South Africa economy

As the World Economic Forum holds its Africa meeting in Cape Town, South Africa’s public finances remain under pressure. The country is predicted to post significant current account and fiscal deficits this year at a time when the US Federal Reserve is moving towards raising interest rates and global funding conditions are tightening. But South Africa is also a promising environment for private companies, impact investors and philanthropists who wish to invest in projects where government budgets are constrained. The World Economic Forum meeting offers an opportunity for the country to attract overseas money and help fill its public service gap. Read more

By Peter Leon, Webber Wentzel

As the great, the good and the not so good descend on Cape Town in midsummer for next week’s annual mining indaba (conference), investors in the South African mining industry may be able to celebrate some unexpected good news.

Two weeks ago, President Jacob Zuma exercised a rare Presidential veto, declining to sign into law a bill which would have created an export licensing system for South Africa’s treasure trove of minerals. Read more

South Africa’s new central bank governor took centre stage on Thursday, but the story was a familiar tale of caution and bleak growth for Africa’s most developed nation.

After heading his first monetary policy committee meeting, Lesetja Kganyago said the decision was taken to keep the bank’s repo rate on hold at 5.75 per cent.

Kganyago took up his post earlier this month, replacing Gill Marcus, who announced in September that she would not be seeking a second five year term. But little changed in the language and detailed delivery of the last MPC statement of the year. Read more

The undisputed headline grabber at the end of South Africa’s monetary policy committee meeting on Thursday was the surprise announcement that Gill Marcus would not be seeking to renew her five-year term as central bank governor when it expires on November.

There is little doubt she will be missed by the financial community and all eyes will be on the appointment of her successor, with the hope that the South African Reserve Bank’s credibility and integrity are maintained. Read more

The backdrop to South Africa’s monetary policy committee’s (MPC) meeting this week seems all too familiar.

One protracted strike has ended, but another larger one has started. The bleak growth outlook appears only to be weaker, and Moody’s, the rating agency, has issued a grim warning about the impact of industrial unrest and the potential risks to the country’s credit rating.

Yet for the first time in a while there does not appear to be a clear consensus on whether the MPC will keep rates on hold or raise them. Read more

If anybody had any lingering illusions about the worrying state of South Africa’s economy, Gill Marcus, the central bank governor, should have put them firmly to bed in a speech on Tuesday.

Candidly outlining the economic malaise engulfing Africa’s most developed nation, Marcus told a business breakfast that “the domestic economy is facing enormous headwinds, many of which are of our own making.” Read more

After a deal-making spree in Africa in 2013 that included investments in Ghana, Cote d’Ivoire and Kenya, private equity group Abraaj is on track for an equally active 2014.

Abraaj, which has $7.5bn in assets under management and is based in Dubai, expects to complete four transactions in the region by the end of the year, including in South Africa, Nigeria and Kenya, partner Sev Vettivetpillai told beyondbrics. Read more

By Stephany Griffith-Jones, Columbia University

Leaders of the BRICS (Brazil, Russia, India, China and South Africa) nations are committed to the creation of a new Development Bank for infrastructure and sustainable development. Details of the bank’s operations are expected at the forthcoming BRICS summit to be held in Brazil this July.

The bank is set to play an important role in helping to meet needs for an estimated US$1tn or more in annual investments in infrastructure and sustainable development. The future growth prospects of the BRICS countries will depend in large measure on these investments materialising.

What are the likely challenges this institution will face as it moves from the design to the operational stage? Read more

With South Africa’s May 7 election done and dusted and the African National Congress set to extend its 20-year dominance of the political landscape, all eyes are now on President Jacob Zuma’s appointments to his next cabinet.

All should be revealed a day or two after Zuma’s inauguration on Saturday, at the start of a second term at the helm of Africa’s most developed economy. Read more

There were no shocks or surprises from Pretoria today. Rather, South Africa’s Monetary Policy Committee agreed with the consensus among economists and kept interests rates on hold.

Its reasoning was clear – even if the committee was split 5/2 on whether to raise the repurchase rate above 5.5 per cent. The volatile rand – which had slumped dramatically against the dollar at the beginning of the year – has appreciated and been holding firm in recent weeks. The central bank’s forecast for headline inflation has also dipped slightly to 6.2 per cent in 2014 compared to its previous forecast of 6.3 per cent. Read more

As South Africa’s monetary policy committee debates whether to raise interest rates or keep them on hold this week, its members’ eyes would have been drawn to the latest inflation figures showing a slight uptick in prices.

