus as I have said, an economy that was based on farming cattle and children! One, I imagine, few modern black women would wish to return to! Indeed, when Britain sought to formally codify its relationship with its black ‘immigrant’ population in Natal through the creation of a legal system which blended customary Zulu law with their own Roman Dutch system, one of the first reactions to the enactment of the resultant ‘Native Administration Law of 1875’ was an appeal by a delegation of regional chiefs and Indunas to protest because the new law allowed black women to leave their traditional homesteads and seek divorce from their husbands.

The new law thus struck at the very foundations of the Zulu economic system and ultimately led to its effective collapse, rendering the Zulu people in turn dependent upon the settler economy. So what is the current view of black women to this historic reality? Let’s start with the fact that South Africa’s fertility rate has steadily declined over recent years — from an average of 2,78 children per woman in 2008 to 2,21 in 2025. This downward trend is supported by information from health facilities, birth registrations, child grant access, and school enrolments — prompting a revision of fertility estimates to reflect what is seen in birth registration data in the District Health Information System (DHIS) and the recorded live births data (Stats SA, 2024; NDOH, 2025).

Part of this decline is explained by the ending of the hated Apartheid-era “Pass Laws” which thereafter allowed for a wholesale movement of Black people from rural areas into the cities where, along with the constraints of much smaller urban accommodation and the economic price of city life, birth-control facilities are readily available to women. But that is only part of the truth. The practical reality is that few urban blacks can afford the Lobolo price which is set traditionally at the equivalent of 11 cows which, at a current average value of + – R15 000 a beast, is an impossible constraint in an era when 33.6 adults are formally unemployed and youth unemployment has risen to 62,4%. Among those aged 25 to 34 – the contemporary marriageable age – the rate has recently increased to 40,4%.

As explained to me by one black woman who has lived with her partner for the past decade, “Though my family would love to receive Lobolo, we cannot even imagine where we would find such a huge sum.”

Asked about children she responded, “Too many of my sisters have been left pregnant by a man who has since been nowhere to be found…and too many of them have been left as the sole providers for three or more children all from different fathers who have all disappeared.

She said that, while it was true that some women took pride in how much their partners had paid for them because it, “Proves how much he values me,” such women were probably a tiny minority. And while she described herself as a Christian and well-understood that the Church strongly opposed couples ‘Living in Sin,’ she said that the majority of young Zulu women in her experience, saw simply no alternative.

Asked what she thought of the traditional system when women as young as 16 years of age were married off to middle-aged ‘indunas,’ she did what I imagine any young girl of every race and religion would do, shivered with horror. It was, I thought, the ultimate reason why, at least in a Democratic society, there will never be any going back to a traditional system….not while women have any say in the matter!

Finally, since mine is arguably derived from a very White-male-orientated view as an unabashed admirer of the Capitalist system, I asked a modern black couple for their perspective on the foregoing. I will lead the September issue with a full critique which suggests that I might be guilty of oversimplification. In brief, however, they offered the following:

“The fact that people “look back on their forebears with a marked sense of nostalgia” is something that could be attributed to people realising that capitalism doesn’t actually favour them. The effects of the Bantustans in the time of apartheid are still lingering in the lives of many South Africans today who, through capitalism, might aspire to rise above the rest and in the process uplift others, but in reality, are battling for survival.

As you correctly point out, the many social ills we see can be attributed to political interference, but I think when one struggles daily due to that impact between socio-political realities and governance, it makes sense to not only question the leaders, but to go as far as questioning the leadership and economic model itself. Remember the outrage of young people last year, in response to Ramaphosa’s Tintswalo analogy? The backlash was that the ideals of a capitalistic and democratic South Africa, were actually the Canaan our foremothers and fathers left the Egypt of Apartheid for.

The cultural shift in both politics and in what we see on our screens raises a yearning in the people for an alternative to what people currently have. I remember when I spoke to a woman named Sisi about who she thought she might vote for, she said Zuma. When I asked her why on earth she would do that, she told me that even though he might have been accused of ‘squandering our money’, local and municipal developments were visible to her.

She went on to further say, at least her children would also have an opportunity to go to school if he were in charge. So in her eyes, more people had access to resources that enabled them to be involved in trade and to improve their lives and their communities. This was enough for her to cast her vote to him.

As the people who leave with just their shirts on their backs towards a “Western dream”, South Africans like her would rather stick with people like Zuma who, to them, is someone they consider to have impacted their lives by ploughing back into their communities. Thus, to them, a Zuma who spent on himself and now comes back to them, is a Zuma who embodies “Ubuntu” as he did not just look to fatten his own pockets, but also put something in theirs as well. This is a sad reality of the psychological damage we live with as a direct result of poverty (among other things).

 As a woman, I think you have done a great deal to try and highlight some plights of black women but language itself shouldn’t be androcentric (I know what you mean by mankind, but it’s just one of those things that the scope of ‘pro-women’ writings must be intentional about). Black women, even in Shaka’s time, were not as subservient as some historians portray them to be. This in no way suggests the absence of patriarchal dominance in that society, but it just says there are other writers who read and relate our history differently.

