The South African economy is in the midst of its longest business cycle downturn in more than 73 years, according to the Reserve Bank, and things aren't looking particularly favourable right now either.
 
The adverse business climate has impacted the stock market too this year, seeing listed companies declining year-to-date on the whole. 
 
According to analysis done by Corion Capital, a boutique hedge fund manager, 60% of listed counters had depreciated by the end of September, with more than a third slumping in excess of 15%. Only 16% of the stocks in the All Share Index gained more than 15% this year to end-September.
 
Topping the list of poor performers are Tiger Brands, off more than 40%, two healthcare companies, Aspen and Mediclinic, MTN, and Woolworths.
 
Performance of the top 40 JSE shares. Tiger Brands and Aspen were the biggest losers, while Sasol and BHP Billiton were the top performers. (Corion Capital)
Performance of the top 40 JSE shares. Tiger Brands and Aspen were the biggest losers, while Sasol and BHP Billiton were the top performers. (Corion Capital)
And the sharp sell-off has continued into October, with only the Resource Index managing to gain ground last week and the Banks Index hardest hit, losing 7%.
 
Garreth Montano, a director of Corion Capital, puts the bout of negativity swamping investor sentiment this year down to:
 
- Low GDP growth. South Africa has unfortunately missed out on a resurgence in the world economy and has been left well behind in terms of GDP growth. The reasons behind the sluggish performance of the domestic economy can be debated at length, but many view the Zuma era as a large contributor to the underperformance of SOEs, heightened corruption, lack of job creation and lack of investor confidence in attracting foreign direct investment.
 
- The land debate and mining charter have further dented prospects of new investment, which would aid growth as well as assist in creating new jobs. All of which are dearly needed.
 
- Many commentators believe that president Ramaphosa’s hands are tied until general elections, and the righting of the ship and benefits to the economy will start gaining momentum once there is more clarity around the land issue and elections are behind us.
 
To add to these internal challenges, emerging markets, as a whole, have had a difficult 2018, being largely led down by the crises in Turkey and Argentina. Trade wars have also had a negative effect, creating concerns about a drag on emerging markets exports due to potential for tariff impositions by the US, Montano says.
 
Locally the negative sentiment towards broader emerging markets has played out in large outflows fromn our bond market, as well as foreigners selling off equities, says Montano. Last week almost R6bn alone was taken out of South Africa by foreign investors.
 
These disinvestments have also played out in currency markets, driving the rand dramatically lower to more than R15 to the dollar at stages compared with its peak of almost R11.50 in February this year.
 
 
Source: Business Insider
After 18 years, Australia's Monash University will be pulling out of South Africa, selling out to JSE-listed education group Advtech in a R340 million deal.
 
Monash South Africa was registered in 2000, and markets itself as a local provider of degrees with international brand recognition. Its Johannesburg campus has a capacity of 6,500 students and features a number of student residences, popular among students from other African countries.
 
But the Monash name will disappear from that campus, its soon-to-be new owners say.
 
Advtech on Tuesday said it would pay R343 million for Monash South Africa, plus whatever cash on hand and working capital adjustments on the effective date of the acquisition.
 
That is very close to the R330 million net asset value Monash SA reported at the end of 2017.
 
Monash had been looking for a partner to take over the South African institution for some time, Coughlan says, and Advtech's track record gave Monash comfort that existing students would be well catered for.
 
Monash is Australia's biggest university. It also has a campus in Malaysia, and centres in India, China, and Italy.
 
Advtech is keen to roll out some of the registered Monash qualifications at its other tertiary institutions, which include Vega, Rosebank College, and Varsity College. Monash this year launched the first Bachelor of Engineering programme at a private institution reviewed by the Engineering Council of South Africa, and its MBA and public health qualifications are a good fit for the company, says Coughlan.
 
Advtech recently bought Oxbridge Academy and The Private Hotel School. Its fellow listed tertiary education group Stadio plans to create a "multiversity" for some 100,000 students in South Africa, and is looking to set up medical and engineering schools in the next three years.
The South African economy is in the midst of its longest business cycle downturn in more than 73 years, according to the Reserve Bank, and things aren't looking particularly favourable right now either.
 
The adverse business climate has impacted the stock market too this year, seeing listed companies declining year-to-date on the whole. 
 
According to analysis done by Corion Capital, a boutique hedge fund manager, 60% of listed counters had depreciated by the end of September, with more than a third slumping in excess of 15%. Only 16% of the stocks in the All Share Index gained more than 15% this year to end-September.
 
Topping the list of poor performers are Tiger Brands, off more than 40%, two healthcare companies, Aspen and Mediclinic, MTN, and Woolworths.
 
