Jacob Zuma, who is tipped to be South Africa’s next president, has assured the US that the country was safe despite recent political uncertainly.
Zuma, who is currently the African National Congress’ president, which is the ruling party in South Africa, met with Secretary of State Condoleezza Rice and President George W. Bush at the White House, rather than country president Kgalema Motlanthe.
Zuma said that the trip was aimed at increasing commercial ties between the largest economies of two continents, adding that not enough had been done in the past to secure trade flows from the US to South Africa.
The United States was assured business would continue as usual and that no policy changes would happen after the country’s former president, Thabo Mbeki, was recalled last month.
Investors in Africa’s largest economy were seeking commitments from Zuma that he would not bow to pressure from his communist and trade union allies to steer South Africa away from the pro-business policies of Mbeki.
In his speech to the Council on Foreign Relations in Washington, the president-in-waiting confirmed that country policy would not change.
“There should be no worry. The situation is going to continue normally. In a sense I am saying: ‘no panic, everything is fine in South Africa’,” said Zuma.
He added that the ANC, as a democratic organisation, took decisions collectively and that the country’s liberal and progressive constitution’s checks and balances would remain in place.
“I have absolutely continued to say that I would change no policies if I became president. I have no authority to do so. That is in the hands of the ANC.”
Zuma said that he was in the USA to push for increased investment and commercial ties with one of South Africa’s key trade partners.
“We believe America, up to now, has not taken advantage of the open economy that we have,” he said.
According to the US Census Bureau, the United States between January and August this year exported US$4.2-billion worth of goods to South Africa and imported goods worth US$7.2-billion.
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Wednesday, October 22, 2008
South Africa's growth projections 'enviable'
South Africa’s projected 3.7 percent GDP growth for 2008 was “like gold” in the current economic environment.
Lesetja Kganyago, Director General in the Treasury, said that in a climate where the world’s seven richest nations may record zero or negative growth for 2009, South Africa’s growth, while slower than initially predicted, was still enviable.
“A projection from 4 percent to 3.7 percent is like gold,” said Kganyago.
In his budget speech, the country’s finance minister Trevor Manuel had cut growth forecasts, but emphasised that South Africa was still in a relatively comfortable position when compared to other economies.
The medium-term budget policy statement dropped South Africa’s GDP projections in 2009 to just 3 percent from the 4.2 percent expected in February as slower global conditions bite.
GDP was projected to grow by about 3.7 percent for 2008, but to rise to 4.0 percent for 2010 and 4.3 percent for 2011.
Kganyago added: “The prophets of recession [in South Africa] have lost their congregation.”
Kganyago noted that for investors in South Africa that the effect of the current global crises would only be felt next year, but added that “we think we have built the anchors and in the outer two years will be back to 4% and more.”
Lesetja Kganyago, Director General in the Treasury, said that in a climate where the world’s seven richest nations may record zero or negative growth for 2009, South Africa’s growth, while slower than initially predicted, was still enviable.
“A projection from 4 percent to 3.7 percent is like gold,” said Kganyago.
In his budget speech, the country’s finance minister Trevor Manuel had cut growth forecasts, but emphasised that South Africa was still in a relatively comfortable position when compared to other economies.
The medium-term budget policy statement dropped South Africa’s GDP projections in 2009 to just 3 percent from the 4.2 percent expected in February as slower global conditions bite.
GDP was projected to grow by about 3.7 percent for 2008, but to rise to 4.0 percent for 2010 and 4.3 percent for 2011.
Kganyago added: “The prophets of recession [in South Africa] have lost their congregation.”
Kganyago noted that for investors in South Africa that the effect of the current global crises would only be felt next year, but added that “we think we have built the anchors and in the outer two years will be back to 4% and more.”
Wednesday, October 15, 2008
Rich black people still, well, rich
While the world is struggling to get to grips with one of the worst financial crises since the Great Depression, South Africa’s growing black middle class was weathering the storm well according to a recent survey.
A TNS Research Surveys report showed that the black middle class of about three million people colloquially known as the “Black Diamonds” was proving resilient to the global financial crisis on the back of spending power that grew by more than a third in 2007.
The survey also found that the spending power of this black class now matched that of the white population, which is of similar size, in South Africa for the first time.
According to Rudo Maponga of TNS Research Surveys, “The most impressive finding is that they have shown resilience to the global and domestic financial decline, increasing their spending power from R180-billion (about $20-billion) in 2007 to R250-billion this year.”
A previous TNS survey had shown that only 10 percent of the black diamonds were affected by the global credit crunch and higher interest rates, which could lead to asset repossessions.
“The black diamonds’ earning power has increased and the majority of them are becoming more financial savvy, which minimises the risk of getting caught up in debt,” said Maponga.
According to the survey, black women in this class accounted for 40 percent of the R120-billion spent annually but South African women.
“Almost half of the women interviewed said they earned over 50 percent of the household income, whilst over 80 percent said they were the main household decision makers when it came to the majority of purchases,” said Maponga.
The survey, which polled 1500 black people in major urban areas, took place in August.