The risk of just believing one view in the spectrum of patriarchal dominance in the Zulu society, is that either extreme cannot truly portray a full historic picture of the Zulu people. I find your portrayal leaning to one side, a side that in itself perpetuates the analogy that the historic Zulu woman was docile. Central to our engagement with history, as I am sure you know, is that we have to ask questions about whose history are we reading, and through whose interpretation are we reading how it is relayed to us? And what of the Zulu woman who has the fuller picture of how tribal economies worked? Would such a woman, living in today’s economy, see something worth grasping in the history of her foremothers?

I would never assert that the woman today is better economically-positioned than the Zulu woman of yesterday, but I wouldn’t with certainty claim the opposite as well. I also know in some of my own reading that black women (even in the yester years within the Zulu kingdom) did have ‘power’. For instance, the leadership of the spiritual life of a community was a role commonly occupied by women. Men would have to listen to these women and obey their instructions.

Women were often ‘King makers’ in the politics of power, playing a critical role in who ascends and descends thrones. Women also owned more than a patch of land for vegetation, they could actually have more depending on their history as a people. In my opinion, Shepstone still has a lot to account for in his role amongst native affairs when it came to issues like ‘lobola’. You seem to suggest that, again, the woman was just a voiceless, docile being in that society, one whose primary economic use was being ‘sold’ and ‘producing’ babies, while her male counterparts farms cattle and goes on to ‘acquire’ more women.

The above was put together in order to hopefully spark discussion at a time when South Africa is beginning a new Citizen’s Dialogue. I would love to hear from readers! Write to Richard@rcis.co.za

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How Iran Could Trigger a Global Economic Collapse

by Nick Giambruno

Warren Buffett once referred to derivatives as “financial weapons of mass destruction.” He wasn’t being dramatic — he was warning that if things went wrong, these complex financial instruments could cause massive, far-reaching damage to the global economy.

What Buffett feared most was how a sudden, unexpected market shock could set off a dangerous chain reaction through the financial system, fuelled by the hidden risks and tangled interconnections that derivatives create.

These instruments link major banks, hedge funds, and corporations in an intricate web of bets on the future prices of oil, interest rates, currencies, and more. For example, airlines and energy companies routinely use oil-linked derivatives to hedge or speculate. If oil prices were to surge unexpectedly, the counterparties on the losing end—often large financial institutions—would be on the hook for enormous payouts. That, in turn, would trigger margin calls, liquidity crunches, and potentially forced asset sales.

The fear spreads quickly. Because many of these derivative contracts are opaque, no one really knows who is exposed or by how much. That uncertainty can lead to panic in the markets as everyone starts pulling back at once. Losses like these rarely stay contained. A default in one part of the system spreads risk outward. If a major player can’t cover its exposure, it endangers its counterparties. If one of those is a major bank, the problem quickly becomes systemic.

This is precisely the kind of domino effect Buffett was describing—a market shock lighting fuses in unexpected places, turning financial interconnectivity into financial fragility.

Because derivatives are so interconnected and can involve huge sums of money, the damage can grow quickly and unpredictably, much like a series of explosions. That’s why Buffett saw them not just as risky tools, but as potential threats to the entire financial system. In other words, financial WMD.

So why bring this up now? Because the recent war between Israel, the US, and Iran is far from over. At some point, a far more serious confrontation between the US and Iran appears inevitable—and when it comes, it will almost certainly disrupt the flow of oil and gas from the Persian Gulf.

To call that a severe supply disruption would be an understatement. Consider this. The Strait of Hormuz is a narrow strip of water linking the Persian Gulf to the rest of the world. It’s the world’s single-most important energy corridor, and there’s no alternative route. Five of the world’s top 10 oil-producing countries: Saudi Arabia, Iran, Iraq, United Arab Emirates, and Kuwait border the Persian Gulf, as does Qatar, the world’s largest exporter of liquefied natural gas (LNG).

The Strait of Hormuz is their only sea route to the open ocean… and world markets. At its narrowest point, the space available for shipping lanes in the Strait of Hormuz is just 3.2 kilometres wide.

According to the US Energy Information Administration, around 20 million barrels of oil transit the Strait daily, accounting for roughly 20% of global oil production—worth about $1.4 billion per day at current prices. Another 20% of global LNG exports also move through the Strait.

It’s hard to overstate the importance of the Strait of Hormuz to the global economy. If someone were to disrupt the Strait, it would ignite a full-blown energy crisis, sending prices soaring and financial markets into chaos.

Thanks to its commanding geography and expertise in unconventional and asymmetric warfare, Iran can shut down the Strait, and there’s not much anyone can do about it. It’s Iran’s geopolitical trump card.

Analysts believe it could take weeks to reopen, if at all. Pentagon war games have shown that in a full-scale war, the US Navy would be unable to keep the Strait open. Faced with swarming missile attacks, American forces would either have to withdraw or risk total annihilation.

