Nov 25th - South Africa Counts Criminal Activity in GDP Calculation

By Phil Izzo

South Africa has found an interesting way to bolster its gross domestic product: include illegal activities.

Stats SA in its latest GDP report expanded its survey to include previously uncovered areas of the economy such as crime, the drugs trade and illegal mining. The “non-observed element” of the economy accounted for 0.2% of GDP in 2008, it said.

“Information was obtained from administrative and enforcement records of the South African Police Service (SAPS), South African Revenue Service (SARS), other associations (e.g. SWEAT for prostitution) and information on other country experiences,” Stats SA said.

The contribution to GDP from the non-observed economy is seen steady at around 0.2% from 2002 through 2008, though it dipped to 0.1% in 2007. The calculations are used for its benchmarking revisions, but isn’t included in its regular quarterly numbers. On Tuesday, the country reported that GDP grew 0.9% in the quarter ended September, marking an end to its first post-apartheid recession.

Pressure has mounted on President Jacob Zuma, elected in April on a populist platform of poverty reduction and job creation. Unemployment rose to 24.5% in the third quarter after 484,000 jobs were lost during the three months, Statistics South Africa said last month.

Maybe the country should consider counting people who work in illegal activities to bring down its unemployment rate.

Source : http://blogs.wsj.com/economics/2009/11/25/south-africa-counts-criminal-activity-in-gdp-calculation/

Nov 20th - S.Africa's rand falls on lower risk appetite, stocks slip

JOHANNESBURG (Reuters) - South Africa's rand gave up some ground against the dollar on Friday, largely reflecting a dip in investors' appetite for risk, while stocks fell across the board, tracking lower world markets.

At 1600 GMT the rand was trading at 7.5995 against the dollar, down 0.79 percent from Thursday's close of 7.54.

"We've basically seen a small sell-off in rand on the back of a little bit of risk aversion that we've seen in the last 2 days of trading," said RMB trader Brigid Taylor.

"We've seen stocks come off and we've also seen the dollar strengthen across the board against the currencies.

Trading had recently been marked by healthy risk appetite at the start of the week, which tended to taper off towards the end, Taylor said.

"I think as we start heading into the end of the year, we're going to see this kind of pattern become much more prominent as guys start to take back profits, especially with the significant (rand) rally we've seen this year," she added.

The central bank, finance ministry and trade unions have all warned the rand's gains of more than 20 percent against the dollar this year could hurt the economy, but the government has stressed it will stick to a free floating exchange rate.

The Johannesburg Top-40 index lost 0.47 percent to 24,338.36 points, while the broader All-Share index slipped 0.48 percent to 26,929.25 points.

"We are following world markets. I think we are also seeing some profit taking," Tubby Goodwin, a trader at Investec Securities said.

The Dow Jones Industrial was down 0.32 percent, while the FTSE 100 index was 0.12 percent lower, shortly after the Johanesburg bourse's close.

Africa's second-biggest grocery chain Pick 'N Pay was the biggest loser, shedding 2.74 percent to 39.81 rand, followed by insurer Sanlam, which slipped 2.48 percent to 21.59 rand.

Media company Avusa Ltd. dropped 7.51 percent to 16.01 rand, after posting a 60 percent fall in first-half profit.

But gold stocks bucked the downward trend on the market, with the JSE gold index up 1.5 percent.

Gold Fields gained 2.29 percent to 109.40 rand, while Anglo Gold and Harmony Gold rose 1.23 percent to 329 rand and 0.57 percent to 79 rand, respectively.

Traders said the weaker rand helped push resources higher.

African Bank was the top gainer, rising 2.48 percent to 29.35 rand, ahead of its full-year results on Monday. The bank has forecast a 10-12 percent slide in headline earnings per share.

Government bonds weakened on Friday, nudging yields higher.

The yield on the 2015 bond went up 6 basis points to 8.355 percent and that for the 2036 bond was up 11.5 basis points at 8.78 percent.

Source : http://af.reuters.com/article/investingNews/idAFJOE5AJ0NY20091120?sp=true

Nov 17th - South Africa keeps interest rates unchanged at 7%

By Polya Lesova

FRANKFURT (MarketWatch) -- South Africa's central bank kept its benchmark interest rate unchanged at 7% on Tuesday, meeting market expectations. The domestic economy will continue to recover, but economic growth is expected to remain below potential for some time, the South African Reserve Bank said in a statement. "The main threat to the inflation outlook emanates from possible electricity price increases," the bank said. The SARB also decided to revert to its previous pattern of meeting every alternate month. As a result, the bank cancelled its December meeting and announced it will meet next in late January.

