May 2007 in South Africa

POLITICAL TRENDS

The Merry Month of May has been interesting to watch as political forces manoeuvre for positions to increase their power in South Africa - or at least to effect changes in future policy.

Zille has chosen to remain mayor of the second largest metropole in South Africa, where she can impose policy instead of criticise it. In a move rare in parliamentary politics anywhere in the world, she has appointed someone else - Sandra Botha - to represent her leadership in the House of Assembly. This is likely to lead to firmly critical, but less aggressive debates than those led by Leon who fought to establish formal checks on potential one-party government.

With the ruling ANC's overwhelming government alliance showing increasing fragility, Zille's demonstrable efficiency and forthright political style could become significant during the government's internal power struggles in the year ahead.

Main event
Centre stage, however, was grabbed at the end of May by the Labour Left. The Trade Union movement - one of the governing ANC's two partners - called for mass, national strikes of public service workers after a week of abortive negotiating with the Cabinet behind closed doors. The government offered a 6% wage increase and a belatedly revealed remuneration package aimed at rewarding skills and competence over several years. The trade unions demanded an immediate 12% across the board.

Sensible settlement is possible, but Government has failed to communicate its comprehensive offer, and the unions, with a sound, popular case, are in no hurry to compromise. Anger at the growing gap between workers and 'the elite' is widespread. Anti-government protest is finding support outside unionist ranks. Thus the current power-play - initiated by the Council of SA Trade Unions and supported by several factions within the ANC Alliance - may draw out the dispute..

Events in June will show whether on-going strikes and protests are maintained and whether these will influence the fundamental policy debate due to take place within the ANC in July. The policy debate, in turn, could effect the ANC's election of its party president in December. And that election, of course, will be a deciding factor in electing a new President of South Africa.

Meanwhile, as wage demands and costs of oil and fuel continue to escalate, they bring increasing pressure on an inflation rate that has remained fairly static during a prolonged period of economic growth.

ECONOMIC TRENDS

Producer and consumer prices jumped simultaneously in the last week of May, according to Standard Bank. This was caused mainly by global oil costs rising $9 a barrel in the previous two months.

Food prices recorded in April showed a mixed reaction, with agricultural products falling an average 0.2% month-on-month, and processed foods rising in price by 2.3% The prices of fresh meat fell by 0.3% while prices of meat products rose by 1.7%. Though food and oil had been the main drivers of inflation, there was ample evidence of broad-based domestic price pressure, said Standard Bank.

This again raises the prospect of an interest rate rise. But a much more immediate pressure referred to by the Governor of the Reserve Bank on May 31 would be wage demands above the inflation rate. A wage increase of 12% demanded by civil servants would be twice the current rate - and wage inflation would become entrenched as workers in the private sector made similar demands.

The producer price index (PPI) rose 1.7 % in April, pushing year-on-year producer inflation to 11.1% - the highest in five and a half years. The consumer price index (CPI) rose 7% year-on-year.

South Africa's trade deficit widened to R5.7 billion in April, raising the possibility of another annual deficit of more than R100 billion, according to Business Report.

Exports in April totalled R38 billion and Imports R43.7 billion. The imbalance was more than double that of April last year and is likely to increase as the huge national reinvestment programme leading to the year 2010 gets under way.