The South African Rand has hit significant lows in the past week and much of it is attributed to
the collapse of Turkey’s Lira. Turkey’s currency has lost over half of its value within the past
month. This is a result of several contributing factors, such as the fact Turkey is over indebted,
the country refuses to adjust its interest rates to be aligned with what would be more favourable
to investors, and also Turkey’s stained diplomatic relationship with America has negatively
impacted their economy. Turkey’s economy still remains vulnerable and subject to more risk, as
they have been sanctioned by America, and in addition to this they also have threats of tariffs
pending against them.
Turkey’s economic crises does not operate in a vacuum or in isolation. Several other countries
which are part of the global emerging markets such as Mexico, Russia, Brazil and China are
effected by what transpired in Turkey. However, of the several countries that have been effected
by the economic conditions in Turkey, South Africa has been impacted the most. The Rand fell
in value and hit a significant low at R15.02 to the Dollar.
A lot of economist are attributing the collapse of the Rand to the collapse of Turkey’s Lira.
However, the argument I present is that the collapse in Turkey just accelerated the inevitable. What
the collapse of the Lira did was highlight and emphasise already existing problems within the
South African economy. The reason that the South African Rand remains highly vulnerable and
was most susceptible to the collapse of the Lira is because our economy is weakening. Currently in
South Africa unemployment remains high, economic growth is stagnant and the country is subject
to a possible credit downgrade. It is like a strong wind passed by and we got blown with it, while
everyone else felt the chills and were shaken a bit, but they were not blown away, because they
were well anchored. All the collapse of Turkey’s Lira did was to expose the internal bleeding of the
South African economy.
Lessons learnt from Turkey and the role of entrepreneurship.
Prior to Turkey’s economic crises, Turkey was seeing rapid rates of economic growth and was
considered one of the fastest growing economies. However, the problem was that this economic
growth was sponsored by massive foreign debts, and in spite of the economic growth the country
became over indebted. The other critical economic error that Turkey made was their failure to
adjust their interest rates, to what would be more favourable to investors and the economy.
These are not the only factors that contributed to the collapse of Turkey, but they are the main
contributors, furthermore if South Africa does not take note of these critical components we could
be subject to the same misfortune. Recently in South Africa we have seen a campaign to raise
capital or investment from foreign states, to facilitate economic growth, but as we have learnt from
Turkey, it is not sustainable to create economic growth which is heavily dependent on foreign
loans. When foreign credit is involved the interest rate has to be aligned with their objectives. This
leaves very little room for negotiation. A failure to appease the interest of foreign investors will be
met with hostility that will play out negatively into the economy.
A way in which economic autonomy could be retained and the bargaining power of South Africa
with the international market can increase in negotiating power is through a concentration and
focus on local entrepreneurship. America is the strongest economy in the world for serval reasons,
but its prioritisation of star-ups and SME’s is a large contributor to its economic success. Small
garage start-ups turn into billion dollar and trillion dollar companies such as Google, Microsoft, and
Apple. In Africa we need to equally prioritise this link between SME’s and start-ups with
sustainable economic growth. Through entrepreneurship we get new businesses and grow SME’s
into large global companies. It is only through entrepreneurship that we can create an ecosystem
that facilitates sustainable economic growth.
Entrepreneurship is a critical component that is needed for sustainable economic growth. However
with that being said the law should regulate the environment in which businesses and
entrepreneurship operates, in order to ensure that commercial integrity is upheld. When the rule of
law is weak the commercial space is negatively effected. In South Africa we do not have at the
moment any contentious defence policy which is comparable to Turkey. However, other policies
being proposed such as land expropriation without compensation could subject us to international
scrutiny and sanctions , if not done in accordance with rule of law.
What the Turkey's economic crisis did is highlight the problems within the South African economy
and made them more pronounced. It further heightened the sense of urgency and the level of
importance and prioritisation of the economy.In order for us reposition ourselves economically and
create conditions for sustainable economic growth we need to promote entrepreneurship and
develop local businesses. We need to further secure and foster this growth with laws and policies
that uphold the commercial integrity and prioritise our economic interests.