Economic disruption from uneven currency trading in Nigeria and continued electricity shortages in South Africa are set to hold back overall growth across sub-Saharan Africa this year, a Reuters poll of economists found on Thursday.
Since commodity prices collapsed four years ago, the region has largely missed out on the global economic recovery, with growth failing to return to rates seen in previous years and set to remain subdued.
The survey, taken in the past week, shows Nigeria, Africa’s most populous country and largest economy, is expected to grow 2.4 percent this year and 2.8 percent next year. South Africa, the number two economy on the continent, will grow 1.3 percent this year and 1.7 percent in 2020.
The 2019 forecasts for the two countries, which together drive around half of the wider region’s growth, are both 0.1 percentage points lower compared to the last survey for Nigeria in January and March’s poll for South Africa.
“Tepid growth in South Africa is one reason why we expect that growth across Sub-Saharan Africa will remain disappointing in 2019,” said John Ashbourne, an economist at Capital Economics in London.
Creaking infrastructure at South Africa’s state power utility Eskom is taking longer to fix than economists previously thought. Rolling power cuts as it struggles with capacity shortages threaten to stymie President Cyril Ramaphosa’s efforts to boost investments and economic growth.
In Nigeria, multiple currency exchange rates designed to deal with dollar shortages following a slump in global oil prices in 2015 have undermined its economy.
Ashbourne said that keeping the naira artificially strong in 2015 prevented the economy from adjusting to lower oil prices.
“The foreign exchange system was improved in 2016, when the Bank partially devalued the official rate and launched a new, ‘Nafex’ rate, now used for 70-80 percent of transactions. But it remains complex and open to abuse,” he said.
South Africa’s economy expanded 0.8 percent last year while Nigeria’s economy grew 1.9 percent, its fastest pace since the recession two years earlier.
The economists surveyed expect South Africa’s key interest rate to remain at 6.75 percent until next year while a separate Reuters poll last month suggested Nigeria’s central bank will wait until May 2020 before cutting its main rate by 25 basis points to 13.75 percent.
Ghana is forecast to grow 6.2 percent, faster than January’s survey suggested. Some analysts expect the exporter of cocoa, gold and more recently oil to be the top performer this year.
Growth in East Africa’s biggest economy Kenya is seen slowing to 5.8 percent growth in 2019, compared to a government estimate of 6.1 percent for 2018. The World Bank is more cautious and has warned growth could slow to 5.7 percent due to dry weather patterns.
The International Monetary Fund last week cut its growth projection for sub-Saharan Africa this year to 3.5 percent from 3.8 percent in October. The World Bank is again more pessimistic, with a 2.8 percent forecast.
A separate survey this month showed yield-hungry investors will trade risky emerging market currencies cautiously against the dollar this year despite the Federal Reserve’s recent dovish stance, though there is still demand for them.
Standard Chartered Africa research head Razia Khan expects the Fed’s more dovish tilt to have a positive impact on sub-Saharan African economies in the months to June, allowing stronger domestic recoveries. However, she was cautious about the likelihood of new easing cycles.
An elephant has killed a suspected poacher and lions have eaten his remains, with a human skull and a pair of pants all that authorities have been able to recover.
The man and his accomplices entered South Africa's Kruger National Park in order to poach rhinos on April 2, according to South African National Parks.
The family of the man, who is believed to have been trampled to death, contacted rangers who arranged an aerial and foot search the following day and arrested his four accomplices.
However, due to failing light, they were unable to locate the man's body, and with "further information" provided by the suspected poachers, the search continued into Thursday.
"During this search … the remains of a body were discovered," South African National Parks said in a statement.
"Indications found at the scene suggested that a pride of lions had devoured the remains, leaving only a human skull and a pair of pants."
The Kruger National Park, one of Africa's largest game reserves, is renowned for its high density of wild animals, including lions, leopards, rhinos and elephants.
Park managing executive Glenn Phillips warned people against entering the reserve on foot, saying "it holds many dangers and this incident is evidence of that".
"It is very sad to see the daughters of the [deceased] mourning the loss of their father and, worse still, only being able to recover very little of his remains," he said in a statement.
It is not the first time a suspected poacher has fallen victim to their prey in the Kruger National Park.
Last year lions killed and devoured a man believed to have been poaching animals in the park, leaving behind only "his head and some remains".
Elephants in the reserve have also been known to react violently to the presence of humans.
In 2014, footage emerged of an elephant overturning a car, seriously injuring a woman when one of its tusks ripped open her thigh.