Since 1994 South Africa, the black middle class has expanded at one of the fastest rates in the world, mainly as a result of pro-black policies aimed at expediting black business interests to deal with apartheid imbalances that advantaged the white population and left the black population mostly in poverty.
However, critics believe these black empowerment policies are making business in South Africa inefficient and expensive while not reaching the majority of poor black households. Elitism is also a problem, as many of the now rich businesspeople were not necessarily poor to start with, coming from positions of advantage in the former homelands.
A TNS Research Surveys report showed that the black middle class of about three million people colloquially known as the “Black Diamonds” was proving resilient to the global financial crisis on the back of spending power that grew by more than a third in 2007.
The survey also found that the spending power of this black class now matched that of the white population, which is of similar size, in South Africa for the first time.
According to Rudo Maponga of TNS Research Surveys, “The most impressive finding is that they have shown resilience to the global and domestic financial decline, increasing their spending power from R180-billion (about $20-billion) in 2007 to R250-billion this year.”
A previous TNS survey had shown that only 10 percent of the black diamonds were affected by the global credit crunch and higher interest rates, which could lead to asset repossessions.
“The black diamonds’ earning power has increased and the majority of them are becoming more financial savvy, which minimises the risk of getting caught up in debt,” said Maponga.
According to the survey, black women in this class accounted for 40 percent of the R120-billion spent annually but South African women.
“Almost half of the women interviewed said they earned over 50 percent of the household income, whilst over 80 percent said they were the main household decision makers when it came to the majority of purchases,” said Maponga.
The survey, which polled 1500 black people in major urban areas, took place in August.
Since 1994 South Africa, the black middle class has expanded at one of the fastest rates in the world, mainly as a result of pro-black policies aimed at expediting black business interests to deal with apartheid imbalances that advantaged the white population and left the black population mostly in poverty.
However, critics believe these black empowerment policies are making business in South Africa inefficient and expensive while not reaching the majority of poor black households. Elitism is also a problem, as many of the now rich businesspeople were not necessarily poor to start with, coming from positions of advantage in the former homelands.
'What global credit crisis?' - South African banks
South African banks were not coming under significant pressure in the face of the global credit crunch and a worsening local climate, according to a recent survey.
While the Ernst & Young financial sector confidence index slipped to a six-year low of 61 points in the third quarter of 2008, down from 70 in the previous period, eight out of 10 investment banks continued to regard prevailing business conditions as “satisfactory” and four out of 10 retail bankers felt the same.
Despite a more challenging environment, which has seen more consumers become indebted as a result of higher interest rates, South African banks have not suffered the same liquidity difficulties as has been the case for banks in the Unites States and Europe.
The report argues that South African banks had escaped much market turmoil as exchange controls had limited the country’s exposure to risk and because an act limiting irresponsible lending had come into effect in the middle of last year.
The report said investment banks were confident despite weaker business volumes and an expected deterioration in the fourth quarter as economic growth slows. The rand and Africa’s biggest stock exchange were also under pressure.
Africa’s largest economy’s central bank raised its repo rate by 5 percentage points to 12 percent between June 2006 and June 2008 to beat inflation, but also slowing economic activity as spending power dropped.
“After the boom of overall business activity of the second half of 2007, growth halved during the first half of 2008, During Q3, growth slackened further,” the report said.
Tighter monetary policy has slowed consumer spending, and put household budgets under severe strain, as highlighted by contracting retail and new vehicle sales. Credit growth has eased this year and household debt levels dropped in the second quarter from a record high.
A government minister has also come out in support of local banks.
"Were South African banks to come under pressure, the government would intervene strongly to protect them," said ANC Treasurer General Mathews Phosa
While the Ernst & Young financial sector confidence index slipped to a six-year low of 61 points in the third quarter of 2008, down from 70 in the previous period, eight out of 10 investment banks continued to regard prevailing business conditions as “satisfactory” and four out of 10 retail bankers felt the same.
Despite a more challenging environment, which has seen more consumers become indebted as a result of higher interest rates, South African banks have not suffered the same liquidity difficulties as has been the case for banks in the Unites States and Europe.
The report argues that South African banks had escaped much market turmoil as exchange controls had limited the country’s exposure to risk and because an act limiting irresponsible lending had come into effect in the middle of last year.
The report said investment banks were confident despite weaker business volumes and an expected deterioration in the fourth quarter as economic growth slows. The rand and Africa’s biggest stock exchange were also under pressure.
Africa’s largest economy’s central bank raised its repo rate by 5 percentage points to 12 percent between June 2006 and June 2008 to beat inflation, but also slowing economic activity as spending power dropped.
“After the boom of overall business activity of the second half of 2007, growth halved during the first half of 2008, During Q3, growth slackened further,” the report said.
Tighter monetary policy has slowed consumer spending, and put household budgets under severe strain, as highlighted by contracting retail and new vehicle sales. Credit growth has eased this year and household debt levels dropped in the second quarter from a record high.
A government minister has also come out in support of local banks.
"Were South African banks to come under pressure, the government would intervene strongly to protect them," said ANC Treasurer General Mathews Phosa
Wednesday, October 01, 2008
South African government to boycott hotels not wanting Fifa to manage them
South Africa’s government could boycott business with hotels that refuse to give Fifa’s accommodation agency access to their rooms.