Performance of the top 40 JSE shares. Tiger Brands and Aspen were the biggest losers, while Sasol and BHP Billiton were the top performers. (Corion Capital)
 
Performance of the top 40 JSE shares. Tiger Brands and Aspen were the biggest losers, while Sasol and BHP Billiton were the top performers. (Corion Capital)
 
And the sharp sell-off has continued into October, with only the Resource Index managing to gain ground last week and the Banks Index hardest hit, losing 7%.
 
Garreth Montano, a director of Corion Capital, puts the bout of negativity swamping investor sentiment this year down to:
 
- Low GDP growth. South Africa has unfortunately missed out on a resurgence in the world economy and has been left well behind in terms of GDP growth. The reasons behind the sluggish performance of the domestic economy can be debated at length, but many view the Zuma era as a large contributor to the underperformance of SOEs, heightened corruption, lack of job creation and lack of investor confidence in attracting foreign direct investment.
 
- The land debate and mining charter have further dented prospects of new investment, which would aid growth as well as assist in creating new jobs. All of which are dearly needed.
 
- Many commentators believe that president Ramaphosa’s hands are tied until general elections, and the righting of the ship and benefits to the economy will start gaining momentum once there is more clarity around the land issue and elections are behind us.
 
To add to these internal challenges, emerging markets, as a whole, have had a difficult 2018, being largely led down by the crises in Turkey and Argentina. Trade wars have also had a negative effect, creating concerns about a drag on emerging markets exports due to potential for tariff impositions by the US, Montano says.
 
Locally the negative sentiment towards broader emerging markets has played out in large outflows fromn our bond market, as well as foreigners selling off equities, says Montano. Last week almost R6bn alone was taken out of South Africa by foreign investors.
 
These disinvestments have also played out in currency markets, driving the rand dramatically lower to more than R15 to the dollar at stages compared with its peak of almost R11.50 in February this year.
 
 
Source: Business Insider
South Africa’s trade surplus widened more than expected to 12 billion rand ($915 million) as exports in precious, base metal and vehicle parts jumped, easing pressure on the economy and lifting the currency.
 
The South African Revenue Service said in Johannesburg that exports rose by 7.1 per cent on a month-on-month basis to 110 billion rand in June, while imports dipped 0.9 per cent to 98 billion rand.
 
Commodities led the rise in exports with sales of precious metals up 38 per cent and base metals rising 13 per cent in the month. Sales of vehicles equipment also went up 8 per cent.
 
Analysts said the large surplus was a sign the current account was narrowing, which would lessen the impact of any reversal of portfolio flows.
 
“This is the fourth month in row of surpluses so it will definitely reduce the current account deficit in the second quarter,” said senior economist at Nedbank Isaac Matshego.
 
“But remember, the current account is structural so we really do need those portfolio flows to keep coming in,” Matshego added.
 
The rand responded to the news of the widening surplus by rising slightly on the data, trading at $1 =13.1350 at 1300 GMT, about 0.2 per cent firmer.
 
The rand has rallied in the past month to become one of the top performing emerging market currencies, due mainly to positive turn in sentiment, but analysts warn it remains at risk to offshore events, particularly the ongoing trade tiff between the United States and China.
 
Africa’s most industrialised country ran a large current account deficit of 4.8 per cent of GDP in the first quarter.
 
 
Source: News24

The International Monetary Fund (IMF) has raised its growth projection for the Sub-Saharan Africa’s economy to 3.8 percent in 2019 from 2.8 percent in 2017, implying 0.1 percentage point increase compared with its April, 2018 projection.

The fund also upgraded Nigeria’s 2019 Gross Domestic Product (GDP) by 0.4 percentage point to 2.3 percent.

The IMF disclosed this in its World Economic Outlook (WEO) Update for July 2018 titled “Less Even Expansion, Rising Trade Tensions” released on Monday.

According to the release, the upgraded forecast “reflects improved prospects for Nigeria’s economy” and supported by the rise in commodity prices.

The global monetary authority said Nigeria’s growth is expected to rise from 0.8 percent in 2017 to 2.1 percent in 2018 and 2.3 percent in 2019 on the back of an improved outlook for oil prices.

But, it left its 2019 growth prediction for South Africa unchanged at 1.7 percent, South Africa is Africa’s most-industrialized economy and hasn’t grown at more than 2 percent a year since 2013.

Nigeria and South Africa’s economies account for about half of the Africa’s GDP.

In May, the National Bureau of Statistics (NBS) released the GDP report for the first quarter of 2018 indicating that Nigeria economy grew by 1.95 percent from 2.11 percent recorded in Q4 2017.

“Despite the weaker‑than-expected first quarter outturn in South Africa, the economy is expected to recover somewhat over the remainder of 2018 and into 2019 as confidence improvements associated with the new leadership are gradually reflected in strengthening private investment,” the fund said.

