Archive for the Economic Snap Shot Category

Without Zuma, we are a screaming buy!

The following article by Dawie Roodt takes a look at our current status.

So, we got downgraded, as expected. In fact, the rating agencies gave us plenty of leeway to correct our sinful ways; to repent. But wickedness, rent seeking, dishonesty and plain evil lead to the inevitable.

But the markets expected a downgrade which lead to this surprisingly mooted reaction on the financial markets. This means, that we have been paying a very dear price for this destructive government for quite some time! We all expected a downgrade and once it happened, little happened! This point cannot be over-emphasised; the fact that the markets reacted very little to the announcement of a downgrade only proves the point that Zuma etal have been hugely damaging to our country for quite some time.

And the other rating agencies are likely to follow suit.

But what does it mean for us?

It probably means that if little does change on the political front, then the rand, the bond market, the economy, employment, poverty…, will all remain suppressed. It means that the bad times will be with us for longer.

But that is the good news! We have already paid the price for our awful political leadership. Sure, things can get worse but Zuma probably played his ace. All that’s left for him is more destruction and more isolation from the rest of his support base. Zuma is a spent force!

We have a massively undervalued currency, we have amazingly attractive yields on our bond market, we have fantastic companies to invest in. South Africa is a screaming buy! Yet, despite all of this, we probably need at the very least two years to regain our investment status; probably five.

All we need now is to change our political leadership and for that we need at least 50 ANC MP’S!!

This is enough, now it’s your conscience, not your careers that matter.

Dawie Roodt
Chief Economist of the Efficient Group

The new dominant class, and how they will squeeze you yet again

An interesting article by Dawie Roodt.  ”It’s budget time again and economists and analysts are expected to say what they think the minister of finance will announce in his speech. This is also a time when economists get the opportunity to ”advise” on all things fiscal: taxes, state spending, borrowing, debt, key ratios and mysterious things designated by incomprehensible acronyms. So here I go; but first some context.  Continue reading The new dominant class, and how they will squeeze you yet again

Four questions for 2017

As we exit 2016, I would like to share with you the following well written article by Izak Odendaal, Economist at Old Mutual Multi-Managers – expanded on by Private Client Securities – Four questions for 2017.

Please Read on…

The week in economic perspective – The big bad wolf

Greek Prime Minister George Papandreou is certainly not the most popular statesman in the European Union (EU) after the stunt he pulled this week. Following his call for a national referendum on last week’s proposed EU debt deal he really painted himself as the EU’s big bad wolf. The deal, comprising a €130bn rescue package for the eurozone, including an €8bn slice for Greece, almost unravelled before it could kick in. Global financial markets tumbled in reaction, losing most of the progress made last week.  Read more

The consequences of the currency by Dawie Roodt

Currency Consequences

Not too long ago certain labour movements, political parties and even a few economists called for “a weaker currency”. Now we have one; their silence is deafening!

Obviously a weaker currency will make it easier for exporters to compete internationally. Their input prices mostly remain rand based while they receive dollars (or another “hard” currency) for their exports. Initially these exporters may be a bit better off, but rising inflation and wage demands will eventually erode this short-term benefit and it won’t be too long before there are calls for a weaker currency again.

The disadvantages of a weaker currency are much more harmful than the possible benefits. The most obvious disadvantage is that we are all poorer because of the rand’s weakness. Everything that is denominated in rands is worth less today than before the collapse of the currency. This includes wages, shares, houses, pensions, gold, everything. Some prices adjusted automatically and quickly to the fall in the rand, like share prices and the oil price, but in most instances it will take a long time for all prices to “catch up” to previous levels. Wages and salaries are good examples of prices that will take time to reach previous levels.