Match, Fifa’s accommodation agent, has so far only contracted half of the 60000 rooms it estimated it would need.
The move by government, which could severely hurt hotels as the government sector is a significant revenue spinner, could encourage hoteliers refusing to sign deals to make their rooms available to Match during the 2010 Soccer World Cup.
Otto Stehlik, Protea Hotels group executive chairperson, issued the warning at an investment conference for the hospitality industry presented by the Tourism Business Council of South Africa. Stehlik is also a member of the ministerial advisory Council for the 2010 Soccer World Cup.
Many of South Africa’s largest hotel groups, including Protea Hotels, City Lodge, Southern Sun and Legacy, have met with Fifa over the last two years to negotiate a fair contract.
Stehlik says, “We’ll be making a lot of money”, but believes the country’s image of being able to host such events could be hurt by a small part of the hotel industry that refuses to make their beds available to Match.
The executive attributes this to “ignorance or greed”, however many hotels feel that although the world cup is the world’s biggest sporting event, that there is no reason why Fifa should get a cut of bed revenue.
Hotels have until the end of October to sign a contract with Match, after which government is apparently prepared to impose boycotts against them. This boycott could, according to Federated Hospitality Association of South Africa’s (FEDASA) executive chairperson Brett Dungan, be extended to private enterprises doing business with government.
Stehlik says that those not willing to sign contracts believed they could be more profitable alone, and that this belief could place the World Cup in danger.
Match’s Adam Brown said that the agency did not have enough rooms at reasonable tariffs, and that this would result in spectators choosing not to come to South Africa.
Contingency plans have already included adding guesthouses and lodges to Match’s inventory, and the possibility of including school and university accommodation too. A last resort would be to berth luxury cruise ships in Cape Town, Port Elizabeth, East London and Durban as additional rooms to let.
Stehlik believes there are enough ships available to make up the shortfall if hotel groups don’t come on board, however, this would be unfortunate as it would mean South Africa’s tourism industry would lose potential revenue.
Brown says the deadline for hotels is at the end of October as inventory must be issued between the 162 tour operators making group reservations in various countries.
Match, Fifa’s accommodation agent, has so far only contracted half of the 60000 rooms it estimated it would need.
The move by government, which could severely hurt hotels as the government sector is a significant revenue spinner, could encourage hoteliers refusing to sign deals to make their rooms available to Match during the 2010 Soccer World Cup.
Otto Stehlik, Protea Hotels group executive chairperson, issued the warning at an investment conference for the hospitality industry presented by the Tourism Business Council of South Africa. Stehlik is also a member of the ministerial advisory Council for the 2010 Soccer World Cup.
Many of South Africa’s largest hotel groups, including Protea Hotels, City Lodge, Southern Sun and Legacy, have met with Fifa over the last two years to negotiate a fair contract.
Stehlik says, “We’ll be making a lot of money”, but believes the country’s image of being able to host such events could be hurt by a small part of the hotel industry that refuses to make their beds available to Match.
The executive attributes this to “ignorance or greed”, however many hotels feel that although the world cup is the world’s biggest sporting event, that there is no reason why Fifa should get a cut of bed revenue.
Hotels have until the end of October to sign a contract with Match, after which government is apparently prepared to impose boycotts against them. This boycott could, according to Federated Hospitality Association of South Africa’s (FEDASA) executive chairperson Brett Dungan, be extended to private enterprises doing business with government.
Stehlik says that those not willing to sign contracts believed they could be more profitable alone, and that this belief could place the World Cup in danger.
Match’s Adam Brown said that the agency did not have enough rooms at reasonable tariffs, and that this would result in spectators choosing not to come to South Africa.
Contingency plans have already included adding guesthouses and lodges to Match’s inventory, and the possibility of including school and university accommodation too. A last resort would be to berth luxury cruise ships in Cape Town, Port Elizabeth, East London and Durban as additional rooms to let.
Stehlik believes there are enough ships available to make up the shortfall if hotel groups don’t come on board, however, this would be unfortunate as it would mean South Africa’s tourism industry would lose potential revenue.
Brown says the deadline for hotels is at the end of October as inventory must be issued between the 162 tour operators making group reservations in various countries.
'We won't pay to stop climate change' - SA consumers
While South Africans were becoming more concerned about climate change, this wasn’t translating into action given that consumers are reluctant to carry the costs of initiatives to curb greenhouse emissions, a survey from the Human Sciences Research Council (HSRC) highlights.
The 2007 South African Social Attitudes Survey sampled 3164 people, finding that of the 72 percent of respondents who knew what global warming was were all well educated in the causes of climate change. Almost half (44%) were more concerned about the effects of climate change than they were a year ago.
Yet, only 71 percent of participants believed the problem was “very serious” or “somewhat serious”, significantly lower than in other nations.
Compared to other nations, South Africans’ perceptions of the dangers of climate change was significantly lower than the almost 95 percent of Brazilians and about 90 percent of Britons, Canadians and Indians rated global climate change as a “very serious” or “somewhat serious” threat in the 2006 GlobalScan Poll, which included 30 countries.