The elephant was later put down and was discovered to have been in musth, a condition that usually affects male elephants once a year when testosterone levels, aggression and sexual activity increase.
Credit: ABC News
In the early hours of Saturday, South Africa again avoided a massive blow: its government bonds were not downgraded to junk.
In a surprising move, Moody’s did not release any report – but just said that “ratings were not updated” for South Africa.
Friday was the scheduled day for an announcement on South Africa’s credit rating. The next date is in November – but Moody’s can change its ratings at any time.
South Africa currently has a Baa3 rating, the last step before “junk”, with a stable outlook. Polls among economists showed they were split on whether Moody’s would change South Africa’s outlook to “negative” (from stable) – and some predicted it would go all the way to “junk”. A “junk” rating means the agency believes there's is a bigger chance that government won’t be able to pay back its creditors.
The two other big ratings agencies, Fitch Ratings and S&P Global, lowered South Africa's credit rating to "junk" in April 2017 after Pravin Gordhan was fired as minister of finance.
If SA lost its investment rate grade from Moody’s as well, it would have cost the country its place in the most important group of government bonds. The Citigroup’s World Government Bond Index contains only bonds that are investment grade.
All the many overseas investment funds that are only allowed to invest in investment grade bonds would have been forced to sell their South African government bonds.
Bank of America previously estimated that South African bonds would have been sold off to the tune of $14 billion (R200 billion).
This would have lowered the value of our bonds, and make it much more expensive for government to borrow money to keep the country afloat.
Retaining our investment grade rating, which SA has held since 2001, should mean the following:
A sell-off of government bonds would have meant a massive outflow of money out of the country – putting pressure on the rand.
A weak rand affects everything, starting with fuel prices. Oil is South Africa’s biggest import. If the rand weakens, oil (which is priced in dollars) becomes basically immediately more expensive.
Imported electronics and machinery are pricier if the rand is weak. And South Africa’s maize and wheat prices are also linked to the global dollar prices.
The rand remained relatively stable following the announcement at R14.48/$.
A weak rand means higher inflation, as more expensive fuel and other imported products push prices higher.
Given that some of the pressure on the rand should ease, this means that inflation will be contained. And this gives the Reserve Bank some leeway to perhaps cut interest rates as a much-needed boost to a comatose South African economy.
The credit ratings of Standard Bank, Absa, Nedbank and FirstRand are all tied up to the rating of South Africa, where they make most of their profit. S&P downgraded seven local banks directly after it cut South Africa to junk. This means that banks have to offer higher interest rates when they borrow money.
By law, banks are also forced to hold government bonds, which would have hurt them in case of a bond sell-off.
If government has to pay more in interest on its debt, it will need more money from you to cover its basic expenses. This can only mean one thing: higher taxes.
Source: Business Insider SA
Retailer Steinhoff will provide the necessary documents to South Africa's capital markets watchdog to enable it to investigate alleged market transgressions, the Financial Sector Conduct Authority (FSCA) said on Thursday.
Steinhoff admitted "accounting irregularities" in December 2017, shocking investors who had backed its reinvention from a small South African business to a multinational retailer at the vanguard of the European discount furniture retail industry.
Findings from an independent report by PwC said earlier this month that Steinhoff had overstated profits over several years in a $7.4 billion accounting fraud involving a small group of top executives and outsiders.
The FSCA said it had met with representatives of Steinhoff who agreed to provide them with all relevant documents, without waiving confidentiality agreements from the PwC report, which Steinhoff has repeatedly refused to share in full with regulators.
The FSCA added that Steinhoff had confirmed the disclosure will enable it to act against all persons implicated in the transgressions.
Steinhoff said it could not comment on the FSCA's investigations or beyond what was released in the PwC report.
Former Steinhoff Chief Executive Markus Jooste and seven others were named by the new CEO as being involved in a 6.5 billion euro ($7.4 billion) accounting fraud, during a session in parliament.
News of the irregularities in 2017 wiped about 85 percent off its market value and threw the company into a liquidity crisis.
Corruption in South Africa isn’t simply a matter of bad morals or weak law enforcement. It’s embedded in processes of class formation – specifically, the formation of new black elites. This means corruption is primarily a matter of politics and the shape of the economy.
In a recently published paper, I attempt to shed fresh light on the unconvincing narratives that have been presented in the media, NGOs and academic circles about the events of the past 10 years.
These narratives generally depict events as a struggle between two opposing forces. On the one side are a network of politicians, officials, brokers and businessmen centred on former President Jacob Zuma and the Gupta family. All are bent on looting, state capture and self-enrichment. On the other are a band of righteous politicians and citizens. This group is seen as drawing together the “old” ANC, activists, “good” business and citizens in general. They are intent on rebuilding institutions and good governance, the rule of law, international credibility and fostering growth and development.
