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Political Developments
There was serious sparring - but no knockouts - on the political front in South Africa in April. The impact of the sparring will be seen only later in the match.
The official opposition party, the Democratic Alliance, is about to elect a new leader. The inside track belongs to Cape Town mayor, Helen Zille. If elected, can she be both an effective sitting mayor of a major metropolitan municipality and, without a seat in the National Parliament, an effective leader of the opposition? She has successfully developed coalitions from a minority position in the past and at a time when the ANC is showing serious internal stress, she may be better equipped than her predecessor to exploit them.
At the same time, the internal battle for the soul of the governing ANC goes on in an unusually public manner. There are two important elections in the offing. The ANC holds leadership elections next year, and its president would normally become President of South Africa after the national elections of 2009. But there is a complication.
Jacob Zuma, dismissed by President Mbeki as Vice President of South Africa, remains vice president of the ANC - and is determined to run for election as party president at the next party congress. He has support from some labour unions and the Youth League of the ANC.
Thabo Mbeki, on the other hand, is precluded from serving a third term as national president, but is under pressure to stand again as ANC president. If he does so, and wins, he could thwart Zuma and name his own choice for national President, thus establishing himself as the power behind the throne.
Watch this space. Telling developments will take place over the next few months that will shape the political future of South Africa.
Crime remains the major concern of South Africa's people. While government downplays the problem, it has sent the nation's number one crime fighter, the Minister of Safety and Security, to Europe to reassure nervous investors that the country is safe for investment.
Economic Developments
The strains of expanded infrastructure spending, much of it related to the preparations for the 2010 World Cup of Soccer, are beginning to tell. The country is running short of cement and exports have plunged by more than 30%. Leading producers are importing to meet local demand. Naturally, prices are soaring, adding to other inflationary pressure (see below).
At the same time, the nation's power generation and distribution system is in crisis, according to some reports. While a good portion of infrastructure spending will go to upgrading and expanding, a shortage of skills in the industry coupled with past neglect have led to repeated power outages and disruptions costly to business. Experts say there are no quick fixes.
Some reports indicate that the economy may actually be as much as 9% larger than indicated in the latest budget. The figure may be overstated but the consensus among economists is that the GDP is several percentage points greater than estimated in February. This has implications for per capita income, GDP growth and other data.
Vital Statistics
At the end of April, the JSE's All-share index was at a record high of over 28,000. The gold price stood at $678 an ounce and platinum at $1280 an ounce.
Inflation pressures emanating from higher economic growth and spending were clearly reflected in end of March statistics.
CPIX, the main measure of inflation, was 5.5% in March (year on year), compared to 4.9% in February. Many economists expect CPIX to breach 6%, the upper limit of the 3 - 6% target range set by the Reserve Bank.
The Consumer Price Index (CPI) also rose to 6.1% in March from 5.7% in February.
The Producer Price Index (PPI) hit 10.3% in March, up from February's 9.5%. It was the highest increase in PPI since December 2002. Food inflation and increased petrol prices helped by infrastructure spending fed the inflationary push.
The trade balance, as expected, continued in the red. The deficit for March rose to R2.74 billion from R2.67 billion in February while the current account deficit rose to 6.4% of GDP, the highest in over 30 years.
Despite the inflation and trade figures, the Reserve Bank did not raise interest rates at its April 12 meeting. If inflationary pressures continue, however, another interest rate hike, after four increases last year, may be unavoidable.
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