Continue reading The consequences of the currency by Dawie Roodt

Kleinsakeondernemings het ? hupstootjie nodig

Sanlam Besigheids- en Professionele Markte,  Ekonomiese Oorsig : September 2012

Klein sakeondernemings, het dikwels hoë rathefboom-verhoudings en is geneig om tydens periodes waar rentekoerse skerp daal en groei  sterk versnel, goed te presteer.  Een voorbeeld is die tydperk vanaf middel-2003 tot en met laat in 2007 toe die reële Bruto Binnelandse Produk (BBP) groei gedurende die meeste van hierdie tydperk  5% oorskry het.  Dit het saamgeval met ‘n 6.5% afname in die prima- oortrekkingskoers.
Maar tans is die vraag waarom die verdienste van klein besighede onderdruk is, ten spyte van die sakesiklusopswaai teen die agtergrond van besonder lae rentekoerse.  Inderdaad,   die jaarlikse groei in die verdienste van genoteerde klein sakeondernemings het afgeneem tot lae enkelsyfers.
Eerstens is konstruksie en vervaardiging redelik goed in die JSE se Kleinkapitaalindeks verteenwoordig.  Ekonomiese aktiwiteit in hierdie bedrywe is gewoonlik meer siklies as, byvoorbeeld, dienstebedrywe.  Maar ten spyte van die sakesiklusopswaai het konstruksie en vervaardiging se reële BBP met slegs 2.4% en 1.7% onderskeidelik gegroei tot en met die tweede kwartaal van 2012 – wat ? swak woonhuismark en matige groei in plaaslike en buitelandse aanvraag weerspieël, vergeleke met die vorige sakesiklusopswaai.
Tweedens weerspieël die swak verdienstemomentum by kleinsake eenvoudig die vaal prestasie van die totale ekonomie.  Die huidige sakesiklusopswaai is duidelik nie so dinamies soos die vorige groei-omgewing in die aanloop na 2007 toe nie.
Sleutel- uitvoerkommoditeite se pryse het sedert verlede jaar gedaal en die land se ruilvoet (“terms of trade”) het  klaarblyklik teen die agtergrond van teleurstellende wêreldwye ekonomiese groei hul hoogtepunt bereik.  Dit strem binnelandse inkomstegroei.
En derdens is die groei  in kredietverlening aan privaat besighede  matig, ten spyte van die laagste Reserwebank-beleidskoers sedert die vroeë 1980’s.  Teen  huidige lae rentekoersvlakke behoort  die aanvraag na krediet sterk toe te neem.  Maar, dit wil voorkom dat die aanbod van  krediet deur kredietverskaffers ingekort is.   Teen die huidige lae vlak van reële rentekoerse meen  banke waarskynlik dat hulle nie genoegsaam vergoed word  vir die  risiko verbonde aan lenings aan klein besighede nie. Klein sakeondernemings is geneig om onvoorspelbare verdiensteopbrengste  te lewer.  Verder is die vereistes van Basel III, insluitende voorskrifte oor banke se likiditeitsratio’s, daarop gemik om kredietverskaffing deur banke te beperk.
Wat kan gedoen word om die verdienstemomentum van kleinsake ? hupstootjie te gee?  Hulle is per slot van rekening die bron van vernuwing en daarom ook van BBP en  werkskepping .
My kollega, Vanessa van Vuuren, die Portefeuljebestuurder vir die SIM Kleinkapitaalfonds,  let op dat klein besighede tydens die resessie deur ? proses van rasionalisering moes gaan.  Dit behoort te lei tot verbeterde verdiensteprestasie indien ekonomiese groei volgehou word.
Maar, uiteindelik  is kleinsake-ontwikkeling slegs deur middel van volgehoue,  produktiwiteitsverbetering moontlik.  Dit moet, terloops, nie die verlaging van die geldeenheid insluit nie, omdat laasgenoemde die mededingendheid van pryse slegs tydelik verbeter.  Ter inligting dui my skattings daarop dat die Rand billik teen sowat USDZAR8.40 gewaardeer is.
Suksesvolle afhandeling van die regering se infrastruktuurbestedingsprogram sal eerder ? beter beginpunt wees.
Verder behoort die regering se Vervaardigingsmededingendheidsverbeteringprogram, wat daarop gemik is om produktiwiteit en mededingendheid aan te wakker deur die aanbied van aansporings in arbeidsinstensiewe bedrywe ook te help. Bedrywe wat reeds by aansporings baat (motorvoertuie, klere, tekstiel, leer en skoeisel) word egter uitgesluit. .  Die Nasionale Tesourie se Begrotingsoorsig van Maart 2012 dui aan dat belegging in vaste kapitaal, produkontwikkeling, standaarde-akkreditasie, prosesherontwerp, en lewensvatbaarheid- en bemarkingstudies vir die aansporing kwalifiseer (p. 20).  In totaal het die Tesourie R5.7 miljard oor die volgende drie finansiële jare, insluitende 2012/13, aan die program, wat deur die Departement van Handel en Nywerheid geadministreer word, toegeken.
Maar aansporings kan slegs so vêr strek en sal waarskynlik nie die tamheid wat in die binnelandse sake-omgewing, insluitende kleinsake heers, oplos nie.
Dit is teleurstellend dat Suid-Afrika so sleg vaar in die wêreldwye entrepreneurskapsopnames.  Ons is vêr agter by talle ontluikende markte soos Argentinië, Peru, China, Brasilië, Hongarye en Uganda.  Dit dui daarop aan dat ons  ? kwantumsprong in vaardigheidsontwikkeling nodig het om die vestiging van Klein & Medium Sakeondernemings te bevorder.
Artikel geskryf deur Arthur Kamp, Beleggingsekonoom, Sanlam Beleggingsbestuur

MPC Interest Rate Decision – Be Careful for that Heartburn, Tito…

The SARB lowered its main repo interest rate by 100 basis points (1%-point) to 10.5%, as effective from 6 February 2009. Read more about the highlights of the MPC Statement.