However, according to HSRC researcher John Seager, there are many other more salient problems pressing South Africans, who see climate change as “a distant threat”.
“When we asked people what the most important challenges facing SA were, the list started with unemployment, HIV/Aids, economic issues and poverty,” said Seager
In the list of challenges, environment was placed at 10.
“If you’re not sure where your next meal is coming from, it’s more pressing than something that will affect future generations,” he added.
The respondents were supportive of government expenditure on developing wind farms (73%) or reducing the cost of energy saving devices (72%). However, they did not believe that the costs of consuming, through increased levies on fuel and electricity, should be increased to encourage reduced consumption. Taxes and levies to fund improved public transport were also out of favour.
Seagre added that although the participants are more aware of the pitfalls of climate change, “greater efforts will be required to increase general awareness and to ‘catch up’ with public opinion in other countries”.
Years of dirt cheap, yet dirty coal electricity may also have made South Africans complacent in the usage of power.
The 2007 South African Social Attitudes Survey sampled 3164 people, finding that of the 72 percent of respondents who knew what global warming was were all well educated in the causes of climate change. Almost half (44%) were more concerned about the effects of climate change than they were a year ago.
Yet, only 71 percent of participants believed the problem was “very serious” or “somewhat serious”, significantly lower than in other nations.
Compared to other nations, South Africans’ perceptions of the dangers of climate change was significantly lower than the almost 95 percent of Brazilians and about 90 percent of Britons, Canadians and Indians rated global climate change as a “very serious” or “somewhat serious” threat in the 2006 GlobalScan Poll, which included 30 countries.
However, according to HSRC researcher John Seager, there are many other more salient problems pressing South Africans, who see climate change as “a distant threat”.
“When we asked people what the most important challenges facing SA were, the list started with unemployment, HIV/Aids, economic issues and poverty,” said Seager
In the list of challenges, environment was placed at 10.
“If you’re not sure where your next meal is coming from, it’s more pressing than something that will affect future generations,” he added.
The respondents were supportive of government expenditure on developing wind farms (73%) or reducing the cost of energy saving devices (72%). However, they did not believe that the costs of consuming, through increased levies on fuel and electricity, should be increased to encourage reduced consumption. Taxes and levies to fund improved public transport were also out of favour.
Seagre added that although the participants are more aware of the pitfalls of climate change, “greater efforts will be required to increase general awareness and to ‘catch up’ with public opinion in other countries”.
Years of dirt cheap, yet dirty coal electricity may also have made South Africans complacent in the usage of power.
Thursday, September 25, 2008
Mozambique alive and ready for commerce
Mozambique, to the east of South Africa, is a country just waiting for commerce. Travelling north from Maputo on the EN1, it becomes clear that new roads built for transport serve an entirely different purpose.
Jagged footpaths follow the roads for kilometres – almost impervious to the straight roads beside them. And where the paths meet the tar it isn’t uncommon to find little piles of fruit or vegetables for sale, lying on anything from mats to rickety cabinets.
An old lady behind the table signals 5 Metical (about 20 US cents) for the pile of tomatoes. As part of the 5MT transaction, the chosen pile is checked to see if it’s still as good for sale as it was when it was packed out. There are also piles of potatoes, onions and custard apples, an indication that Mozambicans – without plastic pre-packaging – have also embraced bulk retailing.
For a land surrounded by greenery, there is also an astounding amount of nursery stalls.
But it isn’t only in the sale of simple goods on the side of the road that trade is thriving. Where the road breaks deals are still to be made. The ferry may be temporarily out of service for repairs, but a large rowing boat will take passengers and wares across the river. Once across, local fisherman cast nets daily, creating one of the worlds few enclaves where sustainable fishing still thrives. And “sustainable” means catching trawling for consumption on the day of catch. There is little sense in freezing good fish.
Unfortunately, one of the world’s poorest nations is still beside Africa’s richest. The inhibitor to South Africa’s wealth benefiting Mozambique is perhaps the poorly managed border between South African and Mozambique. It doesn’t matter how many trade facilitation agreements are signed between SADC members, until the inefficiency of border posts is dealt with, little progress will be made. Firstly, there should only be one border post with clear signage in English and Portuguese to ease flow and minimise unnecessary duplication costs, and secondly clear channels for types of cargo need to be developed so that cargo trucks, public transport and private transport can be processed separately.
Jagged footpaths follow the roads for kilometres – almost impervious to the straight roads beside them. And where the paths meet the tar it isn’t uncommon to find little piles of fruit or vegetables for sale, lying on anything from mats to rickety cabinets.
An old lady behind the table signals 5 Metical (about 20 US cents) for the pile of tomatoes. As part of the 5MT transaction, the chosen pile is checked to see if it’s still as good for sale as it was when it was packed out. There are also piles of potatoes, onions and custard apples, an indication that Mozambicans – without plastic pre-packaging – have also embraced bulk retailing.
For a land surrounded by greenery, there is also an astounding amount of nursery stalls.
