From the editor
with2016’s halfway mark nearing, it is worth reflecting on what the remainder of the year may have in store for us. Locally, it seems increasingly likely that the economy may have contracted again in the second quarter, which would officially leave South Africa in a recession. While this may bring us some reprieve from further interest rate increases in July, it will also increase the odds of a credit rating downgrade in December.
Political risk will also remain a big factor, at least until the local elections in August. Infighting in the ANC, which has led to several deaths and violent protests in recent weeks, is unlikely to to be resolved, and investors would rightly remain nervous about any prospective reshufflings of key Cabinet members post-elections.
None of this bodes well for attracting foreign direct investment, which dropped to a 10-year low in 2015, according to newly released data from the United Nations Conference on Trade and Development (Unctad). Globally, investment flows are expected to drop by as much as 15% this year, largely due to political uncertainty and a fragile global economy, Unctad said.
By the time you read this, we’ll already know the outcome of the Brexit vote. Even if Britons vote in favour of staying, which seems like the smart thing to do, uncertainty will remain over the future of the EU. France may well be the next country to reconsider its membership, with popular rightwing leader Marine Le Pen promising to hold a referendum should she be voted into power in 2017.
A recent survey by the Pew Research Center found only 38% of French respondents had a favourable view of the EU, down 17 percentage points from 2015. The global repercussions of a potential Frexit would be substantially more significant than a Brexit, as France uses the euro.
Janet Yellen, chair of the US Federal Reserve, warned US lawmakers on 21 June of “considerable uncertainty” about the outlook for the US economy, the strength of the Chinese economy, and the potential repercussions of a Brexit.
The reality is that it’s tough out there, and SA cannot afford any more selfinflicted economic pain.
Matter of fact
In our cover story Brexit: Blessing or balls-up? published in the 16 June issue, we wrote that AB InBev has offered £42 a share for SABMiller. In fact, AB InBev has offered £44 a share. We regret the error.