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Blog : 17 November 2016 (Random rant on South Africa's and its economy)
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In today's blog we will just have a rant on some of South Africa's economic variables and what makes it's economy tick and how it runs (or at its current growth rate, what makes it crawl). Yes this blog post will be cynical and written mostly tongue in cheek but behind it there are some truths. Sadly..
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Ready, set, Rant
Politics
So what is it that makes South Africa's economy tick? Who runs it and and how are they running it? Well the Gupta's run it (that has become abundantly clear as soon as they landed their wedding party guests at a South African national key point. And if South Africans had any doubt the State of Capture report confirmed this ).
In the wake of this State of Capture report, South Africans then went on the hunt for a imaginary shebeen that ESKOM CEO Brian Molefe mentioned when the report showed that his cellphone placed him close to or at the Gupta compound in Saxonwold. What Molefe failed to tell the media is the fact the Gupta compound is his local shebeen. Sure he met some friends such as David "the weekend special" Van Rooyen and our minerals minster Mosebenzi Zwane at this so called "shebeen". So perhaps the Gupta's plan to move the Union Buildings to Saxonwold.
So its clear they run the country but based on South Africa's current economic growth rate and forecasted growth rates they are not doing a very good job at running the country. Perhaps thats because they doing such a good job at plundering state resources that the state has no money available to run the country efficiently.
In the wake of this State of Capture report, South Africans then went on the hunt for a imaginary shebeen that ESKOM CEO Brian Molefe mentioned when the report showed that his cellphone placed him close to or at the Gupta compound in Saxonwold. What Molefe failed to tell the media is the fact the Gupta compound is his local shebeen. Sure he met some friends such as David "the weekend special" Van Rooyen and our minerals minster Mosebenzi Zwane at this so called "shebeen". So perhaps the Gupta's plan to move the Union Buildings to Saxonwold.
So its clear they run the country but based on South Africa's current economic growth rate and forecasted growth rates they are not doing a very good job at running the country. Perhaps thats because they doing such a good job at plundering state resources that the state has no money available to run the country efficiently.
South Africa's Auditor-General reported that South African government departments had fruitless and wasteful expenditre of R43billion. Jip R43billion in wasteful expenditure in 2015. Not even the Gupta's can plunder that amount of money in year. They clearly have a lot of friends, or people have been copying their "get rich quick" off the SA government trick. Cadre deployment bearing massive fruits (for the politically connected that is).
Want to leave South Africa due to the crime or rotten to core corruption in South Africa? Good luck. South Africa's national airline, South African airways swallows tax payers money faster than the money can be printed. With it's untouchable Chairperson, Dudu Myeni (good friend of South Africa's number one citizen President Zuma), its been hemorrhaging cash for years. Maybe that's because the chairperson wants to push shady aircraft refinancing deals through the board, and looking to pay totally unknown financial advisers millions for doing nothing. So if you looking to leave SA, don't count on it's national carrier to get you out of here. It's so deep in a financial black hole it cant get itself out of, so there is even less chance of it getting you out of here.
Then there is the "prosecution puppet", boss of the National Prosecuting Authority (NPA) that looks like he is no more than a political pawn used to serve a specific purpose before being discarded once it's job done for the puppet. Abrahams's handling of the Minister of Finance, Pravin Gordhan's trumped up fraud charges showed that he didn't apply his mind to the facts and basically pushed forward with the prosecution even though most legal experts stated the case stands little chance of standing up in court. Clearly just following orders from the puppet master(s).
NPA boss then back tracked on the decision to prosecute, and with that his master(s) plan failed. And within weeks Mr Abrahams has to supply reasons to the President as to why he should not be suspended. Looks like he is being thrown under the bus, by either Mr Zuma himself or the Gupta's who control Mr Zuma. It's no secret the Gupta's tried getting "weekend special" appointed as Finance Minster (by getting Zuma to fire Minister Nene and appointing back-bencher Van Rooyen). He will then sign the nuclear build program (even if it bankrupts South Africa), and this will allow the Gupta's to sell uranium from their Shiva Uranium mine to ESKOM (since they already have influence on the ESKOM CEO as he frequents their shebeen).
In addition to Molefe, the Gupta's already had one of their minions deployed at ESKOM (and on it's board nogal), and this while sitting on the board of Oakbay Resources (who own optimum coal), who sells coal to ESKOM. Conflict of interest much? Anyways let's not digress. Back to Zuma firing Nene to get weekend special in there to sign some paperwork that allows them to plunder some more. But this plan failed. Why? Well there is something called "Mr Market". And he slapped the taste out of the Gupta's and President Zuma's mouths. Within days Mr Zuma backtracked and appointed his now greatest nemesis Pravin Gordhan. The markets reacted so violently to weekend special's appointment that political leaders and businesses alike put pressure on President Zuma to appoint a more suitable candidate.
