Globalization may be defined as the process by which countries may develop global influence and operate at an international scale. However, today globalization has become another word for ‘neo-colonialism ‘for developing economics. As we saw in the documentary ‘Life & Debt’ international institutions tend to enforce regulations on countries under the façade of ‘globalization’. Globalization has been the unseen driving force behind several economic calamities of developing nations.
Several African governments have made significant strides in opening their economies to world trade. Over 31 Sub-Saharan African countries have adopted Article VIII of the Fund's Articles of Agreement. These countries have moved ahead with trade and exchange liberalization, eliminating multiple exchange rates and nontariff barriers, and lowering the degree of tariff protection which has turned out to be detrimental (in some cases) for them. Thus, liberalization has also stalled in South Africa since the WTO Uruguay Round. The basis is, that it is unfair to demand emerging countries to increase market access for industrial goods and services while not mandating proportional commitments for developed countries.
South Africa is an important globalizing financial centre in Africa, however the process of liberalization and globalisation in its financial sector in the late 1999 lead to a dramatic modification in the capital structure. Corporations had to move their listings to the London Stock Exchange and capital flows into South Africa turned out to be of increasingly poor quality. They were mainly short term and speculative and this created an increasing wage disparity. While it intensified the financial power of London, it left Johannesburg as a downgraded “Local Established Player”. Moreover, all this foreign money is entering the stock markets and lending, and there is not enough which poses a risk about the temporary nature of investments.
Globalisation has also adversely impacted the textile and clothing sector of South Africa. This sector directly employs approximately 127,000 people. Thus, the livelihoods of several citizens depend on this industry’s survival. Before 1990, this sector depended heavily on the domestic market, however, after South Africa’s opened its markets to the world, this industry was swamped with low price imports, primarily from China. Earlier, South Africa’s monopoly over textile and clothing industry relied on import tariffs and quota restrictions to protect it from foreign competition. However, to integrate itself into the global economy it had to attain the membership of the World Trade Organisation which coerced the country to remove its protectionist measures.
Even though large firms responded benefited by attracting foreign investment and improved productivity and clothing exports. However, such changes had greater negative effects. Increased capitalisation led to reduced levels of employment and hence the SMEs struggled the most as they were unable to attract the required investment. another option for SMEs is to specialise and there are firms who have been highly innovative in finding niche markets. Thus, the unemployment rates rose significantly and overall economic welfare and business environment declines.
Similarly, while examining the effect of globalisation on South Africas automative industry, we see that domestic subsidiaries are being merged into the global operations of their parent companies. South Africa was forced to reduce its tariff on imported goods and vehicles according to the Uruguay Round Agreement, even though its automobile industry was still in its nascent stage. In 1995, in accordance with the agreements, an all-inclusive tariff reduction was introduced on the automobile manufacturing industry through the implementation of the Motor Industry Development Program (MIDP). Several global companies were seen entering the domestic and regional markets with highly modernised, low cost vehicles without any obstructions. This has led to the overseas outsourcing of components because of the unintended consequences of the ‘Motor Industry Development Plan’. The market for locally-owned component suppliers and component suppliers using local technology is almost non-existent now. South African component suppliers are thus competing with mature technologies in external after-markets, making them vulnerable to exchange rates.
Though the automobile manufacturers have sufficient internal strengths and reserves to compete with global rivals, they lack the resources to generate low priced vehicles.The BMW plant outside Johannesburg is a symbol of globalization in South Africa. The mechanisation used in production is the same in comparison to Germany. 80% of cars generated by this assembly line are exported with 14,000 going to US alone the previous year. However, the plant assembles one car every four minutes; BMW's larger German plants have an efficiency of one a minute. Labour costs make up only 30% of the cost of production Moreover only half the South African-made BMWs are produced in its first attempt without any flaws that need fixing due to lack of technical know-how. On the other hand, for the best German factory making the same car it's 80%.
Workers at the plant were being replaced by robots and the enterprise is practicable only due to a government subsidy: a complicated formula allows BMW to avoid tariffs on imports of other models in exchange for every car exported. This, is being seen as a temporary exercise by the South African government, until productivity climbs to international levels. Thus ‘globalisation’ being a double-edged sword, has increased the problem of unemployment in an already troubled country.
Thus, we have seen throughout the ages, organisations such as the WTO, IMF and world bank tend to propagate ‘neo-colonialism’ under the façade of their relief packages and ‘liberalization policies.’ South Africa represents just one such story of Africa, where its resources and natural wealth has turned out to be a resource curse. The exploitative nature of globalisation adopted in the African continent has destroyed rather than created a path to progress. Globalisation has led to ‘anti developmentism’ in Africa, as it restricts African countries to make efforts to build its own indigenous entrepreneurial class. The state then becomes secondary in the developmental effort.
However, globalisation as we know is a double-edged sword. Along with these negatives, there are several ways in which it has helped the south African economy grow. The problem isn’t with the concept of globalisation but rather, its implementation. As we saw in the documentary, when globalisation is misused by countries and international bodies, it only creates havoc. Thus whether it be Jamaica or South Africa, the need of the hour is to strategically optimise the benefits of globalisation.