From the edi­tor

Finweek English Edition - - CONTENTS - *fin­week is a pub­li­ca­tion of Me­dia24, a sub­sidiary of Naspers.


for­get about Pres­i­dent Ja­cob Zuma and his Gupta/ Nkandla/im­peach­ment mess for a mo­ment. While we were be­ing side­tracked by the soap opera, some in­ter­est­ing num­bers were re­leased. Look­ing at the JSE, for ex­am­ple, I didn’t feel quite so de­pressed about the state of the world. The All Share Index (Alsi) was down only 3.9% in the 12 months to end Fe­bru­ary, and mea­sur­ing this over 36 months, it is up 36%. Not so fast, said Ge­off Blount, manag­ing di­rec­tor of BayHill Cap­i­tal, this week. If you strip out Naspers* and SABMiller (col­lec­tively, they make up about 25% of the index), the Alsi was down nearly 11% over the 12 months to end Fe­bru­ary, “mask­ing the se­vere bear mar­ket that the rest of the mar­ket is in”, he ex­plained. Over 36 months, an Alsi with­out Naspers and SABMiller gained a very mod­est 14%, an an­nu­alised re­turn of just over 4.5%.

On 6 April, rat­ings agency Stan­dard & Poor’s (S&P) pointed out that South Africa’s eco­nomic growth has been on a down­ward trend since 2011 – as it slashed its growth forecast for this year to 0.8%. Yes, ex­ter­nal fac­tors are at play, but those in charge at S&P also seem to be los­ing their pa­tience with our “on­go­ing struc­tural is­sues”, such as the highly reg­u­lated labour mar­ket and in­fra­struc­ture bot­tle­necks. It mat­ters more than usual what they think, as they have the power to give SA that much-loathed junk credit rat­ing.

The Re­serve Bank used the data of 70 coun­tries to try and es­ti­mate what the pos­si­ble im­pact of a down­grade to junk would be. In its lat­est mone­tary pol­icy re­view, re­leased on 4 April, it said a down­grade to junk is likely to in­crease short-term rates by 80 ba­sis points, while long-term bond yields would be ex­pected to move more, ris­ing by 104 ba­sis points.

This will have a num­ber of neg­a­tive ef­fects, in­clud­ing higher gov­ern­ment spend­ing to ser­vice debt costs, a de­pre­ci­a­tion in the rand, which will stoke in­fla­tion, and higher cor­po­rate bor­row­ing costs, which will raise the cost of in­vest­ment.

The ANC must be re­lieved that, in­stead of de­mand­ing to know what the plan is to boost the econ­omy, we are fix­ated on Chan­nel Zuma.

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