|
 |
February - March 2008 at a Glance
|
February - March 2008 at a Glance
[Monthly Article Archive]
Polokwane Fallout Continues
Jacob Zuma, the new ANC President, has had to practise a lot of political tap dancing since his elevation to the ANC presidency in December. It seems as though every time he opens his mouth, he evokes someone's displeasure. And the press follows his every move. When he tries to mollify business by endorsing the budget and the continuity of current macro-economic policy, labour takes him to task - and vice versa. The new leadership within the ANC is clearly exercising its influence, making more apparent the inherent divergence of interests among the tripartite alliance and clearly sidelining the "exiles", who have dominated the ANC since 1994.
Meanwhile, Zuma and his legal defence team continue to deny any corruption on his part in the infamous arms deal and to try to prevent evidence from being presented in court.
But the shadow of the arms deal does not hang over Zuma alone. There have been allegations that President Thabo Mbeki also was involved in arms deals irregularities, along with other ministers. The opposition in parliament calls for a thorough investigation, while some ANC stalwarts suggest an amnesty of sorts to get rid of the problem. At the same time, the ANC is determined to disband the Scorpions (a special prosecuting authority that operates separately from the South African Police Services (SAPS) and is considered by the vast majority of South Africans as much more effective). This naturally gives rise to suspicions that there really is something to hide since the Scorpions are investigating allegations about arms deal corruption and have brought charges against Zuma. Although the opposition parties in parliament oppose the disbandment of the Scorpions, it appears the ANC majority will prevail and fold the Scorpion operations into the SAPS despite overwhelming public opinion in favour of maintaining the Scorpions.
The ANC leadership wants Kgalema Mothanthe, the new ANC Vice President, to be given a cabinet post to help prepare him for his eventual duties as Vice President of the country, or, in the event of Zuma's conviction, President of South Africa. That is likely to transpire in the near future.
Economic Travails
Good news about the economy was difficult to come by during the first quarter of 2008. Inflation continues to rise, electricity shortages won't go away for years, interest rates remain high and could go higher. Economic growth is projected to fall to 4% this year, probably impacting negatively on job creation. Wage settlements during the course of the year are likely to be inflationary. As the Governor of the Reserve Bank said in late March, South Africans need to tighten their belts.
There was some good news in the 2008-09 budget presented February 21. South Africa had achieved a 5.1% growth rate in 2007 and accumulated a 1% budget surplus. A late March report showed that 433,000 jobs were created during the twelve months to September 2007, lowering the unemployment rate to 23%. But that is about as far as the good news went. Year-on-year inflation was well outside the targeted range and projected to remain so.
Eskom power shedding began to bite, causing losses in mining and manufacturing. Higher interest rates were also beginning to bite, causing serious slowdowns in both the housing and automotive sectors.
In late March, Eskom, the state owned electricity supply company, requested a 53% hike in electricity prices over the next few years to cover the cost of new generating plants. The labour unions and elements of the ANC protested loudly but government has little choice but to approve the request. It can not afford to do anything that would impede the infrastructure improvement programmes and the preparations for the 2010 Fifa World Cup. Add increased electricity costs to the higher costs for food (grain prices increased 20% last year) and fuel (up 30%) and it is difficult to see how inflation can be brought back to the targeted 3-6 per cent range in the near term.
CPIX for February, year-on-year, reached 9.4%, the highest in five years. Headline inflation rose to 9.8%. The Produce Price Index for February, y-o-y, was 11.2%. Reserve Bank Governor Tito Mboweni insisted that the inflation outlook did not necessarily mean that interest rates would be raised when the monetary policy committee meets next month but he did not rule it out either.
Leading Indicators
Gold Price - $946 an ounce (March 27), after reaching $1,000 earlier in the month
Platinum Price - $1983 an ounce (March 27), after reaching $2200 earlier in the month
JSE All Share Index - R29, 693 (March 27), compared to R25, 135 on January 24
CPIX - 9.4% - February, y-o-y
CPI - 9.8% - February, y-o-y
PPI - 11.2% - February, y-o-y
Exchange Rate - R/US$ - 8.03; R/Euro - 12.65; R/Pound - 16.06 (March 27)
Unemployment - 23%
|
|
|
|