But it isn’t only in the sale of simple goods on the side of the road that trade is thriving. Where the road breaks deals are still to be made. The ferry may be temporarily out of service for repairs, but a large rowing boat will take passengers and wares across the river. Once across, local fisherman cast nets daily, creating one of the worlds few enclaves where sustainable fishing still thrives. And “sustainable” means catching trawling for consumption on the day of catch. There is little sense in freezing good fish.
Unfortunately, one of the world’s poorest nations is still beside Africa’s richest. The inhibitor to South Africa’s wealth benefiting Mozambique is perhaps the poorly managed border between South African and Mozambique. It doesn’t matter how many trade facilitation agreements are signed between SADC members, until the inefficiency of border posts is dealt with, little progress will be made. Firstly, there should only be one border post with clear signage in English and Portuguese to ease flow and minimise unnecessary duplication costs, and secondly clear channels for types of cargo need to be developed so that cargo trucks, public transport and private transport can be processed separately.
SA MP resignations may hurt soccer World Cup
In the light of a spate of ministerial resignations following the firing of South Africa’s president last week, the local organising committee (LOC) for the 2010 soccer World Cup would meet urgently to determine how changes would affect preparations.
LOC chairman Irvin Khoza confirmed that the resignations would be discussed at an urgent board meeting next week.
Given the size of the project, all the government ministries are involved in ensuring the success of the soccer World Cup. Currently, various government departments have given 15 guarantees in support of the tournament.
“Right now we are consulting with the ministries. It is important to say that the ministries have not resigned, and the government guarantees were signed by the ministries and not the individuals,” said Khoza.
The LOC would request certainties that the departures of key officials wouldn’t negatively affect any projects that the departments were driving.
Khoza added that the LOC had made Fifa aware of the political changes.
Fifa requires several guarantees from countries wishing to host the event, in the areas of access to the country, safety and security, healthcare services, a supportive financial environment, and transport and communications.
Some of these guarantees give Fifa extensive powers in the host country before, during and after the event. While South Africa would still need to pay to stage the event, goods belonging to the delegation, its commercial affiliates, broadcast rights holders, the media and spectators would have import and export customs duties, taxes, costs waived.
South African Revenue Service (SARS) has also agreed to provide administrative support in handling tax connected to the event, while the treasury has guaranteed unrestricted import and export of all foreign currencies, as well as their conversion into dollars, euro and Swiss francs.
LOC chairman Irvin Khoza confirmed that the resignations would be discussed at an urgent board meeting next week.
Given the size of the project, all the government ministries are involved in ensuring the success of the soccer World Cup. Currently, various government departments have given 15 guarantees in support of the tournament.
“Right now we are consulting with the ministries. It is important to say that the ministries have not resigned, and the government guarantees were signed by the ministries and not the individuals,” said Khoza.
The LOC would request certainties that the departures of key officials wouldn’t negatively affect any projects that the departments were driving.
Khoza added that the LOC had made Fifa aware of the political changes.
Fifa requires several guarantees from countries wishing to host the event, in the areas of access to the country, safety and security, healthcare services, a supportive financial environment, and transport and communications.
Some of these guarantees give Fifa extensive powers in the host country before, during and after the event. While South Africa would still need to pay to stage the event, goods belonging to the delegation, its commercial affiliates, broadcast rights holders, the media and spectators would have import and export customs duties, taxes, costs waived.
South African Revenue Service (SARS) has also agreed to provide administrative support in handling tax connected to the event, while the treasury has guaranteed unrestricted import and export of all foreign currencies, as well as their conversion into dollars, euro and Swiss francs.
Wednesday, September 17, 2008
Zimbabwe's road to recovery long, hard
A power-sharing agreement signed in Zimbabwe between those gunning for power was unlikely to bring quick economic relief according to analysts.
The deal, signed between former President Robert Mugabe and political rival Morgan Tsvangirai would see Tsvangirai filling a new post as prime minister. Mugabe would become president again, and a deputy prime minister position would be filled by Arthur Mutambara, a leader of a splinter party.
The once bread-basket of southern African is little short of a basket case after more than a decade of poor rule by Mugabe’s ZANU-PF party saw the country’s economy shrink by at least 65 percent. Inflation reached 11.2 million percent in June.
The historic deal has been seen by many as an opportunity for Zimbabwe to rebuild itself and reclaim the wealth it once had, but Harare-based economist John Robertson said the economy would continue to struggle for years.
“Despite the deal, this year’s economic shrinkage will be worse. Confidence in the country is low. There has been a lot of skills flight. The change is going to be very, very slow,” Robertson said.
The new government would inherit $4-billion in external debt and domestic debt of $79.9-million, as well as a currency that has already had 13 zeroes removed from it in a vain attempt to prop up the free-falling Zimbabwean dollar.
The three leaders have agreed that “the government will lead the process of developing and implementing an economic recovery strategy and plan.”
However, working together may be difficult.
“It looks like Morgan has been cheated in this deal, they (MDC) don't have anything other than to shuffle papers and that’s it,” said Robertson.
University of Harare Professor Anthony Hawkins added that although foreign assistance could mean a growing economy by the first half of 2009, lost productivity would take years to redevelop.