Source : http://www.marketwatch.com/story/south-africa-keeps-interest-rates-unchanged-at-7-2009-11-17

Nov 16th - S.Africa's ANC and allies to review c.bank mandate

By Peroshni Govender

JOHANNESBURG (Reuters) - South Africa's ruling ANC and its allies agreed to look at broadening the mandate of the central bank from merely tackling inflation, ANC Secretary General Gwede Mantashe said on Sunday.

Mantashe told reporters the alliance, which includes the South African Communist Party and the labour federation COSATU, had formed a team to study the effects of a strong rand, following warnings about the repercussions of its strength on the economy.

The ANC and its allies met for three days to iron out their differences, with the government under pressure to shift economic policy to the left.

COSATU and the SACP want higher spending and for the inflation targets that guide monetary policy to be scrapped.

Mantashe said the partners had agreed at a "robust" meeting to look at the central bank's mandate.

"The summit agreed that the alliance task team on macroeconomic policy must remain seized with reviewing and broadening the mandate of the Reserve Bank," he said at a briefing after the meeting, adding that monetary policy should be in line with the aims of fiscal policy.

The Reserve Bank has the task of fighting inflation, keeping it between 3 and 6 percent. In September, inflation was 6.1 percent year-on-year, compared with almost 14 percent a year ago.

Critics say this had led to interest rates that are too high, which COSATU blames for exacerbating poverty. They want the target scrapped and interest rates cut to help pull the economy out of its first recession in nearly two decades.

The central bank has cut its repo rate -- its base lending rate -- by 5 percentage points since December despite inflation still being outside the band, although at 7 percent it remains high by global standards.

WEAKER RAND

COSATU and the SACP want the government to intervene to weaken the rand, which has firmed more than 20 percent against the dollar and gained sharply on the euro this year.

"We are looking into this because if this (global) crisis is encouraging imports and not exports, it deepens our crisis," Mantashe said.

The central bank and Finance Minister Pravin Gordhan have warned of the effect of the gains on export sectors and the economy in general, but have stressed the policy of a floating exchange rate will stay.

Economic Development Minister Ebrahim Patel this month agreed to a debate on the rand.

COSATU President Sidumo Dlamini told Reuters the allies would continue discussing its proposal, raised at the meeting, that the alliance and not the ANC, be the centre of political power.

This would shift power away from the party, giving COSATU and Communist Party greater influence by making them more directly responsible for setting government policy. Such a change, if it happened, could unsettle foreign investors.

Earlier media reports said many ANC officials were opposed to the plan.

Mantashe said the meeting endorsed Trevor Manuel as head of the National Planning Commission (NPC).

Manuel is unpopular with the left for his relatively conservative fiscal policy during more than a decade as finance minister, but is respected by investors who want him to remain a key player.

The NPC -- announced in May but yet to start work -- will use a panel of experts to guide overarching government policy.

Source : http://af.reuters.com/article/topNews/idAFJOE5AF03Q20091116?sp=true

Nov 12th - Racism Claims Impede $64 Billion S. Africa Investment

By Antony Sguazzin and Mike Cohen

Nov. 12 (Bloomberg) -- Political interference and claims of racism at South Africa’s biggest state-owned companies have left them leaderless, threatening to delay $64 billion in investment and slow the economy’s recovery from recession.

State power utility Eskom Holdings Ltd. has lost its chairman and ports and rail company Transnet Ltd. has no permanent chief executive officer amid disputes fueled by allegations of racism.

Eskom plans to spend 385 billion rand ($52 billion) over the next five years to avert a recurrence of power shortages that idled the country’s mines for five days last year. Transnet is spending 81 billion rand. Together the plans form the bulk of a government program to pull the economy out of its first recession in 17 years.

“If Eskom doesn’t sort out their problems, the market will punish them by charging them more on their debt,” said Malcolm Charles, a portfolio manager at Investec Asset Management in Cape Town. “They are running out of lives.”

