GREEN SHOOTS . . . WITH BLACK SPOTS

Financial Mail - Investors Monthly - - Opening Bell -

A may be see­ing signs of life in its econ­omy but things are far from rosy. Though some of the coun­try’s dif­fi­cul­ties such as power out­ages and pro­tracted strikes have sub­sided, re­cent po­lit­i­cal and eco­nomic de­vel­op­ments do not in­spire con­fi­dence.

Data con­tin­ues to point to weak­ness in eco­nomic growth while the po­lit­i­cal soap opera con­tin­ues.

One can only won­der what rat­ing agen­cies, who will be re­view­ing the coun­try in De­cem­ber, are think­ing and whether de­vel­op­ments do not ac­tu­ally put the coun­try at a higher risk of a down­grade.

Pol­i­tics seems to be the cen­tre of at­ten­tion right now, all the way from Luthuli House, to new may­ors at met­ros mak­ing big changes, to public dif­fer­ences of opin­ion be­tween fi­nance min­is­ter Pravin Gord­han and min­eral re­sources min­is­ter Mosebenzi Zwane, and the Hawks are pur­su­ing Gord­han for a “rogue” spy unit that was al­legedly es­tab­lished at the SA Rev­enue Ser­vice dur­ing his time as the in­sti­tu­tion’s head.

Then there were com­ments by ANC deputy sec­re­tary-gen­eral Jessie Duarte, who said the Re­serve Bank needed to cush­ion the rand but that its pri­vate own­er­ship pre­sented a “dif­fi­culty.”

Duarte’s com­ments led to a quick re­sponse from the cen­tral bank, which as­serted its in­de­pen­dence: “In car­ry­ing out its man­date, the Re­serve Bank does not bow to any pres­sure, be it po­lit­i­cal or from the pri­vate sec­tor.”

Whether one speaks to govern­ment or busi­ness or labour, the sen­ti­ment is that there is a need to work to­gether

Sto im­ple­ment poli­cies that will grow the econ­omy. But this is ob­vi­ously not the case.

Zwane, who is be­lieved to be close to the po­lit­i­cally in­flu­en­tial Gupta fam­ily, says there is a need for a ju­di­cial com­mis­sion of in­quiry into the banks that ter­mi­nated their re­la­tion­ships with Gupta-owned com­pa­nies. Zwane said this was a cabi­net de­ci­sion, but the pres­i­dency later rub­bished this as un­true. Pres­i­dent Ja­cob Zuma told par­lia­ment re­cently he was en­gag­ing with Zwane over the mat­ter.

It is highly un­likely that Zuma will fire Zwane over the mat­ter, de­spite calls from even the tri­par­tite al­liance mem­bers for him to take ac­tion against Zwane.

At the same ap­pear­ance in par­lia­ment, Zuma also said there was no war be­tween the pres­i­dency and trea­sury.

Gord­han has told par­lia­ment in a writ­ten re­sponse that courts were the best op­tion for those ag­grieved about banks ter­mi­nat­ing bank­ing re­la­tions with Gupta-owned com­pa­nies.

At least there seems to be some move­ment in the right di­rec­tion at one of the state-owned en­ter­prises, SAA.

The air­line, which has suf­fered op­er­at­ing losses amount­ing to mil­lions of rand in the past, fi­nally has a new board and trea­sury has ap­proved a guar­an­tee but with con­di­tions. These in­clude re­turn­ing the air­line to fi­nan­cial sustainability; im­ple­ment­ing more ag­gres­sive cost-cut­ting ini­tia­tives; and start­ing a new process of ap­point­ing a CEO, chief fi­nan­cial of­fi­cer and other key ex­ec­u­tives in con­sul­ta­tion with Gord­han, among oth­ers.

Busi­ness con­fi­dence is un­der pres­sure, and so too is fixed in­vest­ment spend­ing by the pri­vate sec­tor. Fixed in­vest­ment spend­ing by pri­vate sec­tor com­pa­nies de­clined but at a slower pace of 3% in the sec­ond quar­ter fol­low­ing a 13% drop in the first quar­ter. Neg­a­tive pri­vate sec­tor fixed in­vest­ment spend­ing im­plies job cre­ation and a con­tri­bu­tion to eco­nomic growth is lim­ited.

The Rand Mer­chant Bank/Bureau for Eco­nomic Re­search’s busi­ness con­fi­dence in­dex added 10 points to 42 in the third quar­ter, bring­ing to an end seven quar­ters of de­clines.

Eco­nomic data is sug­gest­ing that eco­nomic growth got off to a slow start at the be­gin­ning of the third quar­ter

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