Worse still, Iran could target oil infrastructure across the Persian Gulf, destroying production facilities in Saudi Arabia, the United Arab Emirates, Qatar, Bahrain, and Kuwait. Even if the Strait reopened, there could be nothing left to export.

Military strategists have known this for decades, yet no viable strategy has ever emerged to neutralize Iran’s leverage. Tehran has made it clear: if a full-scale war breaks out it will close the Strait and destroy the Persian Gulf’s energy infrastructure. In short, Iran holds a knife to the throat of the global economy.

Since the 1979 Revolution, the US has sought to overthrow Iran’s government. But Iran’s control over the Strait has long served as a powerful deterrent to regime change. That deterrence, however, may be breaking down.

We are now in the midst of World War 3—and Iran has become the decisive battleground. The US and Israel may be willing to risk global economic collapse to topple the Iranian government, a move that would dramatically shift the global balance of power in their favour.

If a war with Iran shuts down the Strait of Hormuz, the impact would dwarf every oil crisis in modern history. During the first oil shock in 1973, about 5 million barrels were removed from the global oil market. At the time, daily global oil production was around 56 million barrels. That means roughly 9% of the world’s supply vanished. Oil prices roughly quadrupled.

In the second oil shock of 1979, about 4 million barrels disappeared from the market. Daily production was around 67 million barrels—so about 6% of global supply was lost. Oil prices nearly tripled.

Then, in 1990, during Saddam’s invasion of Kuwait, about 4.3 million barrels were removed. With global production at roughly 66 million barrels per day, that was a 7% supply loss. Oil prices more than doubled. Now compare that to a Strait of Hormuz shutdown, which could instantly remove 20 million barrels from a global market producing about 100 million barrels per day—a staggering 20% of supply gone overnight.

This would be the largest supply shock in history. By far. If war with Iran proceeds and Tehran closes the Strait of Hormuz, I think the effect on the price of oil will be at least as severe as it was during the 1973 oil shock, which saw oil prices go up 4x.

A similar move today could see oil prices above $275 a barrel. However, I consider that a conservative estimate because closing the Strait of Hormuz would cause a much larger supply shock than the 1973 OPEC oil embargo.

And unlike financial crises of the past, this one can’t be fixed with printed money. Central banks can inject liquidity, but they can’t manufacture oil. Physical supply shortages aren’t solvable by monetary policy. Even the combined efforts of the US and Russia to increase oil production couldn’t replace the missing 20 million barrels per day quickly enough to prevent market chaos.

This kind of price shock would hit derivatives markets like a sledgehammer, where oil and gas are heavily traded via futures, options, and swaps. Any firm on the wrong side of the trade would face steep losses, triggering margin calls, liquidity demands, and potential defaults. Big banks that serve as counterparties or intermediaries would be directly exposed to the fallout.

This could set off a cascade of defaults and margin calls that ripple through the global financial system—and make 2008 look tame by comparison. A closure of the Strait of Hormuz is a credible trigger for a catastrophic global economic depression.

Iran’s true nuclear option isn’t a warhead—it’s a financial WMD, setting off a chain reaction by shutting down the Strait and sending oil prices through the roof, detonating the derivatives bomb at the heart of the global financial system. The potential closure of the Strait of Hormuz isn’t just a geopolitical event—it’s a match hovering over a powder keg of global finance. As you’ve just read, the ripple effects through oil markets and the derivatives system could trigger a historic economic shock, far worse than anything we saw in 2008.

But the truth is, this isn’t an isolated risk. It’s just one part of a much larger and far more dangerous transformation already underway. A new kind of crisis is unfolding—one that combines monetary collapse, geopolitical conflict, and financial system fragility into a single, unstoppable force.

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What CEOs are saying about the alleged AI bubble

By Diane Brady

Are we in an AI bubble? And if so, how should CEOs be thinking about that? None other than Sam Altman is opining that investors are “overexcited about AI.” Yet, as my colleague Sharon Goldman points out, Altman also says he expects to invest trillions of dollars in building out data centres in the coming years.

A man who compares his latest product launch to the Death Star isn’t one who shies away from hyperbole. Altman has repeatedly said artificial general intelligence, the period at which an AI model performs as well or better than humans at most tasks, could soon be upon us. Competitor Dario Amodei of Anthropic agrees. For some, that’s a signal to Buy Buy Buy.

Bubbles can take different forms. The dot-com bubble enveloped hundreds of start-ups that had people bidding for groceries and buying dog food from a sock puppet, few of whom made profits. This time around, the wealth of the many is being funnelled to a few. More than a third of the S&P 500’s market cap comes from the “Magnificent Seven”—Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla.

That’s been true for some time and, unlike many dot-com disasters, these companies show real revenue growth. I hear more concerns about their market power, not market price. Meanwhile, companies like OpenAI and Anthropic are minting billionaires by the day without raising a penny in the public markets.