I argue that a much deeper set of social forces underlies and shapes the struggles within the governing party, the African National Congress (ANC), and the society more broadly. These political struggles are inseparable from struggles over the shape of the economy.
The primary process to change the economy has been the drive to accelerate the emergence of new black elites. But institutional interventions, such as black economic empowerment, have been insufficient.
Already, during the Thabo Mbeki period as well as the presidency of Nelson Mandela, an alternative informal political economic system was emerging at national, provincial and local levels. Through this, networks of state officials, ambitious entrepreneurs as well as small time operators, were rigging tenders or engaging in other kinds of fraud so as to sustain or establish businesses, or simply to finance self-enrichment.
Because of a number of factors there was little alternative for channelling the aspirations and burning sense of injustice of black elites and would be elites in post-apartheid South Africa. These factors include the property clause in the Constitution, the conservative strategies adopted by the ANC government and the fact that large corporations and white owned businesses dominated the economy.
This means that opportunities are few, demand is high and competition is fierce. In this context, the state is where people who are locked out are most likely to gain some access.
This links to the issue of violence. The emergence of new elite classes is often a ferociously contested, ugly and violent affair. South Africa is no different from many other post-colonial countries – or indeed the histories of the Euro-American elites that currently dominate the globe.
In South Africa this violence takes the form of burning down homes and state facilities, intimidation, assault, the deployment of the criminal-justice system to protect some and target others, and, increasingly, assassination.
I argue that this set of practices constitutes an informal political economic system. By a system I don’t mean a structure which is centrally coordinated or planned. What I’m referring to is a pervasive and decentralised set of interlocking networks that reinforce and compete with one another in mutually understood ways, and include the use of violence as a strategic resource.
This system preceded Zuma’s presidency, and extended far beyond the Zuma-Gupta network. The recent revelations about corruption at the Zondo commission into state capture, VBS mutual bank or in the book, How to steal a city by Crispian Olver, make this abundantly clear.
It should also be abundantly clear that the informal political-economic system necessarily entangles President Cyril Ramaphosa’s core network of institution builders.
Ramaphosa’s key challenge is to build a stable coalition within the ANC so as to embark on his project of institution building. His trajectory, and the future shape of corruption in South Africa, will be determined by the character of the coalition he can forge – or that will be forced on him – among party barons within the ANC.
For the purpose of building institutions and attracting investment, it will be necessary to establish as stable a coalition as possible. This means it will have to be a broad coalition. One thing is sure: the coalition will include corrupt figures. It already does. The informal system of patronage politics will remain pervasive.
Even so, Ramaphosa’s power is precarious in the ANC. The odds are stacked against success in establishing stability. For the medium-term the trajectory of politics is likely to be characterised by multiple contestations over material opportunities, political power and symbolic representation. This will give rise to an increasingly volatile, unstable and violent political space.
To return, then, to the prevailing narrative and its misreading of the politics of corruption.
Deep structural issues
The problem with the narrative is that it assumes it’s possible simply to remove some “rotten apples”“, and it sets standards Ramaphosa cannot possibly match.
Perhaps, though, it is a useful fiction for the mobilisation of civil society, journalists and judges, which at the very least may contribute to containing corruption?
There is some validity in this. Yet it fails to direct attention to the deep structural issues which give rise to corruption as an aspect of class formation.
The only long-term and stabilising solution would be to draw into the formal system some of the purposes of the informal system. This would require a much more fundamental redistribution of assets and wealth, which could be deployed in the large-scale formation of a new black business class, primarily located in manufacturing and agriculture, as well as to fixing the education crisis. The result would be the formation of professional, scientific and technical middle classes.
This kind of solution will not emerge from the Ramaphosa administration, which is much more fixed on reproducing the policies of the Mbeki era. The problem is that these were what created the opportunity for the rise of Zuma in the first place.
South Africa’s central bank says rising fuel and electricity prices posed a domestic risk to the inflation outlook and impact on its 2019 growth.
The apex bank governor, Lesetja Kganyago, gave the remarks on Wednesday after the latest fourth-quarter data showed an annualised growth of 0.8 per cent.
Besides, Kganyago said the impact of the volatile Rand currency and tightening global financial conditions were also being monitored for possible inflationary impacts.
The governor, however, maintained that he expected the economy to grow by 1.7 per cent this year and two per cent in 2020.