South Africa is as beautiful as ever—but the pandemic has exacerbated the world’s worst inequality

I’m back at my desk after more than three weeks vacationing in my native Cape Town. The trip (my first there since the end of 2019) should have taken place last December, but that plan was stymied by the emergence of the Omicron variant down in South Africa, and the travel restrictions that pointlessly ensued.

It was a glorious visit, heavily featuring the socializing I’d been so sorely missing over the past couple of years (COVID numbers are very low there right now). We stayed in spacious properties in beautiful places, ate fantastic food at reasonable prices—I now need to shed a few kilograms—and generally soaked up the kind of lifestyle that makes Cape Town a fabulous place to live…if you have money.

South Africa’s is the most unequal society on the planet. There are obviously historical reasons for this, with many effects persisting despite the end of apartheid some three decades ago—the racist Group Areas Act may be long gone, but housing inequalities remain baked into the geographies of the country’s cities. The deep corruption of the African National Congress (ANC), which has ruled since the introduction of democracy in 1994, has also helped to keep the poor poor.

This is nothing new. However, the past two years have clearly pushed a lot more people into harsh destitution. Homeless encampments have sprung up everywhere—under bridges, on traffic islands, in graveyards. A friend who researches urban design told me that, for the average South African, everyday life is now worse than it has ever been; a bold claim given the country’s history, but a plausible one.

South African GDP may continue to expand, but it’s not bringing jobs with it. The unemployment rate is now over 35%, and over 46% if you also include discouraged job seekers. Youth unemployment is particularly bad. The middle class is shrinking. Again, much of this is the fault of generalized maladministration and state corruption, but it’s also down to the heavy economic restrictions that the government imposed during COVID lockdowns—President Cyril Ramaphosa only lifted the national state of disaster earlier this month, after more than two years.

I remain someone who believes South Africa will turn itself around—its obituary has been prematurely written many times, and Ramaphosa does seem to sincerely want to reduce corruption—but there’s no doubt that the pandemic has exacerbated systemic problems and that, for many millions of people, there is little hope to grab hold of.

It remains to be seen how this will play out politically; the ANC’s support continues to erode, and it’s hard to know whether to be warier of people giving up on democratic politics altogether or, with nothing to lose, giving their votes to the far-left, increasingly totalitarian Julius Malema and his populist “Economic Freedom Fighters.” South Africa may have always frustrated the worst predictions of outsiders, but at some point something has to give. And that’s a reality that cannot be ignored, no matter how amazing a place it is to be with money in your pocket.

More news below.

David Meyer
@superglaze
david.meyer@fortune.com

TOP NEWS

Netflix shift

Netflix, which lost 200,000 subscribers last quarter and 25% of its share price on the announcement of that fact, will add a cheaper version of its service that includes advertising. Co-CEO Reed Hastings, who has generally been a fan of the subscription rather than ad model: “I’m a bigger fan of consumer choice, and allowing consumers who would like to have a lower price and are advertising-tolerant to get what they want, makes a lot of sense.” Fortune

Mask rules

A Florida district judge has struck down the U.S. government’s mask mandate for public transportation, so the Transportation Security Administration won’t enforce it for now. The Biden administration is considering its options and still recommends people wear masks on planes and trains. Delta Air Lines expressed relief at the ruling by referring to COVID-19 as an “ordinary seasonal virus”—then walked back that phrasing after a backlash. Fortune

Grubhub sale

Just Eat Takeaway may sell Grubhub, owing to investors being less than pleased with the $7.3 billion purchase and wanting JET to sell off assets. JET was pushing back against this just a couple of months ago. Financial Times

Recession odds

Moody’s chief economist Mark Zandi, who is regularly cited by the Biden administration, reckons there’s a 35% chance of the U.S. entering a recession in the next couple of years. That’s in line with Goldman Sachs’ prediction. Fortune

AROUND THE WATERCOOLER

Crypto stocks

Crypto stocks—Coinbase, Riot Blockchain, etc.—have been performing even worse than cryptocurrencies this year. Wall Street Journal

Housing inventory

The U.S. housing market appears to be heading into a cool-off period, but, as Fortune’s Tristan Bove notes, inventory remains low: “Two factors collided over the past few years to send prices this high. Demand for housing increased amid the early-pandemic low mortgage rates, while the supply of new homes sat at historic lows, creating the perfect recipe for intense competition and higher prices. But now that relationship is breaking down too, and the calculus is changing.” Fortune

Gazprom ties

Germany’s coalition-leading Social Democrats are under pressure over their historic coziness with Russian energy firms, particularly Gazprom and its now-canceled Nord Stream 2 natural-gas pipeline. The current circumstances threaten the future of previously rising star Manuela Schwesig, who is head of the state where Nord Stream 2 comes ashore in Germany. Politico

Musk and Twitter

Here’s a timeline of Elon Musk’s hectic past few weeks as a major Twitter shareholder who is now considering a leveraged buyout of the social media firm. Fortune

This edition of CEO Daily was edited by David Meyer.