“Getting back to where we were in the 1990s, it would take us another 10 years and getting back to the 1980s, it would take us another 15 years,” said Hawkins.
The International Monetary Fund has already agreed to hold talks with the new government after ending their relationship with Zimbabwe over un-paid debt in 2006, while the European Union has decided against immediately lifting sanctions, saying they would monitor the situation.
The deal, signed between former President Robert Mugabe and political rival Morgan Tsvangirai would see Tsvangirai filling a new post as prime minister. Mugabe would become president again, and a deputy prime minister position would be filled by Arthur Mutambara, a leader of a splinter party.
The once bread-basket of southern African is little short of a basket case after more than a decade of poor rule by Mugabe’s ZANU-PF party saw the country’s economy shrink by at least 65 percent. Inflation reached 11.2 million percent in June.
The historic deal has been seen by many as an opportunity for Zimbabwe to rebuild itself and reclaim the wealth it once had, but Harare-based economist John Robertson said the economy would continue to struggle for years.
“Despite the deal, this year’s economic shrinkage will be worse. Confidence in the country is low. There has been a lot of skills flight. The change is going to be very, very slow,” Robertson said.
The new government would inherit $4-billion in external debt and domestic debt of $79.9-million, as well as a currency that has already had 13 zeroes removed from it in a vain attempt to prop up the free-falling Zimbabwean dollar.
The three leaders have agreed that “the government will lead the process of developing and implementing an economic recovery strategy and plan.”
However, working together may be difficult.
“It looks like Morgan has been cheated in this deal, they (MDC) don't have anything other than to shuffle papers and that’s it,” said Robertson.
University of Harare Professor Anthony Hawkins added that although foreign assistance could mean a growing economy by the first half of 2009, lost productivity would take years to redevelop.
“Getting back to where we were in the 1990s, it would take us another 10 years and getting back to the 1980s, it would take us another 15 years,” said Hawkins.
The International Monetary Fund has already agreed to hold talks with the new government after ending their relationship with Zimbabwe over un-paid debt in 2006, while the European Union has decided against immediately lifting sanctions, saying they would monitor the situation.
Global credit crunch not making South Africa unattractive
South Africa was still an attractive investment destination for foreign capital, even though it was not immune to the global turmoil in the markets, said analysts.
According to investment managers Stanlib, South Africa was attractive due to its strong credit rating, relative to its peers, and its relative stability.
Stanlib noted that “recently, most emerging market currencies have come under significant pressure, reflecting an increase in global risk aversion as the global economic slowdown spreads. So far this year the rand is the worst performing emerging market currency.”
A high current account deficit has drawn negative attention to the rand, helping it drop by almost 15 percent against the US dollar since the end of 2007. The currency was currently being traded at levels not seen since 2003, when it was still recovering from a crash in 2001.
However, they added that out of 37 credit rated emerging market economies, only China, Korea, Malaysia, Poland and Chile have better credit ratings than South Africa.
“Thus we are still an attractive and stable investment destination,” said Stanlib.
The country’s National Treasury Director-General Lesetja Kganyago said that South Africa had not managed to escape the effects of the prevailing global market turmoil, which had developed out of reckless lending in the US sub-prime sector.
“The road ahead (for markets) continues to look bumpy. South Africa has not been immune to these developments,” said Kganyago.
Kganyago added that a slowdown in consumer demand was a necessary adjustment, given that although growth was fuelled by this over the past four years, it was also inflationary.
According to investment managers Stanlib, South Africa was attractive due to its strong credit rating, relative to its peers, and its relative stability.
Stanlib noted that “recently, most emerging market currencies have come under significant pressure, reflecting an increase in global risk aversion as the global economic slowdown spreads. So far this year the rand is the worst performing emerging market currency.”
A high current account deficit has drawn negative attention to the rand, helping it drop by almost 15 percent against the US dollar since the end of 2007. The currency was currently being traded at levels not seen since 2003, when it was still recovering from a crash in 2001.
However, they added that out of 37 credit rated emerging market economies, only China, Korea, Malaysia, Poland and Chile have better credit ratings than South Africa.
“Thus we are still an attractive and stable investment destination,” said Stanlib.
The country’s National Treasury Director-General Lesetja Kganyago said that South Africa had not managed to escape the effects of the prevailing global market turmoil, which had developed out of reckless lending in the US sub-prime sector.
“The road ahead (for markets) continues to look bumpy. South Africa has not been immune to these developments,” said Kganyago.
Kganyago added that a slowdown in consumer demand was a necessary adjustment, given that although growth was fuelled by this over the past four years, it was also inflationary.
Wednesday, September 10, 2008
'Local, SADC energy security more sensible'
South Africa may need to review its energy policies to be more neighbour-centric according to a local chamber.
Cape Town Regional Chamber of Commerce and Industry said that the discoveries of on-shore methane gas in southern Africa meant a “complete reassessment of the country's energy policies” was necessary.
Gerald Wolman, president of the chamber, said that recent gas discoveries could have a far-reaching economic impact on the economy and stability of the southern African region.
South Africa has of the world’s largest coal reserves, and over the past few years companies have prospected for coal-bed methane in about a dozen sites.
