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Can we get SA back on track?

Progress is unlikely to be smooth and will take time.

A look at the lingering risks that threaten to derail the current rally. Do we now have a chance to get our country back on track? Or will the positive sentiment fizzle out?

Arthur Kamp:

As the dust settles following the 2019 general election, it’s evident that the centre has held. Together, the ANC and the DA, which roughly occupy the middle ground on the economic ‘ideology spectrum’, have the support of close to 80% of the electorate (or at least of the two thirds of voters who turned up at the polling booths).

Although support for the ANC, which leans towards relatively more state involvement in the economy, declined in comparison to the 2014 general election, it has recovered relative to the 2016 local elections. Moreover, a scenario in which the ANC would have been forced into a potentially unstable coalition in Gauteng should it not have secured a clear majority in the province, was avoided.

As a consequence, the result has been interpreted as an expression of confidence in President Cyril Ramaphosa, including his drive to stamp out the wastage of scarce resources due to graft and the economic reform agenda he outlined in his February 2019 State of the Nation Address (Sona).

Looking out for signposts

That said, market participants are acutely aware of the apparent fissures within the ANC, which may disrupt attempts at reform. Accordingly, they may reserve judgement and are likely to look out for signposts to confirm the president’s ‘mandate’, including the composition of the cabinet when it’s announced later this month.

At the forefront of the president’s mooted reforms is a bid to encourage a surge in jobs producing fixed investment spending, including foreign direct investment – supported by a programme to bolster business confidence partly by improving the ease of doing business in South Africa and addressing governance and financial management issues at key public sector enterprises.

But, in addition to policy clarity and certainty, investors need to be assured that the lights will stay on. Accordingly, Ramaphosa’s Sona alluded to a plan to split Eskom into three separate businesses – to isolate the costly and inefficient generation component of the electricity supplier, ostensibly paving the way for Eskom’s transmission business to purchase electricity from cheaper and more efficient producers, while also increasing usage of renewable energy.

The best plans are, nonetheless, likely to come to naught should South Africa not address the ever-present risk posed by its failed fiscal consolidation. The contingent liability risk lurking in the extensive guarantees issued by the government on the debt of the public sector enterprises has come home to roost, culminating in a cumulative R69 billion cash injection, if not more, by the National Treasury into Eskom over at least the next three years.

Government spending

This draws attention to government spending more broadly. Even though Ramaphosa is expected to drive economic reforms, the developmental state model remains central to government’s economic planning and the policy objectives of the ANC party, including fee-free education and the proposed shift towards national health insurance, preclude a sharp reduction in spending. In any event, the Treasury appears committed to a gradual decrease in the relative size of the government’s bloated wage bill, through natural attrition and voluntary retrenchment only. This suggests more revenue-generating measures are likely to be announced, while the possibility of prescribed assets is still on the table.

Moreover, the president is not in a position to ignore party policy, including the resolutions taken at the ANC’s 2017 elective conference to pursue expropriation of property without compensation and nationalisation of the South African Reserve Bank (Sarb). The latter is in itself not overly concerning, although it’s likely to cause some volatility in asset prices, while the Treasury would need to compensate the bank’s private shareholders.

A far more serious problem would, however, emerge should nationalisation of the Sarb (if it occurs) adversely impact the independence of the bank. The bank’s mandate includes the pursuit of an appropriately low inflation target set by the Treasury, in support of long-term stability and sustainable growth. This requires the bank to act independently without fear or favour.

Hence, while it seems fair to argue that the general election of 2019 may signal an end to South Africa’s slide into economic policy uncertainty and depressed confidence, risks linger. Meanwhile, progress is unlikely to be smooth and will likely take time.

Alwyn Van Der Merwe:

As the results of the 2019 general election became apparent on Friday, the rand strengthened, government bonds traded at higher prices and shares that are largely dependent on the strength of the local economy responded positively. It was a picture very similar to the one that unfolded early in the first quarter of 2018 after the election of Cyril Ramaphosa as president of the ruling party.

For this rally to sustain itself, we now need to see ‘promises’ converting into reality. As has been argued before, the journey needs to start off well. If our president misses the first ‘navigation point’ by not assembling a cabinet that will allay sceptics’ fears that the ANC is unlikely to transform, the positive sentiment is likely to fizzle out soon. However, a good start by the president is likely to provide solid support for those who believe that South African shares are cheap and deserve a higher rating.

