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SOVEREIGN MAN

Government corruption causes mass blackout

September 28, 2011
Cape Town, South Africa

Around 11:15 this morning, I left my flat and headed towards the Cape Town Gold Coin Exchange to check out their kruggerrand prices today.

(Note: They charge around 10% over spot, and buy coins for about 1% over spot. This is inclusive for all major coins that they carry. They have kruggerrands, eagles, and maple leaf coins in stock.)

I was sitting at a red light not too far from the new football stadium they built for last year’s World Cup tournament, when suddenly all the traffic lights went out. I thought it was just a weird anomaly, so I proceeded cautiously.

By the time I reached the coin shop, I realized that the whole city was without power. Again. Entire buildings had shut down, stores closed, and schools let out. It was a full-blown blackout… and it lasted for several hours.

This sort of thing is not uncommon in South Africa. Politicians will tell you that electrical demand is outpacing supply because of the country’s rapidly growing economy. That’s one way to put it– lemons into lemonade.

But give that excuse to the nearly 50% share of unemployed youths… or the 1 in 6 people who don’t even have electricity, and you’ll get a slightly different view.

A few years ago, the major mining companies in South Africa approached the government with a clearly stated problem. South Africa’s power grid was failing… and without major investment and political attention to the issue soon, the mining companies wouldn’t have the resources they needed to continue producing.

Bear in mind that the mining sector is one of South Africa’s most important economic drivers. They are the nation’s leading employers and exporters, so you’d think that their pleas for critical infrastructure investment would be heeded.

Here’s the thing– political corruption is rampant everywhere. In the developed world of North America and Western Europe, though, politicians are skillfully subtle at their corruption.

Money rarely changes hands in the light of day, but rather gets funneled through campaign contributions, use of corporate perks, and special ‘consultancy’ fees upon retirement. These guys get their rewards under the table and after they leave office.

In South Africa, though, the corruption is blatantly obvious. It’s almost insulting. The politicians here must think their citizens are so stupid, they won’t notice massive financial aberrations.

Julius Malema is a great example. As President of the African National Congress Youth League, Malema draws a small government salary.  Yet somehow he drives around in multiple $100,000+ sports cars and owns multi-million dollar homes.

As it turns out, Malema is the sole beneficiary of a mysterious ‘family trust‘ that is apparently bankrolling his lavish lifestyle.  Local businesses that are awarded substantial government contracts are routinely found depositing funds into the trust account.

Nobody tries to hide corruption here. It’s outright theft in the light of day, and this is the real reason why the power keeps going out. Public funds are siphoned off or misallocated for private gain, and major infrastructure projects are routinely stalled as a result.

And so, a few hundred thousand people sat around in the dark today. It wasn’t the first time, and it won’t be the last.  But it’s not just South Africa.

Much of the infrastructure in the developed world is in serious need of investment.
But given at least half a dozen financially cataclysmic ‘Lehman events’ that are looming, (Greek default, Italy restructuring, further US sovereign downgrades, etc.), it’s unlikely that the necessary upgrades will be made… especially for public utilities.

Economics drive everything. People that have suffered through a devastating sovereign collapse (Argentina, for example) understand that flipping a switch doesn’t necessarily mean the lights come on.

Most people take these major systems for granted– that there’s gas in the gas stations, water in the pipes, electricity in the wires, food on the grocery shelves, cash in the cash machines, etc.

A real economic depression affects these major systems as well. Shortages, rationing, and outright failure are all possible. Is it the end of the world? No. Is it something to consider? Absolutely… unless you enjoy sitting around in the dark.

A big part of self-reliance is weaning yourself off total dependence on these major systems. This could mean a lot of things– planting a small garden; installing a solar array or generator; owning gold and silver coins; etc. Any of these options is worthy of your attention.

Personally, I’m taking things a step further. As I’ve mentioned before, we’re in the early stages of establishing a resilient community in central Chile where the scenery is stunning, the climate is warm (Mediterranean), and the soil is some of the most fertile in the world. Oh yeah, and the government leaves you alone too.

Just yesterday, in fact, I gave instructions for the farm crew to begin planting our first batch of organic crops (remember, the seasons are flipped in the southern hemisphere). We also have multiple sources of water and several ways to generate our own energy, including solar, hydro, wind, and geothermal.

I discuss this project in more detail in our premium service Sovereign Man: Confidential, and I’ll certainly let you know here as things progress.

In the meantime, I want to encourage you to look at areas in your own life where you are dependent on big systems, and make a conscious effort to reduce those dependencies.

About the author: Simon Black is an international investor, entrepreneur, permanent traveler, free man, and founder of Sovereign Man. His free daily e-letter and crash course is about using the experiences from his life and travels to help you achieve more freedom.

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Comments on this entry are closed.

  • KJQ

    Simon. A bit of ‘devil’s advocate’ here, but what makes you think Chile’s government will be immune to the tendencies of countries like the USA and Europe (i.e. seize and/or take control of private assets)?  Aren’t they just a little less down that slippery slope of government control?

    • Jimmy Hickman

      As Simon mentioned in the article, “Economics drive everything.”  He’s like to take your money for his project that you may have found on Google, “the black hole of accurate information” as he says:  http://www.sovereignman.com/expat/google-is-the-black-hole-of-accurate-information/.  Can’t wait for the next bad news out of Chile so Mr. Cobin can tell us how it’s all being inaccurately reported.  Somebody’s going to have to pay for those organic crops and they’re hoping it’s you.

    • John Lloyd

      I would like to here Simon’s answer to this too….in the event of a global financial meltdown, which is at this point of time at matter of when not if, it wouldn’t surprise me if the various governments around the world become very heavy handed, including Chile’s.

  • http://elevationgroupvideo.com The Elevation Group

    And with the increasing geomagnetic storms from the Sun, the weak electrical grids will be affected more and more in the future.

    The blackout in the Southwest U.S. (San Diego and Phoenix) earlier this month, that left nearly 6 million people without power, is a great example. 

  • http://moneycrisisgameplan.com Money Crisis Game Plan

    The U.S. electrical grid is not even strong enough to handle overloads, such as can happen from EMF blasts from the Sun.

    People better prepare now to have clean water, food storage, lights, gold and silver, etc… because storms are on the increase and you never know when you will be without power and utilities.

  • Ryan

    Simon,
    I would like to learn more about the community being developed in Chile, how can I do that?

  • MadDog

    I love your tongue-in-check challenge:  “Absolutely… unless you enjoy sitting around in the dark” referring of course to a blackout.  But on a larger, metaphorical and philosophical level – it is still a very appropriate question.  Sadly, I know far too many people who are totally comfortable “sitting around in the dark”.  These are not stupid people, they are very well educated.  But they are very IGNORANT.  They’ve heard the truth; it surrounds their lives and dominates the news.  But they choose to ignore it … to remain ignorant … to sit in the dark.

  • Steve

    Simon, minor question: Why does it cost twice as much to buy Krugerrands from the country that made them? BullionDirect.com is typcailly 5% or less over spot.

    (I’m not connected to BD, just saying…)

  • Carol

    Hey Simon Black,

    I would say this to you that 90% of the universe is made up of dark matter, we all would do good to learn how to make a product that serves us well in the terms of engagement of an ever changing world.

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