But Altman is onto something: Bursting bubbles are historically bad for business. Investors tend to be kind to players that are pumping up their portfolios. Attitudes change when markets crash. Disgruntled shareholders file securities class action suits, claiming they were deceived. Governments are pressured to step in to make sure the carnage never happens again. Heroes become villains and the spotlight shines brighter on issues that didn’t seem as urgent when times were good.

There’s also a nagging feeling growing among leaders I talk to that what’s great for the titans of tech might not be so great for the rest of us. In March, Altman embraced Anthropic’s “Model Context Protocol” as an open-source standard for connecting AI models to external data sources and tools. Google Deepmind CEO Demis Hassabis soon embraced it, too.

Steve Lucas, the CEO of enterprise software company Boomi, told me yesterday that he’s suspicious of MCP, arguing, “there’s nothing that would stop a model from saying, ‘Oh, you have a nice MCP interface. Let me ask you how you work and reverse-engineer many of the functions of the application.’” That could cement their dominance, helping LLMs become the user interface for almost everything.

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Inflationary Questions

By John Mauldin |

Recently I compared our jobs data, which is sometimes questionable, to World War II weather forecasts. Those were also questionable but necessary anyway. The generals needed them “for planning purposes.”

This analogy has a flaw, though. A forecast for future weather isn’t the same as data on past weather. The data—wind speed, barometric pressure, and so on—is the input that goes into the forecast. Assuming the instruments work, the data is what it is. It may or may not lead to an accurate forecast.

With economic data, the challenge is that our instruments are more error prone. The monthly jobs reports rely on employers responding to surveys correctly and quickly. The fact this doesn’t always happen causes revisions that call the whole process into question. That’s not because anyone is hiding anything. The process is understood and transparent. Just by their nature, surveys are error prone and even more so of late.

Notice the revisions below cycle through periods of mostly higher, then mostly lower. This is because the BLS’s methodology is backwards-looking and trend-following, which causes large revisions when the trend changes. The data responds more slowly at turns in the economic and employment cycle. By the way, notice that most of the revisions are undercounts. That is because the economy was growing most of the time since 2008.

Source: Unleash Prosperity

All that said, I think a big part of the problem is not with the data itself, but with how we all use it. Many, perhaps most people don’t look at economic data with open minds. They’ve already decided which economic narrative they believe; they want data to confirm it. If the data doesn’t cooperate, they think the problem is in the data, not in their narrative.

I’ve talked about this before. In behavioural economics it’s called “confirmation bias,” an incredibly powerful psychological force that can unconsciously twist our thinking unless we make a concerted effort to resist. And believe me, it takes effort. I am the chief sinner.

Confirmation bias is even stronger in today’s politically polarized atmosphere. It affects all sides. We assume data will be good when our side is in power and bad when it isn’t. If the data doesn’t reflect our view, we often discredit the data rather than asking whether we should change our view.

We should all want accurate data above all else. Then we can have productive debates about what to do next. We also have to accept that our data is never perfect; the economy is just too big and complex to summarize in a few charts.

Our data methodology has room for improvement. We can always do better. Unfortunately, the economy doesn’t stop while we rethink everything. Revising those methods is kind of like changing the oil while your car is moving. If you do it, you’d best do it carefully.

That being said, I am part of a chat group that has been vigorously debating how we should actually develop the BLS employment data. I have generally been on the side that the BLS is doing the best they can and the flaw is in the surveys. Another group said we should use AI and known data. Color me skeptical.

Then one person simply went to Chat GPT 5.0 and asked some very specific questions about what we can do to improve the BLS unemployment data. To my amazement, Chat GPT came back with a rather lengthy explanation of how we can use current databases of actual employment, government databases, etc. and an actual plan to create a new employment analysis system over the next five years. Very public and transparent.

It turns out there are a lot of databases on employment out there, and the AI suggested ways to combine them with unemployment data from the government to create a more real-time unemployment database. Given the problems with the current methodology, it’s certainly worth looking at. And by the way, it would be much less expensive.

I say all that as a preface to this week’s big data points, the CPI and PPI inflation reports. I’ve written many times about the many flaws in these reports. But we can accept those limitations and use them to inform our decisions.

Inflated Supercore

Markets celebrated the July CPI inflation data, but not because it improved. It didn’t. Stocks rose because inflation, at first glance, appeared to have stabilized enough to let the Fed address rising unemployment with a rate cut next month.

Unfortunately, looking deeper than the surface says inflation remains a serious concern. While headline inflation held steady at 2.7%, it had a lot of help from falling gasoline prices. Core inflation (ex-food and energy) rose 3.1% from a year ago. Worse, the so-called “Supercore” index, which also subtracts housing costs, was up 3.6%.

This chart highlights the monthly change by category.

The categories that rose more than average tend to be either labor-intensive or imported. Shelter costs don’t stand out in percentage terms but remain a problem because of their large weighting in the index.

Here’s the quandary in a nutshell: Service inflation, including but not limited to housing, isn’t improving. Now the goods categories that had been showing low or even negative inflation are beginning to tick higher.

