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OFF-TOPIC South Africa's riots, and Potential threats

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RequisiteRequium

New Contributor
May 21, 2021
9
3
11
I think it is about time we discuss Jurisdictional risk, and how financial markets can bleed into survival risk. Jurisdictional risk is defined as risk that arises when operating in a foreign jurisdiction. This risk can come by simply doing business or by lending money in another country (Understanding Jurisdiction Risk). I would use Sovereign risk, but Jurisdictional risk is more important to point out since this issue is not systemic to the broader african market or any trading partners for south africa. Now, there is a ton of history to cover for the background of south africa, but i will give you a quick tldr & some links to check the flow. Since the fall of Apartheid and the view of reparations in south africa (which is similar to the impact in Zimbabwe), you had a rising sentiment of communism, race tension and haves/have not in south africa. This has lead to many conflicts where you have white farmers who built up their wealth and the africans who lived on the land for generations who believe that they should nationalize that land (see Zimbabwe for what actually happened with that issue). This leads to racial tensions between each other, and has gotten worse where there was a rise of attacks on those white farmers to where they see it as a white genocide while the President of south africa denying it with the former president Donald trump saying it is. This fire keg of tensions finally hit when unemployment hit 32.6% with 43.2% of the labor force without work for 3 months, and the arrest of Jacob Zuma & the majority populous of Zuma tribe reside turn into riots claiming it is a political/ethnic crackdown (African politics is mostly based on tribes for representation. Please refer to the Rowanda genocide where this tribal crackdown really hits.). This is now creating the speculation that this has transformed for the last 2-3 days into a racial riot where they want white people & non africans to suffer like the rest of the 43% of the population for the last year under covid (This last statement is based on eyes on the ground south africans & their voice recordings through whats app & telegram).

Now, this is an ever updating situation, and most do not consider South africa as important. However, anyone who deals with shipping companies in trade, and/or deal with investing in african companies knows how vital South Africa is to the health of Africa. South Africa deals with 86.51% of all Southern african trade(1), Africa’s ports account for 4% of global containerized trade volume, much of which comprises imports of manufactured goods (2), Port of Richards Bay reached the milestone in handling over 100 million tons of cargo during 2017/18, and Cape Town is South Africa’s second biggest seaport and its strategic location ideally positions it as a hub terminal for cargo to South America and the Far East (3), and South africa is a member of the AFCFTA which makes it more interconnected with it's neighboring countries & is pivotal to gold, coal, iron, and car production (4). This makes the situation have massive impact onto the already tightened supply lines, and if we were to see another Evergiven. Then we can expect inflation to skyrocket.

Now, any view of history knows about unemployment and governmental policy in the third world will know how this is very similar to the Arab Springs incident but in an african fashion. If this is the case, then the burning of electronic stores, looting of food/food spoilage, shipping containers, chemical plant, water treatment, and burning fields of crops then (5) (6) (7) (8) (9) (10) (11) (12) (13) all makes sense. Now, if you were to look at it from a different perspective then the LA riots from the Korean American perspective will help be a reference guide to how the local level response has been since most in south africa know that the police have not been helping in the early onset, cops letting people go, and one cop actually loot himself (14) (15) (16).

The real question we must ask ourselves as investors will be as followed.
1. Will the risk be systemic to all of africa?
1a. If it is not, then how long will it take to quell, and rebuild supplies to get the Navel & land route working for travel/export
1b. If it is, how is this going to hurt other African nations who rely upon South Africa for exports, and will they suffer stress like the Arab Springs?
2. How will supply chains deal with South Africa not being able to fully bounce back from this issue?
3. How is your nation dealing with the fault lines that have existed pre-covid, and is it being solved or metastasizing into a bigger issue waiting for a match?
4. Is your portfolio prepared to take advantage of the market not realizing this could be a bigger deal?

Now, I am linking the FX market for USD/ZAR, and you can tell this is a big deal when a $1 swing is 10000 pip's, and the FX markets are gaged on a position of a trade based upon how much of a currency lot you have per pip. (17) There is opportunity everywhere, but it is all about if you can see it & if you are willing to take it. I know this will be an ever-changing story, but I am looking at this situation with a hawk's eye. Especially with this tweet from the EEF (18).


Links to general view:
View: https://www.youtube.com/watch?v=Jgb3sn4-bhw

UPDATE 1-South Africa's unemployment rate reaches new record high in first quarter
View: https://twitter.com/FaeceSocietatis/status/1415125265202745349

Sources for numbered references:
(1)International Trade: The Position of Africa in Global Merchandise Trade
(2)Maritime trade and Africa | UNCTAD
(3)https://www.trade.gov/knowledge-product/south-africa-port-and-logistics
(4)South african foreign trade in figures - Santandertrade.com
(5) View: https://twitter.com/FaeceSocietatis/status/1415037355006824449

