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September - October 2008 at a Glance
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September - October 2008 at a Glance
[Monthly Article Archive]
The fall of Mbeki
While the attention of the world has been riveted on the economic meltdown in Western financial markets, the political earthquake that has struck Southern Africa in late September has attracted relatively little notice. As Thabo Mbeki was putting the final touches to the power-sharing arrangement between Robert Mugabe's ZANU-PF and Morgan Tsvangerai's MDC in neighbouring Zimbabwe, his enemies back home were conspiring to unseat him from the South African presidency. The Zimbabwean deal, which leaves Mugabe in the presidency and in control of the army, and makes Tsvangerai prime minister at the head of a council of ministers and in control of the police, looks extremely shaky. It has thus far not persuaded Western donors to advance the financial support necessary to resurrect the Zimbabwean economy and its elected prospects have been further diminished by the fall from grace of its architect and broker.
In South Africa itself, an application by Jacob Zuma to have his prosecution for fraud and corruption set aside on a technicality was upheld by a judge in Kwa Zulu-Natal, clearing the way for the ANC president to ask the same court (in November)for a permanent stay of prosecution. While stressing that he was not pronouncing on the guilt or innocence of Zuma, Mr Justice Nicholson found that having announced previously that it had insufficient evidence to charge Zuma, the National Prosecuting Authority ought to have consulted him before bringing fresh charges. Invited by the NPA to dismiss the allegation that the charges were politically motivated, Judge Nicholson found that there might have been political interference by President Mbeki and members of his cabinet in the prosecution of Zuma. This was enough to provoke Zuma's supporters in the National Executive of the ANC, elected at the recent party congress in Polokwane, to 'recall' Mbeki from the presidency and to appoint a caretaker until the general elections seven months hence. Calculating that he could not muster the support he needed in Parliament to defy the party Mbeki went quietly, amid mutual protestations of brotherly amity and a desire to act in the best interests of the ANC. Mbeki and the NPA have since taken Judge Nicholson's judgment on appeal to the Constitutional Court, ensuring that there will be no immediate end to Zuma's quest to be cleared of criminality.
Mbeki's replacement is Kgalema Motlanthe, the quietly-spoken, publicity-averse, former trade unionist and secretary-general of the party, who was recently appointed a minister in the presidency on the insistence of the Zuma camp in the ANC. (Zuma was not eligible for election now because he is not an MP). Fourteen members of Mbeki's cabinet tendered their resignations, of whom only six were not reappointed. The most significant re-appointee was the Minister of Finance, Trevor Manuel, whose resignation shocked the markets until was announced that he would continue as Finance Minister.
Addressing the nation on TV shortly after his appointment, President Motlanthe went out of his way to assure the country that continuity would be his watchword and that no major policy changes were envisaged - a statement that may concern the ANC's alliance partners, Cosatu and the SA Communist Party, who are strong backers of Jacob Zuma. Opinion polls show, however, that Motlanthe is at lease as popular in the country at large as Zuma, who may yet be denied the presidency if he cannot shake off the serious charges against him.
Economy buffeted by global price rises
South Africa's longest period of economic expansion - at an average of five percent over the past nine years - has slowed in 2008 as a result of a surge in oil, food and electricity prices, high interest rates, and a cooling of consumer demand. Producer Inflation surged to 19% in August and is likely to ease only in 2009 when it is predicted that interest rates will come down.
The economy has been adversely affected by a shortage of electricity, brought about by years of government under spending on generation capacity. Nationwide power cuts have caused a reduction in the output of aluminium and forced gold and platinum mines to curtail operations, pushing up metal prices and undermining the country's economic reputation. Deficits on the capital and trade accounts have led to a weakening of the rand - to over 8 to the dollar.
South African banks, by and large, have escaped the meltdown being experienced in the US and Europe - thanks partly to their uninvolvement in the sub-prime debacle, good regulation and, the shackles imposed by exchange controls. What life there is in the economy is being boosted by infrastructural spending on transit systems, roads and stadiums in preparation for the FIFA 20120 World Cup.
The local equity market has also been dragged down by the global financial crisis. The FTSE JSE index has dropped to a level in the 24 000s - its lowest rate since January 2007.
Leading Indicators (Sept29)
| Gold Price | $ 902 |
| Platinum Price | $ 1140 |
| JSE All Share Index | $24 499 |
| CPIX (July) | 171.1 (+13.4 % y-o-y) |
| CPI (July) | 166.4 (+13.7 % y-o-y) |
| PPI (July) | 182.5 (+18.9% y-o-y) |
| Real GDP Growth Rate (July) | 4.9% |
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| Currencies (Sept 29): |
| R/$ 8.036; R/£ 14,827; R/€ 11,763; |
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