Add those two together and it’s hard to make the case inflation is on the mend. Here’s David (Rosie) Rosenberg:

“On the low-flation side, we did get benign readings out of hotels/motels (-1.3% MoM, and riding a five-month losing streak), appliances (-0.9%), new autos (flat), video/audio equipment (flat), apparel (+0.1%), and toys (less than +0.2%).

“But there were too many items with outsized increases that make me a touch uncomfortable: air fares (+4.0%, ending a five-month string of declines and the biggest print since May 2022), home improvement (+1.6%), delivery services (+0.9%), furniture (+0.9%), medical care services (+0.8%—driven principally by a record increase in dental costs), recreation services (+0.4%), used cars (+0.5%—this was a surprise), sporting goods (+0.4%), and personal care goods and services (+0.4%).

“The rental metrics remained stubborn, at +0.3% MoM, as has been the case for the better part of the past year, though the broader-term trends are slowing down. But the overriding issue here is that there were more items in the CPI showing a pulse than playing dead. If the Fed decides to cut rates, it is not because of disinflation but because it has shifted its attention to the weakening labor market. All in all, however, I am less than impressed with this particular report.”

This week’s Producer Price Index report was on the high side, indicating that reducing inflation on the retail side may be an issue over the next few months. Expectations were for a rise of 0.2% but what we got was a rise of 0.9%. These reports do swing around a lot, but this is not what we want to see. This graph is from Mike (Mish) Shedlock:

Source: MishTalk

So, assuming recent patterns continue, the key question is whether goods price inflation will continue accelerating. To answer that question, we must discuss the elephant in the room.

Structural Breaks

Let’s take a long-term look at inflation. This chart shows headline CPI for calendar years 1985–2024—the last four decades.

In the 1990s and early 2000s, inflation stayed generally between 2% and 3%. The range shifted after the 2008 recession, falling mostly between 0% and 2%. That was the era when Fed officials worried inflation wasn’t high enough. They got their wish in 2022. But in the meantime, we all came to think sub-2% inflation was normal. Federal Reserve and mainstream economists talked about “structural shifts” that would keep inflation low, allowing for lower interest rates.

A prime reason inflation stayed so low for so long was our growing reliance on low-priced Chinese goods. This had benefits for Americans but also costs, which were unfortunately concentrated in certain regions and occupations. The resulting backlash is the reason President Trump is now using tariffs to discourage imports.

Let’s note something which should be obvious but deserves repeating. Rising goods inflation isn’t an unintended side effect of tariff policies. It is one of the goals. Higher prices for imported goods are supposed to incentivize more domestic production, create more manufacturing jobs, and make the US less reliant on imports.

That’s the theory, at least. Whether it will have those effects is another subject. But the higher-prices part is here, and it’s becoming evident in the inflation data.

Sidebar: The new Federal Reserve governor nominee, Stephen Miran, Trump’s current head of the Council of Economic Advisers, actually advocates for a weaker dollar that would create opportunities to manufacture more products in the US as foreign products begin to cost more. I would argue quite aggressively this is a bad idea, but the point is that there are advocates in this administration for these policies.

Rather than throw more numbers at you, I’ll share a chart that makes it clear. Each bar below shows annualized inflation by month since August 2024. They are divided by colour to show the contribution by category. Segments below the zero line were negative that month, adding a disinflationary influence. What jumps out at you?

Source: EconReporter

The biggest inflation factors are obviously shelter (purple) and core services (red). Food prices (blue) have been a smaller but steady contributor. Energy prices (yellow) helped pull inflation down in nine of these 12 months. So did core goods (green) until December.

Starting in April, core goods began running above zero instead of below it (see dotted circle), with an increasingly positive contribution each month.

Correlation isn’t always causation, but in this case it seems pretty obvious. In April the president announced his intent to aggressively discourage imports by imposing high tariffs. The rates are settling down to lower levels than Trump initially ordered, but still much higher than before.To be clear, most of this inflation was already in the mix before Trump took office. Shelter and core services are still the main sources. But the recent increase in inflation, and particularly goods inflation, looks tariff-driven.

For example, here are the one-month (not annualized) price increases the CPI shows for some import-heavy goods.

• Infant & toddler clothes  +3.3%
• Women’s dresses  +2.7%
• Tools, hardware & outdoor equipment  +1.6%
• Dishes & flatware  +2.0%
• Bedroom furniture  +1.5%
• Coffee  +2.3%

(I am very curious about how the public will react if coffee keeps rising at that rate. Most people don’t consider it optional. And, other than small amounts grown in Hawaii and Puerto Rico, the US has no way to produce coffee domestically. Or bananas, or many other goods.)

Note also, price increases aren’t limited to the goods that are being tariffed. The effect spills over as demand increases for US-made substitutes.

Other research supports this, too. Alberto Cavallo of the Billion Prices Project, an alternative inflation measure I’ve mentioned before, has a new paper showing how the US marked a broad-based inflation trend change this year. He found 75% of the non-shelter CPI categories recently had what he calls “positive structural breaks.”