Nigeria’s economy is recovering after it plunged into recession in 2016 after a drop in the prices of crude oil in the international market, owing to its over dependence on the oil, the country’s main source of foreign exchange earnings.

Credit: TheRipples.com

The role of “white monopoly capital” in post-apartheid South Africa has been in the news lately. In the South African context, it can be understood as the white population’s extensive control over the country’s economy.

The debate reflects a recanting view against the rainbow nation dream sold when the country gained political freedom 22 years ago. The idea is that white monopoly capital is the source of the problem of multiple failures of the South African political economy.

The response has been a rising chorus of white monopoly capitalism deniers who argue that the governing African National Congress (ANC) is using the concept as a shield against criticism. Instead of addressing its failings such as a faltering economy, widening inequality, unemployment, corruption and incompetence, the argument goes, the ANC is deflecting attention for the country’s difficulties by blaming white monopoly capital.

Some in this camp add that South Africa has recorded significant progress in redistributing the country’s wealth, mainly via the allocation of equity in formerly white companies to black economic empowerment groups. They quote figures that they say reflects rising levels of black ownership on the Johannesburg Stock Exchange.

But by relying on a single indicator, they ignore other key pointers which are critical to understanding the stranglehold that white capital has over the South African economy. The exclusive focus on the JSE ignores the fact that the stock market is just one of many forms of capital. Others include land – probably one of the most contentious of all forms of capital in South Africa’s history – home ownership and human capital, in the forms of knowledge, skills and education.

A multifaceted enquiry into the state of South African economy that includes all these forms of capital leaves no doubt that white capital continues to dominate the economy.

To reject this reality shows a clear lack of understanding of “capital” and the link between historic and contemporary forms of “capital accumulation”. This is because the historical legacies of colonialism and apartheid – which saw the transfer of a vast amount of the country’s resources into the hands of white European migrants – continue to shape the political, economic and social life of the country.

Persistence of white privilege

Legacies of white privilege still persist. High levels of poverty and rampant unemployment still haunt black communities.

This inequity is also evident in patterns of ownership. Despite claims to the contrary, a study of black ownership on the Johannesburg Stock Exchange shows clearly that black South Africans remain small time players. According to a recent study, only 23% of the shares traded on the exchange are held – directly and indirectly – by black South Africans.

On top of this, capital, in its varied forms such as the land, property and human capital, remains heavily skewed to white ownership. The land is particularly important in the South African context as it carries most colonial scars. The country’s colonial and apartheid regime (both white minority) used expropriation to remove people from their land. They then used this stolen land to accumulate capital in the forms of mining and agriculture.

At the time of apartheid in 1994, more than 80% of the land was in the hands of white minority. Data from the Institute of Poverty, Land and Agrarian Studies suggest that just under 60,000 white-owned farms accounted for about 70% of the total area of the country in early 1990s. Land reforms programme has been slow. Some suggest that less than 10 % of the total land has been redistributed from white to black ownership since 1994.

Another cornerstone of the colonial as well as apartheid designers was to deny all black people access to economic opportunities as well as to limit their scope in both education and jobs. These developments have had sequential implications and generational effects. The result is that racial inequalities continue to be reproduced.

There are a great many examples that can be cited to show this. For example, white people continue to be more skilled and attain higher education levels than their black counterparts. They are, therefore, more likely to attain higher positions in the labour market and, on average, earn higher wages.

Black South Africans remain heavily under-represented in the skilled jobs market because they are largely unskilled and hence most affected by the country’s high unemployment.

The colonial and apartheid legacy can also be seen in asset ownership. White people own houses, hotels, resorts, shops, restaurants, savings, cash, foreign assets and other forms of complex financial products. They leverage their ownership and control to extract rents and increase their wealth, while majority of the blacks are still poor.

Capital accumulation and wealth creation

The adoption of the market-based reforms in post-apartheid South Africa meant that the already skewed distribution of wealth in the country got worse. Whites continued to reap the rewards of their previous privilege under the new economic system.

There’s no doubt that the country’s new ruling party elite has also benefited from the political system, many through black economic empowerment deals. The alliance between the white monopoly capital and corrupt ANC government afflicts devastating consequence on the poor.

The South African government needs to do more to address widening inequality, rampant unemployment and deliver on the promises of development for all and not just few. It needs to prove its detractors wrong – that it’s pursuit of what it terms “radical economic transformation” fulfils the promise of addressing the country’s skewed economic ownership patterns.

Mohammad Amir Anwar, Post-doctoral Research Fellow, University of Oxford

This article was originally published on The Conversation. Read the original article.

  1. Opinions and Analysis

Calender

« October 2018 »
Mon Tue Wed Thu Fri Sat Sun
1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
29 30 31