Bobby Godsell, the 57-year-old white chairman of Eskom, which has 71.5 billion rand of outstanding debt, according to Bloomberg data, resigned after he tried to enforce a verbal offer by the black Chief Executive Officer, Jacob Maroga, 49, to step down. The youth league of the African National Congress and the Black Management Forum, which represents black executives, said he was a racist.

‘Baas-Boy’

Godsell had a “baas-boy mentality” toward Maroga, the forum said on Nov. 6, using the Afrikaans term for master. The treatment of Maroga showed “the covert anti-transformation and racist agenda inherent” in a country that ended apartheid only 14 years ago.

The search for a new chairman and CEO may take six months, acting Chairman Mpho Makwana said at a press conference today.

The disputes at the state enterprises highlight a battle between groups that united to back Jacob Zuma for leadership of the ANC and are now fighting for positions and influence over the country’s new president. While labor unions are targeting jobs growth and service delivery, groups like the Black Management Forum say their main objective is to transform the economy through the promotion of black executives.

“Powerful individuals are playing politics with the senior positions,” said Nic Borain, a Cape Town-based political analyst whose clients include HSBC Plc. “The tension between running an effective state and running a mad feeding frenzy for an aspirant class of people is becoming untenable for the ANC.”

Backing

Labor unions and the ANC’s Secretary-General, Gwede Mantashe, have defended Godsell. Minister of Public Enterprises Barbara Hogan told lawmakers in Cape Town today that Godsell has “integrity and the best interests of the country at heart,” adding that she couldn’t legally interfere and didn’t want to inflame tensions by commenting.

There is a group within the ANC and its allies that is “increasingly revealing themselves to be less concerned about the performance of the parastatals and more concerned about making a fast buck,” Borain said. Others “are deeply worried about the situation” and have argued for the companies to concentrate on efficiency and stop the infighting.

At Transnet Sipho Maseko, a BP Plc executive earmarked to replace Maria Ramos as CEO, said he no longer wanted the post after a public spat about the position broke out.

His decision came after a rival for the post, Siyabonga Gama, was suspended from his position as head of the rail division of Transnet and said he was the victim of racism. Justice Minister Jeff Radebe and Communications Minister Siphiwe Nyanda objected to the suspension, while the ANC Youth League and the Black Management Forum backed his claims of discrimination.

Leaderless

South African Airways, the state-carrier, and the South African Broadcasting Corp., which runs government television and radio stations, are also without leaders. SAA CEO Khaya Ngqula left in March after a labor union demanded an investigation of procurement procedures, while ANC officials and the opposition have been fighting about the composition of the SABC’s board.

The meddling and infighting is undermining management. Eskom’s five-year expenditure program could escalate to more than 500 billion rand, said Marc Goldstein, an energy analyst at Frost & Sullivan in Cape Town. The government has said it will guarantee up to 175.9 billion rand of Eskom’s debt and agreed to lend it a further 60 billion rand.

Eskom sold 500 million rand of bonds due in 2018 yesterday at a yield of 9.52 percent, a spread of 67 basis points to government notes of a similar maturity.

“Investors are going to say: Listen here, we want a bigger spread,” said Deon Van Zyl, head of fixed interest at Metropolitan Asset Managers in Cape Town said.

Speedy Resolution

Investment by state-owned companies will represent 5.3 percent of gross domestic product in the fiscal year through March 2010, according to the Treasury’s figures. That makes them pivotal to the recovery in an economy the government expects to shrink 1.9 percent this year.

“At a time of a significant investment and debt issuance program, the government needs a speedy resolution” to the infighting at the companies, said Peter Attard Montalto, an economist at Nomura International Plc in London.

To contact the reporters on this story: Antony Sguazzin in Johannesburg at asguazzin@bloomberg.net To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net

Last Updated: November 12, 2009 09:35 EST

Source : http://www.bloomberg.com/apps/news?pid=20601109&sid=aAaPlGQ53fyc&pos=15#

Nov 12th - Trouble at the grid

Nov 12th 2009 | JOHANNESBURG
From The Economist print edition

A race row over electricity

UNTIL the end of last month, Eskom, the state-owned power company, was mainly known for its inefficiency and incompetence. Power cuts have been maddeningly common throughout the country. But now the company has been engulfed by another, much more South African, sort of row, about race.