Source: Alberto Cavallo

I could go on, but I think you get the point. A counterpoint is that the tariff effects will be a one-time increase that policymakers should “look through.” That’s a reasonable position but presumes tariff rates and related policies will reach some point of stability. I will “look through” more easily when we get the necessary and needed stability.

Ineffective Tools

The Fed is caught between inflation and unemployment. Which will it decide to fight? Wall Street thinks the latest reports show unemployment is a bigger problem, and the Fed will therefore cut rates at its next meeting, with more cuts likely to follow.

(Note the Fed faced a similar problem in the 1970s. Then-Chair Arthur Burns kept saying that price increases on this or that item or service were one time and we really needed to “look through” the data points. He was clearly wrong. I’m sure every FOMC voter knows the risks of repeating that mistake.)

Stock prices respond bullishly to falling rates for a purely mechanical accounting reason. Lower interest rates raise the net present value of future cash flows, which is the basis for stock valuations. The Fed can magically make equities more attractive even if nothing else changes. Of course that’s what bullish Wall Streeters want. Will they get it? The futures market says so. I’m not so sure.

For one thing, FOMC voters consider themselves data driven. Before their next scheduled vote on Sept. 17, they’ll get the second estimate for Q2 GDP on Aug. 28, a PCE inflation report (Aug. 29), the August jobs report (Sept 5), and a CPI report (Sept 11), plus a host of lower-profile releases. Any of those could change the outlook.

The fact that all this data and its compilers are suddenly under a new level of scrutiny might complicate the situation a bit, but I don’t think it will affect their votes. FOMC members will, like generals do with weather forecasts, consider the reports “for planning purposes” and apply whatever level of doubt they think appropriate.

New governor Stephen Miran’s presence at the meeting, assuming the Senate confirms him by then, will add another complication. He may dissent, either because they don’t cut rates or don’t cut them enough, but I don’t think he will change the outcome. It will be significant if we see three of the seven governors dissent. Two did last time and Miran may join them. I’m not sure that has ever happened before. Regional Fed presidents can dissent, but multiple governors dissenting is rare.

Marketwise, the biggest tantrum risk is if the committee doesn’t cut because a majority thinks inflation is still too high. As of now, it’s hard to argue inflation is near their goal. The Atlanta Fed maintains an Underlying Inflation Dashboard that shows various inflation measures relative to the Fed’s 2% target.

Source: Atlanta Fed

The red backgrounds are a colour code of how far each benchmark is from the target, with each adjusted to a level that would match 2% core PCE. Here’s the colour key.

Source: Atlanta Fed

All red means all nine inflation measures are more than 50 basis points above target. They can always change their target, of course, or just ignore it. This chart was all red a year ago, too, and it didn’t stop them from cutting rates. But we know some now regard that move as a mistake. It’s hard to imagine them doing it again.

There’s reason to think inflation could rise over the near term. The minor-but-visible tariff impact we see so far is happening even though companies are still absorbing most of the impact. A Goldman Sachs analysis found that as of June, US consumers were only bearing 22% of the price impact.

Source: Scott Lincicome

This suggests the tariff impact on core goods could rise from here if companies decide to pass along more of the tariff costs as price increases. (Of course, if they don’t pass them on that means lower profits, which is also a problem.)

Why haven’t businesses done this already? I suspect most are still in wait-and-see mode. Nobody wants to aggravate customers only to see the tariffs get negotiated away or stopped by court decisions. Better to absorb the costs as long as you can. And with a lot of inventory built up before higher rates took effect, they’ve been able to manage this. But they can’t do it indefinitely if they want to maintain profit margins.

I also suspect the recent lull in new hires is a result of lower profit margins. Remember, monthly swings of 100,000 jobs are still a very small percentage of the number of people employed. The employment number we all obsess about is actually quite small in the grand scheme of things and happens “on the margin.” And if a small percentage of businesses are not hiring because their profits are squeezed, it shows up “on the margin” in the employment numbers to which the Fed pays attention.

Remember, too, weak energy prices have been suppressing headline CPI and PCE. That could change at any time for all kinds of reasons. Remove that disinflationary factor and the situation could change faster than we would like.

The Fed could easily find itself in the worst of both worlds: rising inflation and rising unemployment at the same time. Then what? I really don’t know. What kind of job-producing activity that isn’t already happening will take place if rates drop a percentage point or two? Is that really enough to put employers in hiring mode? Similarly, what kind of demand will disappear if the Fed holds rates at the current level or a little higher?

We may be approaching a time when the Fed’s tools just aren’t suited for the problems we face. I criticize central bankers a lot. I’ve even fantasized about a world without them. In the next year or two, we may see what that world looks like. I am not sure that I will like it.

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Some accidents are worse than others

by Brian Kantor

The Road Accident Fund (RAF) has been much in the news, for the usual dispiriting reasons. The RAF is a very important, tax-funded spender. It manages great complexity with over R50-billion of revenue and expenditure a year: a formidable amount which the Treasury expects to increase at an annual average rate of 19% p.a. over the next three years, from R53.1 billion in 24-5 to 89.7 billion in 2027/28.