Anglo Operations discovered a one trillion cubic feet reservoir of the gas in the Waterberg coal fields, in the north of the country. Just across the border, neighbouring Botswana has a reservoir of about 60-trillion cubic feet.
Wolman said that it would be more sensible for South Africa to be signing energy security deals with Botswana, than with distant countries like Venezuela.
“We should be working with our neighbours because that will produce the best results for the region,” he said.
Methane gas has the potential to generate electricity, or for heating and liquid fuels.
“South Africa has the technology to convert this gas into liquid fuels and Botswana has the gas. [Botswana] is also a stable country and co-operation would be in the best interests of the Nepad deal,” he added.
Botswana and the northern parts of South Africa are often dry for long periods. However, the chamber added that gas power stations where ideal as they had small footprints and did not need water for steam or cooling.
Cape Town Regional Chamber of Commerce and Industry said that the discoveries of on-shore methane gas in southern Africa meant a “complete reassessment of the country's energy policies” was necessary.
Gerald Wolman, president of the chamber, said that recent gas discoveries could have a far-reaching economic impact on the economy and stability of the southern African region.
South Africa has of the world’s largest coal reserves, and over the past few years companies have prospected for coal-bed methane in about a dozen sites.
Anglo Operations discovered a one trillion cubic feet reservoir of the gas in the Waterberg coal fields, in the north of the country. Just across the border, neighbouring Botswana has a reservoir of about 60-trillion cubic feet.
Wolman said that it would be more sensible for South Africa to be signing energy security deals with Botswana, than with distant countries like Venezuela.
“We should be working with our neighbours because that will produce the best results for the region,” he said.
Methane gas has the potential to generate electricity, or for heating and liquid fuels.
“South Africa has the technology to convert this gas into liquid fuels and Botswana has the gas. [Botswana] is also a stable country and co-operation would be in the best interests of the Nepad deal,” he added.
Botswana and the northern parts of South Africa are often dry for long periods. However, the chamber added that gas power stations where ideal as they had small footprints and did not need water for steam or cooling.
‘Inward-looking world leaders choose war’
South Africa’s Finance Minister has bemoaned world leaders for risking global peace and security.
Trevor Manuel delivered the message in his capacity as special envoy of United Nation's secretary-general at the financing development summit in New York in the United States. The summit was designed to review progress made on promises world leaders made in 2002 in Monterrey, Mexico.
But Manuel’s direct message stressed that if world leaders continued their inward-looking views on how to deal with peace and security, they were inviting war.
“Cold facts suggest that since Monterrey we have done the opposite of what we said we would do, that we have chosen war instead of peace,” said South Africa’s longest serving minister.
Manuel said that global food, fuel and financial crises were a consequence of collective failure by world leaders to balance the world economy.
The minister added that this would not have been the case if the Monterrey commitments were met, which would have seen richer nations living up to their promises of being more generous with resources, and more open in their trade agreements.
Manuel said that world military expenditure was estimated by the Stockholm Institute at $1.3-trillion for 2007, which was a 3 percent increase on 2006.
“Compare this to the $104 billion that was spent on [official development assistance],” said Manuel.
Manuel added that military expenditure amounted to 2.5 percent of world GDP, while, according to the Secretary-General’s MDG Gap Task Team, official development assistance from DAC members represented only 0.28 percent of their aggregated national income.
Manuel added that aid flows post-Monterrey were moving in the opposite direction of what was promised. Aid flows dropped by 4.7 percent in 2006 and a further 8.4 percent in 2007.
The Monterrey Consensus was adopted by over 50 heads of state, 200 ministers of finance, foreign affairs, development and trade, and was further represented by the UN, IMF and WTP. It focussed on financing development and ensuring international trade with developing countries became more transparent.
Trevor Manuel delivered the message in his capacity as special envoy of United Nation's secretary-general at the financing development summit in New York in the United States. The summit was designed to review progress made on promises world leaders made in 2002 in Monterrey, Mexico.
But Manuel’s direct message stressed that if world leaders continued their inward-looking views on how to deal with peace and security, they were inviting war.
“Cold facts suggest that since Monterrey we have done the opposite of what we said we would do, that we have chosen war instead of peace,” said South Africa’s longest serving minister.
Manuel said that global food, fuel and financial crises were a consequence of collective failure by world leaders to balance the world economy.
The minister added that this would not have been the case if the Monterrey commitments were met, which would have seen richer nations living up to their promises of being more generous with resources, and more open in their trade agreements.
Manuel said that world military expenditure was estimated by the Stockholm Institute at $1.3-trillion for 2007, which was a 3 percent increase on 2006.
“Compare this to the $104 billion that was spent on [official development assistance],” said Manuel.
Manuel added that military expenditure amounted to 2.5 percent of world GDP, while, according to the Secretary-General’s MDG Gap Task Team, official development assistance from DAC members represented only 0.28 percent of their aggregated national income.
Manuel added that aid flows post-Monterrey were moving in the opposite direction of what was promised. Aid flows dropped by 4.7 percent in 2006 and a further 8.4 percent in 2007.