We have the head clown stationed at the SABC in the name of Hlaudi Motsoneng. He sticks like snot on a wool blanket. Even the ANC cant get rid of the man they had placed there to ensure news coverage from the public broadcaster is skewed towards favouring the ANC. Especially ahead of the elections there were instructions to not give airtime to bra Julius Malame. But based on his recent outings about slaughtering white people perhaps the SABC was on to something with not giving him the platform to spread such nonsense. Rumours applently that Motsoneng sold SABC archives to multi-choice for a pretty penny and Hluadi then paid himself a nice fat bonus for selling (what is probably the SABC's most valuable asset).
Economy
The South African government wants to grow the economy at 6% per year. That's great. But that's a pipe dream right now. There is a greater chance of a "Sharknado" in Gauteng than South Africa growing at that right with it's current policies. Below we will take a look at a few issues hampering South Africa's growth.
South Africa's monetary and fiscal policy mix is often conflicting. With the one being expansionary and the other contractionary. See our Monetary Fiscal Policy Mix article here. In addition to this the Reserve Bank had a credibility crisis to manage and they raised interest rates a few times when they could have left it unchanged. This was done partly to show the market they are sticking to their word, but also in part to protect the vulnerable currency (as SARB is worried about our import inflation). But as we have shown in the past import inflation is actually very low as our main import (crude is at very low levels). So SARB punished consumers by raising interest rates even though inflation was not caused by consumer demand, but external factors such as the draught experienced in South Africa pushing up food inflation. SARB is also not very good at forecasting where the inflation number is heading as we showed in our of our blogs. Read it here.
South Africa's monetary and fiscal policy mix is often conflicting. With the one being expansionary and the other contractionary. See our Monetary Fiscal Policy Mix article here. In addition to this the Reserve Bank had a credibility crisis to manage and they raised interest rates a few times when they could have left it unchanged. This was done partly to show the market they are sticking to their word, but also in part to protect the vulnerable currency (as SARB is worried about our import inflation). But as we have shown in the past import inflation is actually very low as our main import (crude is at very low levels). So SARB punished consumers by raising interest rates even though inflation was not caused by consumer demand, but external factors such as the draught experienced in South Africa pushing up food inflation. SARB is also not very good at forecasting where the inflation number is heading as we showed in our of our blogs. Read it here.
Looking at trade, South Africa is a very open country in terms of trade (a large part of the economy is made up by imports and exports). The ideal would be to align and promote trade with countries where we our "net trade" is positive (I.e we exporting more than what we are importing). But in true SA style it's doing the opposite of what it needs to do in order to align and promote trade with such countries. In fact SA is aligning itself with a country with whom it's net trade is billions in the red. China. South Africa is looking to keep promoting trade with China. But the more South Africa does this the more money needs to leave the country to pay for it's imports instead of money coming into South Africa to it for its exports, while at the same time South Africa is pushing away from countries such as the USA, and this with AGOA in place and the fact that South Africa exports more to USA than what they import from us. Makes perfect sense.. If you are China yes. See trade balances between SA and Chimerica (China and America) here.
The South African government has a significant tax revenue problem because of the fact that the tax base is very small (not a lot of citizens pay taxes when looking at the total population). So a few citizens are paying for the services of many. South Africa needs to widen the tax net and increase the tax base. If this cannot be done, eventually those it has been milking excessively will take their bags and go, making that tax base even smaller. See Tax system worryingly dependent on rich here.
The South African government has a significant tax revenue problem because of the fact that the tax base is very small (not a lot of citizens pay taxes when looking at the total population). So a few citizens are paying for the services of many. South Africa needs to widen the tax net and increase the tax base. If this cannot be done, eventually those it has been milking excessively will take their bags and go, making that tax base even smaller. See Tax system worryingly dependent on rich here.
Labour unions ensuring and keeping strict and restrictive labour laws in place, which as a lot of experts have noted in the past is a stumbling block for growth in South Africa. As it is hard to get rid of dead weight with the strict laws in place. Hardly any changes have been made to these laws in years (the ANC government cant really afford to do) even though its a known stumbling block for growth. If changes are made to labour laws, it will upset the labour unions who in turn is a large support base for the ANC government. Unions also keep demanding above inflation wage increases, which complicates the reserve bank's efforts to curb inflation. In the same breath public sector labour unions do the same thing, even though they know that the state is looking to cut back on expenses, in particular it's wage bill. So the government is fighting a tough economic environment with it's hands behind it's back. And a big fighter just entered the world economic ring, and his name is Donald Trump.
Buckle up ladies and gentlemen, we in for a very interesting ride. And so is the ANC. Cracks are in the ANC faster than what SA's price athelete Wayde van Niekerk can run. Infighting and jockeying for positions before the next ANC elective conference. As politicians look to align themselves with whom they think will be the next president. And it looks like more and more of them are leaving the Zuma/Gupta camp and heading towards the Pravin/Ramaphosa camp. Perhaps South Africa's economy can grow and flourish if it was run by people actually interested in growing it, instead of plundering it. Just a thought thought.
So there is some light at the end of the tunnel, well that is if ESKOM can keep the lights on long enough for us to get there.
So there is some light at the end of the tunnel, well that is if ESKOM can keep the lights on long enough for us to get there.
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