The RAF, as a social service, and its 50 plus billion bill can be compared favourably, or is it unfavourably, with other kinds of tax funded expenditure. The old age grant now runs at 117-bn, and the child support grant at R90.4b in a Social Development Budget of R422b. The RAF is estimated by the Treasury to have a negative asset value (liabilities over assets of R370b – rising to R423b by 27/28)

Can South Africa afford such largesse? Could not other spending make a better claim? Or lower taxes be a better idea and win more votes than the RAF?

Fall off your bike or the mountainside, get bitten by a shark or a snake, drown in the sea river or lake and society commiserates and hopes your damages are covered by some insurance. Society cannot hope to do much more for the victim given a lack of resources. But, get unlucky on the road, have a car push you off your bicycle, or the pavement, and SA society comes to the rescue- very expensively.

The payments by the RAF are funded by a levy on the price for petrol and diesel, set at R2.18 per litre of unleaded petrol. That is now about ten per cent of the price paid at the pump. A stealth tax paid for benefits the wider public surely does not recognise very well. How many drivers/taxpayers are aware of how much they are paying for the RAF when they fill up. And who, other than the successful claimants on the fund, are aware of the scale of the benefits provided? Bad luck is not expected. It sadly just happens. Compulsory third party insurance elsewhere is typically covered by private insurance companies and the premiums they raise from vehicle owners. As it was once long ago in South Africa until superseded by the RAF – mistakenly surely.

According to the report of the RAF for 2023-24, there were 79,377 new claims registered that financial year, and 63,015 claims settled. The average claim on the Fund had grown by 9.5% to R287,000. In that year, 159,122 such claims were made; a sharp decline from the 374,000 claims made in 2019.

Total outlays of the RAF were R45 600 million in 2023-04, of which payments made to compensate for incomes lost were R21.6b, or a chunky 47% of all pay-outs. The average claim for earnings lost was R1.2m, So-called general damages paid amounted to R12.7b or 28% of total payments made and the Fund, out of financial necessity, has succeeded recently in reducing the number of personal claims made and improving the rate at which claims are paid out. And in reducing legal fees incurred. The sums paid out have increased at a slower rate from R42b in 2019 to R45.6b in 2024.

Further slowing down the growth in pay-outs is essential. A first step would be to ensure that the loss of future income, inflation adjusted, was appropriately discounted by the high after realised inflation yields available from the RSA available to any beneficiary with a lump sum pay out. Somewhere close to a real and certain 5% p.a. for ten years.

On a claim for the allowed maximum R350,000 of annual income lost, for say an agreed ten years, to which an agreed inflation rate of say 5% p.a. were added each year, the pay-out, equal to the present value of the future agreed income losses would be R3.4m  when applying an 8% discount rate (5% inflation + 3% real) or close to R3m, R400,000 less when using a higher discount rate of 5 % p.a. above inflation.

Still much less would have to be paid out were the years of lost income more strictly limited, and the income inflation rate were assumed to be much lower. The accident victim could moreover be forced to buy a monthly annuity in exchange for the larger lump sums agreed. A regular source of income would be more socially desirable than a lump sum easily squandered. Insurance companies could compete for the lump sum provided by the RAF offering an annuity to be administered by them on behalf of the client. And collect the income tax due, as they do with any administered pension. A further way to reduce the net cost of the RAF.

The liability for the annuity offered would likely be matched by the insurer purchasing a government bond of similar duration. Hence helping to fund government debt, perhaps less expensively. Most important, vehicle owners could be encouraged to substitute private accident insurance for the RAF. It would need tax incentives to have them convert. The savings for the taxpayer of private third-party insurance could be immense. The RAF law would have to be amended to allow some of these changes essential for fiscal sustainability.

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Getting a grip on the informal sector

By JP Landman

The outgoing Capitec CEO, Gerrie Fourie, generated quite a debate on measuring the informal sector and unemployment in South Africa.

I paid a visit to Joe de Beer, Deputy Director-General responsible for economic statistics at Stats SA. He was very generous and helpful and clearly has his feet firmly on the ground. I also rely on several 30-year overviews of the SA economy by the Bureau of Economic Research at Stellenbosch and work done by Prof Johan Fourie at Stellenbosch. Any mistakes are mine.

The basics

The size of a country’s economy is determined through a system of accounts, standardised globally by the United Nations and known as the SNA or System of National Accounts. The first guidelines were published in 1953. The SNA has been regularly updated since then, with the most recent update in 2025.

The SNA measures the economy through a sequence of accounts. These allow, among others, the estimation of GDP in various ways, using production, income, and expenditure approaches. The accounts capture the money flow and give us a bird’s-eye view of the economy. We call that bird’s-eye view GDP or gross domestic product.

