GREEN SHOOTS . . . WITH BLACK SPOTS
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