The Monterrey Consensus was adopted by over 50 heads of state, 200 ministers of finance, foreign affairs, development and trade, and was further represented by the UN, IMF and WTP. It focussed on financing development and ensuring international trade with developing countries became more transparent.
Wednesday, September 03, 2008
South Africa falls off global property 'top 10'
South Africa was no longer one of the world’s top 10 performing housing markets according to a UK-based property group.
Knight Frank said that according to the latest global house price index, South Africa has moved down to 19th position in the second quarter of 2008. A year earlier it was 7th on the list.
The index shows the southern African nation’s house price growth slipping from 15.5 percent to 3.8 percent over the one year period.
Nick Barnes, the head of international research at Knight Frank, believes the reserve bank’s five basis point hike had “severely” knocked the affordability of the South African housing market.
The bank has raised its prime lending rate by 500 basis points to 15.5 percent since June 2006, when the tightening cycle started. Market commentators are confident the tightening cycle has ended, foreseeing rate cuts as early as next year.
Three years ago South Africa boasted the world’s fastest growing housing market according to Knight Frank, appreciating at a whopping 30 percent annually.
Barnes believes, “South African consumers are highly indebted and it seems likely that prices will fall in the near future.”
Many local property analysts are still bullish that the property market will make a recovery soon, and that any fall-off in prices will be short-lived.
South Africa is not the only country where housing prices have cooled significantly. The United Kingdom’s property market slumped from 14th position to 37th place over the same period, with prices on average down -3.9 percent during the second quarter 2008.
In terms of performance, the United States is near the bottom of the pile, recording an average price fall of -16.8 percent.
Knight Frank said that according to the latest global house price index, South Africa has moved down to 19th position in the second quarter of 2008. A year earlier it was 7th on the list.
The index shows the southern African nation’s house price growth slipping from 15.5 percent to 3.8 percent over the one year period.
Nick Barnes, the head of international research at Knight Frank, believes the reserve bank’s five basis point hike had “severely” knocked the affordability of the South African housing market.
The bank has raised its prime lending rate by 500 basis points to 15.5 percent since June 2006, when the tightening cycle started. Market commentators are confident the tightening cycle has ended, foreseeing rate cuts as early as next year.
Three years ago South Africa boasted the world’s fastest growing housing market according to Knight Frank, appreciating at a whopping 30 percent annually.
Barnes believes, “South African consumers are highly indebted and it seems likely that prices will fall in the near future.”
Many local property analysts are still bullish that the property market will make a recovery soon, and that any fall-off in prices will be short-lived.
South Africa is not the only country where housing prices have cooled significantly. The United Kingdom’s property market slumped from 14th position to 37th place over the same period, with prices on average down -3.9 percent during the second quarter 2008.
In terms of performance, the United States is near the bottom of the pile, recording an average price fall of -16.8 percent.
Australia becomes SA's top executive export market
Australia has topped the United Kingdom as the most popular destination for executives leaving South Africa according to Human Capital at Deloitte.
Deloitte said that the average executive turnover for Africa’s powerhouse between August 1 2007 and July 31 2008 increased to 13.5 percent from 10.5 percent during the previous period.
“This statistic extrapolates to South Africa losing up to 50 percent of its executives every four to five years,” Deloitte spokesperson Willem Verwey said.
Australia was actively recruiting South Africans disillusioned by generally poor leadership as its government struggles to deal with incompetence and corruption, and unnecessary political squabbles. The survey found that the manufacturing and finance sectors reported the highest percentage of executives emigrating over the last three years.
Executives gave the following reasons for deciding to emigrate: crime and violence (60%), better employment opportunities (35%), and company transfers (30%).
Other reasons for attrition included early retirement (22%), emigration (15%), retrenchment (11%), and lack of career advancement (11%).
The survey said that during the period salaries were up a healthy 9.3 percent on average.
Verwey said that with inflation above 8.8 percent and recently reaching 13 percent, companies have had to take active steps to ensure their salaries remained competitive. However, higher salaries alone were not enough to keep a significant number of executives from deciding to jump ship.
Deloitte said that the average executive turnover for Africa’s powerhouse between August 1 2007 and July 31 2008 increased to 13.5 percent from 10.5 percent during the previous period.
“This statistic extrapolates to South Africa losing up to 50 percent of its executives every four to five years,” Deloitte spokesperson Willem Verwey said.
Australia was actively recruiting South Africans disillusioned by generally poor leadership as its government struggles to deal with incompetence and corruption, and unnecessary political squabbles. The survey found that the manufacturing and finance sectors reported the highest percentage of executives emigrating over the last three years.
Executives gave the following reasons for deciding to emigrate: crime and violence (60%), better employment opportunities (35%), and company transfers (30%).
Other reasons for attrition included early retirement (22%), emigration (15%), retrenchment (11%), and lack of career advancement (11%).
The survey said that during the period salaries were up a healthy 9.3 percent on average.
Verwey said that with inflation above 8.8 percent and recently reaching 13 percent, companies have had to take active steps to ensure their salaries remained competitive. However, higher salaries alone were not enough to keep a significant number of executives from deciding to jump ship.
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