Arthur Kamp is an investment economist at Sanlam Investments, and Alwyn van der Merwe is a director of investments at Sanlam Private Wealth

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EYEWASH (means it looks good)!! This man sat right next to the man who looted the country and hurt the poor and WATCHED IT HAPPEN.He voted in favor of confidence in Zuma. There needs to be a “swamp” draining!!

Ja zokey. So him resigning would have helped né? Lekker man.

Money men are known for following smell, eyes closed, with Titanic results. The core of all problems have the name B.E.E. This resulted in a two phase economy. Formal and informal. More apart then ever. With formal losing all the way. Resulting in a true continent Africa country. Kings and vassals are placed by vote. Serfs sing their praise. Thinking, the real Titanic, when setting sails, destiny was inescapably the bottom. Smell, not eyes, guided that ship.

Get the economy back on track?

You mean, ask ordinary South Africans to spend hours in traffic to and from work (for those that still have jobs), see the same non working traffic lights, pot holes worse than those in War ravaged countries, crime, pay huge taxes, see the ZAR value drop, see our investment corrode away every week?

While Politicians live a King’s lifestyle,

Maybe not, only Politicians benefit from the current formula.

Maybe Politicians should go to work while South African citizens take a break.

Back on track? I thought they stole the tracks. From now on it is a 4×4 Jeep track. It will never be the same.

Here’s a simple answer:

Socialist regimes & policies in the 3rd world have a 100% economic failure rate in modern history.

South Africa has/will have a socialist regime for years to come. 70%+ voters asked for it. Reforms are coming? Actions speak louder than words.. there are no actions, just words.

The dots are connected. We’ve sowed the wind, we’ll reap the whirlwind. We’re all betting men/women here. How do you like the odds?

When we see the corrupt “comrades” in prison then we will begin to make progress . This wont happen !!!

The headline says it all. The alcoholic who is impatiently waiting for the bottle store to open, asks himself “Can I get my life back on track?” The same with the drug addict on his way to the dealer.

You realise the enormity of the problem when you “hope” that the leader of a party of socialist looters, with a manifesto and track record of destruction and plunder, will implement free-market policies, strengthen the rule-of-law and build a capitalist society with respect for property rights and individual liberty. This professed saviour was instrumental in the perversion of the law when he wrote BEE codes and turned himself into a billionaire, nationalized mineral rights, drew up the mining charter and spread socialism throughout the economy.

What we fail to realize, is that the economy is on track. It is not the track we want it to be on, but it is on the track that was chosen by 70% of voters. The fact that this track leads to the fiscal cliff, currency devaluation, hyperinflation and the premature death of 20 million people does not bother them. We are on track all right.

Sensei, do you have a blog? If not, I would strongly encourage you to start one. Excellent comment, as per usual.

Thank you for the suggestion and the kind compliment. Firstly, I will find out what a blog is, and then I will write one…the problem is, if I want my blog to be hugely successful, I will have to write about stuff that interests the majority of people. There are TV shows, magazines and cheap politicians to fill that market.

If I have a blog, and you are the only reader, we might just as well WhatsApp one another….☺

Please add me to that Whatsapp group 🙂

Add me too. Sensei for president!

I’m IN! 🙂

Will be great to have Sensei for president (…and bonus…it will be the FIRST South African president that has a black belt in Karate!) & has a sound grasp of economics as a farmer AND certified investment planner/trader. And most important, he’s anti-socialist and pro free-market.

I will stand as your FinMin 😉

I’m with The Hun on this one. Sometimes in life there is just no way back. An alcoholic turns his back on the bottle after decades of abuse. He’s a changed man but his body is still wrecked and he is broke.Consider the people in charge and the voters who keep them in power. Can you honestly tell me that you believe that there is hope for this country? Get out of Dodge by any means possible.

Nearly 50% of eligible voters did not vote. And a lot of people who could have registered to vote didn’t. So you are president of halve a country.

Just stopping the self-destructive behaviour of Government will be a major boost!

The proof will be in the pudding…. replacing the head of a Transnet with a non BEE choice is the first good sign, followed by the firing of the Minister of the Environment. And the fact that JZ is whingingI about his trail ( for his early misdemeanor with Shabier Sheik, remember him?) is also a positive sign ( if it goes ahead.). so there are positive signs, let’s just see if they bare fruit!

Also…no effing around with the Constitution or The SAReserve Bank! Leave these two things alone and our credibility with the First World just might recover!

….getting SA “back on track” they say?

I say, what happens when it’s discovered that the “tracks” are STOLEN?!

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