Shared challenges

from the continuing eurozone crisis to stop-start indicators across a range of countries from the US to China.

SA in turn will remain vulnerable to these developments.

Global factors directly affect the trade and current accounts, as they reduce demand for exports. Export performance has worsened recently due to the mining strikes, but accommodative policy has also been supporting imports. The net result has been record trade deficits and a ballooning current account deficit.

We expect the current account deficit to remain wide into 2013. This, combined with a probable slowdown in bond inflows — particularly if there are further downgrades or a change in global risk sentiment — forms our opinion that the rand remains vulnerable to further weakening.

Though this would be of some help to exporters, whether that benefit proves temporary will depend on the extent to which rand weakness is allowed to filter through to inflation and wages, which could ultimately erode any advantage to exporters.

There is no doubt that the global crisis has had a negative effect on the country.

A disturbing trend has appeared for policymakers to seem to blame it for all ills, but that is not the full story. For example, the failure to consolidate the fiscus must be attributed partly to public-sector wage hikes.

And to an extent, the current account deficit widening is due to the result of loose domestic policy on imports, not just the effect of the crisis on exports.

Business confidence is harmed not only by the global crisis, but by policy uncertainty and a suboptimal response to the labour unrest and service delivery protests.

It is not simply a matter of principle that underlies worry about this “blame game”. Problems have to be

Volatile economic conditions around the world are affecting SA acknowledged before they can be dealt with.

It’s said that politics and policy are easy when economies are doing well, but much harder during tough times. SA needs its policymakers to grasp the nettle.

Valentine is economic and fixed interest strategist at Coronation Fund Managers

FINANCIAL MAIL

DECEMBER 20 1 2