On October 30th rumours first circulated that the board had asked Jacob Maroga, Eskom’s chief executive, who is black, to step down. A month earlier a group of senior employees at the cash-strapped utility were reported to have sent an anonymous letter to the minister for public enterprises, demanding his removal. On November 5th it was reported that Mr Maroga had not been pushed after all, but had resigned after a clash with the board’s chairman, Bobby Godsell, who is white.

The next day it emerged that both men had offered their resignations to Eskom’s board on October 28th after a stormy discussion over the direction the troubled company should take. More convinced by Mr Godsell’s vision of the future, the board refused his resignation but accepted that of Mr Maroga, who had presided over the shortages as well as increases in prices. His resignation was announced by Mr Godsell a day later. But Mr Maroga, who had apparently reckoned that the board, on which blacks have a majority, would back him, then “withdrew” his resignation.

The Youth League of the ruling African National Congress (ANC) then joined the fray, denouncing Mr Godsell as a racist for his “hideous attempts to undermine African leadership” in the economy. The Black Management Forum was equally indignant, saying that state-owned enterprises were being turned into “slaughterhouses” for black professionals. Eskom’s sole shareholder, the government, was silent.

By November 9th Mr Maroga was back at his CEO’s desk. Hours later Mr Godsell, who was said to have met President Jacob Zuma the previous weekend, announced his own resignation, citing lack of government support. Many South Africans were appalled. The main trade-union federation said Mr Godsell’s departure would be a “great loss”. There was not “a shred of evidence” that he was a racist, it added.

Now Eskom says it is “proceeding on the basis that Mr Maroga is no longer the CEO.” The government continues to say nothing. Meanwhile South Africans can expect their lights to flicker on and off.

Source : http://www.economist.com/world/middleeast-africa/displaystory.cfm?story_id=14861585

Oct 28th - Higher borrowing ‘right’ for South Africa

By Richard Lapper in Johannesburg

Published: October 28 2009 01:40 | Last updated: October 28 2009 01:40

South Africa’s finance minister outlined ambitious new borrowing plans on Tuesday as part of efforts to help Africa’s largest economy out of recession and meet election commitments on job creation and social welfare.

Unveiling his first mid-term budget statement, Pravin Gordhan told South Africa’s parliament that the government planned to raise R640bn ($83bn, €56bn, £51bn) in debt over the next four years. “Higher borrowing is the right thing to do, in these times,” he said.

Mr Gordhan, the former head of the country’s tax administration, took over in May after president Jacob Zuma’s triumph at the polls. He said he expected the public sector borrowing requirement, which includes funding requirements for municipalities and state enterprises, to rise to 11.8 per cent of gross domestic product in the current fiscal year that ends in March.

Government debt would rise from 23 per cent of GDP this year to 41 per cent by March 2013, he said, and interest payments will nearly double to R100bn.

South Africa’s economy is expected to contract this year by nearly 2 per cent, largely because of a sharp deterioration in global trade and commodity prices.

Mr Gordhan described the fiscal response as “one of the largest in the world”.

With the slowdown depressing tax revenues, the deficit is set to rise from the 3.8 per cent predicted in February to a new level of 7.6 per cent. Spending is expected to rise by R14bn compared with the amount estimated earlier.

However, Mr Gordhan also promised that the government would clamp down on corruption and waste.

“We have to achieve more with less,” Mr Gordhan said. “We cannot spend on wasteful extravagances and golf days. We cannot tolerate unnecessary bureaucratic structures.”

South Africa entered recession with relatively low levels of indebtedness and in fiscal health, he said, pointing to the fact it had a budget surplus only two years ago.

Whereas many governments had spent huge sums to rescue banks, South Africa’s spending growth was “driven by real physical investment”.

Much of the planned spending on roads, railways, power stations, housing and water is geared to improving the country’s preparedness to host next year’s football World Cup.

The scale of the deficit was not a surprise to markets: investors had already marked down local bond prices on forecasts in recent weeks.

But some analysts said the scale of proposed borrowing left the government very little room to adjust its fiscal plans further.

Separately, Mr Gordhan announced that South Africa’s exchange controls were to be relaxed, partly in an effort to ease upward pressure on the rand.

Source : http://www.ft.com/cms/s/0/1e4ebe22-c350-11de-8eca-00144feab49a,dwp_uuid=c0df00e2-2037-11dd-80b4-000077b07658.html