Data released by Statistic SA on Wednesday revealed that the Consumer Purchase Index inflation rate in April hit 6.1 per cent – 0.1 per cent higher than in the previous month. It means inflation crept slightly above the 6 per cent ceiling the monetary authorities traditionally like to keep it. Read more

When South Africa’s GDP growth numbers for the first quarter are announced at the end of the month, the destructive impact of the country’s longest-running mining strike on the national economy is set to become emphatically clear, analysts said.

Capital Economics, a London-based research firm, predicted on Thursday that South Africa’s first quarter GDP grew at only 0.2 per cent, down from 3.8 per cent in Q4 (see chart). The forecast is based on a proprietary GDP tracker, which aggregates data on retail sales, manufacturing and mining output to create a proxy for GDP. South Africa announces GDP on May 27th. Read more

The convincing nature of the African National Congress’ (ANC) victory in South Africa’s general election is likely to ease pressure for difficult yet necessary reforms to the country’s economy and labour markets, analysts said on Friday.

With 98 per cent of the vote counted, the ANC had garnered 62 per cent, while the Democratic Alliance took 22 per cent and a new radical party, the Economic Freedom Fighters (EFF), took 6 per cent. Read more

If you have ever sat mute on a plane trying, but failing, to think of a way to start a conversation with the person next to you – then South Africa Airways (SAA) is here to help.

In recent days it launched “social check-in”, through which you share personal details with strangers on Facebook before checking in and choose to sit next to someone you’d like to get to know better. Read more

While the ruling African National Congress (ANC) is widely expected to triumph at South Africa’s election on May 7, the attention of investors may be focused more intently on the showing of an extremist workers party that advocates the nationalisation of mines and banks, land expropriation and hiking the minimum wage sharply higher.

Analysts said that in spite of the ANC’s reputation for corruption, incompetence and nepotism, the party of President Jacob Zuma may still win around 60 per cent of the vote, down from the 66 per cent won in 2009. Read more

The “fragile five” – Brazil, India, Indonesia, Turkey and South Africa – have had a torrid time since Morgan Stanley identified them last year as countries particularly vulnerable to the “tapering” of US monetary stimulus because of their large and rising current account deficits. Read more

At first glance, it looks as if South Africa’s latest announcements on trade and manufacturing data suggest two different narratives – one of recovery and one of continued slowdown. In fact, however, a common thread between them points toward an overall slowing growth trend.

A surprise trade surplus of R1.7bn in February represented a swing from January’s deficit of R16.9bn, pushing the rand higher as investors grew more confident over South Africa’s export performance. However, the manufacturing Purchasing Managers Index, announced on Tuesday, slipped to 50.3 in February from 51.7 in January, suggesting a slowdown in manufacturing growth. Read more

South Africa kept interest rates unchanged on Thursday as Africa’s largest economy continues to grapple with the policy challenge of subdued growth set against inflationary pressures.

The decision by the central bank’s monetary policy committee to keep its repo rate at 5.5 per cent was expected as the volatile rand has recovered slightly from a disastrous beginning to the year when it tumbled to five year lows against the US dollar. Still, the MPC’s decision was a tight one, with a four-to-three split on the committee. Read more

South Africa’s current account deficit narrowed in the fourth quarter of last year to 5.1 per cent of GDP from 6.4 per cent in the third quarter. But the good news was tempered by the fact that the improvement came primarily from a slump in imports rather than an export recovery.

The current account deficit – along with the country’s budget deficit – is seen as a key forward indicator of South Africa’s vulnerability to further weakness in its currency, the rand, which has depreciated by around 19 per cent to R10.88 against the US dollar over the last year (see chart). Read more

In a world of shrinking liquidity, sub-Sahara African governments are finding little room to manoeuvre in stimulating their cooling economies as investors and ratings agencies take a much harder line on state excesses.

With growth prospects improving in developed markets and questions being raised about the fate of emerging markets – especially with growing evidence of a bigger than expected Chinese slowdown – investors have started to write off large swathes of the developing world. Read more