(6) View: https://twitter.com/FaeceSocietatis/status/1415009038249693185

(7) View: https://twitter.com/FaeceSocietatis/status/1414706432344219652

(8)KZN farmers dump milk as violence disrupts supply chains
(9)https://twitter.com/FaeceSocietatis/status/1414970923589963785
(10)https://twitter.com/Sotiridi1/status/1414978343158665223
(11)https://twitter.com/Newzroom405/status/1414899593041547265
(12)https://twitter.com/Newzroom405/status/1414917158518366210
(13)https://twitter.com/FaeceSocietatis/status/1414705619261665286
(14)K-Town '92: Reporters - L.A. Riots Documentary
(15)https://twitter.com/FaeceSocietatis/status/1414920973745278981
(16)https://twitter.com/FaeceSocietatis/status/1415009839378542596
(17) Live stock, index, futures, Forex and Bitcoin charts on TradingView
(18)https://twitter.com/EFFSouthAfrica/status/1414695743873503235
 
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RequisiteRequium

New Contributor
May 21, 2021
9
3
11
This came up today on zerohedge or yesterday on bloomberg.
It seems like this might actually be something more serious if (a massive if) this is just the start across nations in these areas or are under financial/political turmoil.
 

RequisiteRequium

New Contributor
May 21, 2021
9
3
11
Things are now getting more interesting in south africa.
It seems like the targeting of key arteries in South africa are corrected based on the New york times (1 - 3). "Coordinating a campaign of economic sabotage through WhatsApp, Telegram, Twitter and other social networks, they succeeded.", and "The insurrection was organised on social media once the 12 masterminds had crafted the strategy of chaos, according to senior ANC and intelligence sources who were interviewed by Daily Maverick on condition of anonymity. The chat messages in the graphic below have been filtered off social media and reportedly come from groups on WhatsApp and Telegram where the insurrectionists organised."
"Now removed from power, the beneficiaries of Mr. Zuma’s rule are determined to wreak havoc...In the absence of effective opposition, the A.N.C. is coming apart at the seams. Never a party of ideology, it has always been a broad coalition united in opposition to minority rule. Since the end of apartheid, it has struggled to develop a stable political identity."

All of this points to the view that it takes one bad black swan to destabilize a politically fractured nation. This is now exacerbated with the assumption I made earlier about the shipping of african raw goods, and South Africa's ties with the broader supply chain since this now hit the news. Quote, "Importers – already struggling with shortages of key goods – will now have longer to wait for containers on those ships. Just how long is not yet clear; a global shipping crisis and shortage of some types of containers already has the industry overall scrambling. Those same troubles have made shipping lines allergic to delays they can not quantify". This was resolved in 2 days, but Trasnet had to force majeure to ensure the container terminals could go back live. This means that this could have a backlog of orders in Durban, Ngqura, Port Elizabeth and Cape Town, and will increase the inflation we see later on due to the fact that Transnet also controls the rail network to export the commodities from other nations to the key ports (4-5).

TLDR: It is not a good day in South Africa, and it will be worse due to this. The lack of availability to get food to this nation just got a lot harder which will exponentially increase the issues of political tensions because food like oil is nonlinear in price when theta compression occures.

1.https://www.nytimes.com/2021/07/28/opinion/south-africa-violence-anc.html
2.https://archive.is/DeG1T
3.https://archive.is/E2rMb
4.https://www.businessinsider.co.za/transnet-admits-it-was-hacked-as-ships-start-skipping-south-africas-ports-2021-7 https://archive.is/upue0#selection-467.0-467.350
5. South Africa's Transnet restores operations at ports after cyber attack
 

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RequisiteRequium

New Contributor
May 21, 2021
9
3
11
Well, It seems like the olympics chilled some tensions in south africa, but that does not address some fundamental issues with the country about food and income inequality (1-2). We might see a gear up in tensions if the former president dies since this will be a power grab of tribal conflict which will reignite the existing gasoline in the country (3-4).

I did some research about how critical South africa is to the internet in africa, and apparently it is critical. This is an article and document from 2013 that discusses the root server (TLD server which is crutial in resolving issues with your ip address when you type youtabe.com into youtube.com instead of nothing) (5-6).
Although, they did expand their TLD servers properly in Africa. The bulk is in South Africa, and I can not get much research tying the potential impact a civil war, and economic of them assaulting TLD servers along side a cyber attack on the grid like the incident before. The riots discussed earlier were in KwaZulu-Natal are which is right near Durban which is exactly where 4 TLD servers in South Africa are hosted (7). The more I peel back this onion of South Africa, the more I realize how South Africa is a close equivalent to a G10 nation in terms of geographically strategic hub like Japan or India.

1. South Africa on high alert for more civil unrest: report
2. South Africa’s new finance minister speaks out on a basic income grant
3. Jailed former South African President Zuma taken to hospital
4. In a sudden bout of racial killings, a South African suburb sees a dark history repeating itself
5. https://www.itu.int/ITU-D/finance/w...inars/Egypt-13/documents/session7_Ibrahim.pdf
6. L-Root server copies to strengthen internet infrastructure in Africa
7. Root Server Technical Operations Association
 

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