GDP is the total value added in the economy by all economic actors, whether they’re individuals, households, companies, mines, banks, the government … the whole lot. This is very important for a discussion on the informal economy because value added is a net number. It’s the combined value of all goods and services minus the cost of inputs to produce them. The deduction is very important; otherwise, we double count.

Let’s apply all this.

Follow the street vendor

An informal pavement seller sells tomatoes and sweets on the pavement. She sells them for R2 000 and that is her earnings for the day. She is not registered in any way whatsoever. Many now assume that her R2 000 earnings are not captured in the national statistics. Not so quick.

The pavement seller bought tomatoes and sweets from suppliers. It can be from the fresh produce market, or a branch of Boxer or Makro, a nearby corner vegetable shop, or perhaps a neighbour who grows tomatoes. Let’s assume her purchases came to R1 000, then her value added to GDP was R2 000 minus R1 000.

She also had other input costs. Let’s assume she spent R50 on transport to her trading-spot and another R50 to employ a youngster to help carry her stuff and look after the goods. Her value added to GDP is now R2 000 minus R1 000 minus 2 x R50 = R900. Very different from her R2 000 sales for the day.

Her input costs of R1 100 are captured elsewhere in the GDP process. They are captured in the retail sales where she bought her supplies, the petrol sales to the taxi she took and the wage she paid to the youngster helping her.

The bottom line: to just take the R2 000 turnover and allege it is not included in the formal GDP number is inaccurate. One must deduct her input costs. The same logic holds for the vetkoek-seller, a spaza shop, a shebeen, a hairdresser, a backyard mechanic, a physiotherapist, an estate agent, and a doctor working from home.

What about the R900 difference between the R2 000 sales and the R1 100 input costs? Is that recorded anywhere? She uses the R900 to buy personal groceries and clothes and to pay fees … basically, her living expenses. Her purchases are sales made by another party. In economic parlance, her purchases constitute demand, which the expenditure account captures. Likewise, the doctor or tennis coach who only takes cash will likely spend that cash at some point. Their production (cash earned) is converted into purchases (expenditure), which are recorded.

So, a large portion of the R2 000 is captured in GDP data, be it in the production or expenditure accounts.

Informal sector

The outline above suggests that most transactions will get picked up somewhere in the SNA. Most, but not every rand. The question is then: how much remains uncounted?

Stats SA assumes that about 8% of the economy is informal and not captured by official statistics. In Joe de Beer’s opinion, this may be too low. The number may be adjusted upwards when the next 5-year benchmarking and rebasing of the various sectors in the economy is done. IMF people are currently at Stats SA to help prepare for that change.

The 8% may not sound like much. But the economy measured R7.024 trillion in 2023 – 8% of this would be R561.9 billion. That’s more than the entire mining sector that year (R444 billion). Think about it: all the platinum, gold, coal, copper, diamond and other mines are smaller than the assumed informal sector! A lot of hairdressing, street vending, cash, visits to the doctor and so on can fit into that amount. It’s a massive sector, which many companies have not explored. Capitec has, and very successfully so.

Unemployment

According to Stats SA, unemployment in the first quarter of 2025 came to 32.9% or 8.2 million people, while 16.7 million people were employed. These numbers got the Capitec boss animated.

The numbers are derived from a household survey that Stats SA conducts every quarter in line with international criteria. It covers 33 000 dwellings, which are surveyed every quarter. A criticism is that the selection of 33 000 is based on 2011 census data. That is true, but it has also been updated with community survey data from other Stats SA reports, and the sample is updated frequently. Stats SA is now developing a new sample, using information gleaned from the last census.

Capitec has 24-million individual clients, of whom 8.8 million are fully banked, and 13 million are active app users. Put that in a country context: 16.7-million people employed; about 18-million on social grants; and about 9-million on the Covid-19 relief grant. That’s close to 44 million people; almost double the number of Capitec clients.

Clearly, Capitec is sitting on a treasure trove of information (as do other banks). But this on its own cannot tell us who are employed, unemployed, grant beneficiaries, and so on. More work needs to be done to determine this. Let’s see if the Fourie debate can inspire alternative methods of measurement, other than household surveys. If successful, it would be a win-win.

So What?

• In measuring an entire economy, one will never have 100% accurate numbers. The trick is to capture most of it.
• Certainly, anecdotal evidence from one’s own experience is not enough to draw firm conclusions on something as big, diverse and complicated as an economy with more than 62 million people. One needs to be on firmer ground.
• The system of national accounts run by Stats SA is robust, complies with global standards, and is regularly updated.
• The current inclusion of the informal sector in national GDP numbers is 8%, bigger than the mining sector. The informal sector is certainly not ignored in the statistics, even if some businesses do.
• More rigorous work on unemployment will be very useful. Banks can usefully collaborate with Stats SA on this.

Sources

1   Interview, Joe de Beer, Deputy Director-General: Economic Statistics, Stats SA, July 2025.

2   Thirty years of democracy, Bureau for Economic Research (BER), August 2024.

3   Fourie v Stats SA: A final word, Prof Johan Fourie, Currency, July 2025.

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