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South Africa’s big question: ‘Why are we waiting?’


Nazmeera Moola is Head of SA Investments at Ninety One.

It may sound like a whiny complaint from my eight-year-old daughter, but ‘why are we waiting?’ is what South Africa seems to be asking at the moment.

In recent weeks, the number of people that want “something” to happen is rapidly becoming the majority in South Africa. What that “something” involves, means different things to different people.

Some people want President Cyril Ramaphosa to effectively quash the rebellion in the ANC that has gained ground post the election, spurred on by the recent campaign-financing allegations. Quite a few people want him to do something about Eskom, where there is limited operational progress despite the R59-billion transfer from the National Treasury planned this year.

A lot of people want progress in prosecuting those responsible for the corruption that has badly undermined South Africa’s balance sheet in the last five years. Most South Africans just want the political noise and mudslinging to stop – so that we can get on with the work needed to get the economy growing and create jobs.

The status quo is not sustainable. As a country, it feels as if we are stuck in a holding pattern, with little progress in any direction. The ANC continues its internal battles, with South Africa largely neglected. To date, the public protector has made no utterance on any of the massive fraud and corruption allegations against senior government officials that have surfaced at the Zondo Commission.

The head of the National Prosecuting Authority has repeatedly asked for the public’s patience as she attempts to rebuild a gutted institution and begins the hard work of building winnable cases to prosecute the guilty. Most people would like to see progress on the widespread waste and theft of public funds that has taken place in recent years.

Growth of sub-1% over the last few years has led to growing unemployment. The first-quarter data for 2019 shows that South Africa’s unemployment rate rose to 29%.

Googling “retrenchment” yields a plethora of companies ranging from Mail & Guardian to Nedbank issuing retrenchment notices in recent months. According to the Commission for Conciliation, Mediation and Arbitration (CCMA), the number of companies approaching the council for retrenchments in the second quarter of this year increased to 185 from 137 last year. That is a 27% increase in the number of companies looking to reduce their workforce in a year.

Growth of sub-1% makes South Africa’s fiscal balance unsustainable. Slow growth means that government revenues will remain under pressure. Add in the Eskom debacle, and the consolidated deficit looks set to reach around 6% of GDP. That is the highest level since the Global Financial Crisis. The spread on South Africa’s bond yields to the emerging market average is currently at 330 basis points – this is an all-time high.

In an environment where the internal dynamics of the ANC are so fraught that any misstep by the president is used to undermine his entire agenda, we can understand why he tends to be overly cautious. However, the solution to many of South Africa’s ills is growth. And the key to growth is reform. There has been no progress on economic reforms to date. As a start, there is still no operational reform plan for Eskom, spectrum sales seem unlikely to take place in the next year and no progress has been made on easing tourist visa regulations.

Tangible, faster progress in these areas will do much to dispel the notion that Ramaphosa is not in charge. It will do much to generate confidence – from business and those households in South Africa with savings to invest.

In the meantime, it behoves us to retain some perspective. After the US Fed’s hawkish cut and the rising US-China trade dispute, global and local financial markets are jumpy. Markets are greedily consuming bad news. Much has been made of the fact that the coverage ratio for this week’s government bond auction (the value of bonds for sale divided by the value of bids for bonds) declined from 3.3 times to 2.3 times.

Everyone seemed to miss the fact that the size of the auction increased by almost 50% to cover the proposed Eskom transfers. If we take this into account, the coverage ratio was flat from last week. There was no deterioration.

Unfortunately – much like the average eight-year-old – neither the media or the markets have time for nuance at the moment. DM


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