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SA confidence at lowest since 1980s disinvestment

Weak economic growth, rising debt and a high unemployment rate continue to vex the country.

South African business confidence slumped to the lowest level since disinvestment from the country over its apartheid policies started gaining momentum more than three decades ago.

A sentiment index compiled by the South African Chamber of Commerce and Industry declined to 89.1 last month from 92 in July, according to an emailed statement Wednesday. That’s the lowest level since April 1985, the year the United Nations Security Council called on members to introduce more far-reaching economic measures against South Africa.

While Africa’s most-industrialised economy dodged a second recession in as many years, it’s stuck in the longest downward cycle since 1945, according to central bank data. Weak economic growth, rising debt and an unemployment rate at 29% continue to vex the country, provoking social tensions and prompting warnings from business groups and analysts that it may be forced to seek assistance from the International Monetary Fund.

South Africa experienced a wave of xenophobic attacks over the past three weeks, which have seen scores of foreign-owned shops looted and burned. While Police Minister Bheki Cele said the primary motive behind the violence is crime, some groups say the actions are partly due to the frustration of people who continue to live in poverty.

“The current state of fiscal deficiencies, social injustices and unemployment necessitates an urgent adjustment in how their impact is viewed, no longer as just economic terms that must be studied and converted into action, but as the likely cause of crime violence, looting and anti-foreigner sentiments that are currently dominating news headlines,” the business chamber said. “It is denting the status of South Africa as a favoured investment destination and affecting lives and businesses of ordinary South Africans.”

‘Giving up hope’

A quarterly business confidence index compiled by FirstRand’s Rand Merchant Bank unit and Stellenbosch University’s Bureau for Economic Research dropped to a two-decade low of 21 in the three months through September, from 28 the previous quarter. That means eight out of every 10 respondents are dissatisfied with prevailing business conditions.

“It would appear if more and more business people participating in the BER’s survey are simply giving up hope, a concerning development, and one that spells even greater trouble ahead for an already weak economy,” RMB said in an emailed statement.

Business sentiment surged to a two-year high in early 2018 after Cyril Ramaphosa won the leadership of the ruling African National Congress and took over as president of the country, but has since waned as businesses continue to seek real reforms.

Policy uncertainty and legislation that forces bank to write off certain debts, along with plans to introduce prescribed assets for pension funds and a national health insurance system, and unresolved issues around land reform added to the adverse business climate in August, Sacci said.

“To further delay growth-boosting reforms that should have been implemented years ago, such as easing of immigration regulations, cutting red tape, auctioning spectrum and simplifying visa regulations, will simply perpetuate this vicious cycle South Africa is currently in,” said RMB chief economist Ettienne le Roux. “Time is not on our side, especially now that the global headwinds the country is facing are becoming ever-fiercer.”

© 2019 Bloomberg L.P.

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Ah, I can’t feel a tad nostalgic for the 80’s…

Business Confidence at 1985 levels…

Troops in the (DA) townships in Cape Town…

Student protests on campus…

But we are one up on 1985….our ZAR is 15 to the $, and it was only a puny 2 back then.

Just remember that 1985 is 34 years ago. So from R2 to R15 is an annual depreciation of about 6% or thereabouts, which is roughly the interest rate / inflation rate differential between us and the USA over that period.

People tend to forget that the rand is supposed to depreciate by those rate differentials

In 1985 the “regime” started disbanding apartheid. Apartheid was not gaining momentum. In this year the mixed marriages and immorality acts were repeated. Shortly thereafter in Joburg I could get on the same bus as my Indian colleague.

I think the main reason why most people are so negative as that none of the thieves in government that are responsible for so called state capture have gone to jail. Zuma still says what he wants, Ace has never stopped talking although he is implicated in huge fraud, and SARS will get another wakeup call soon, when tax revenue falls even further. Malema still denies any wrong doing and at the same time he can call whoever, whatever he wants! Giving up hope in a system that has failed is understandable! We cannot change the system and the worse is that voters re-elected the people that put us here and are keeping us here! How do you change this defunct system? Most of the time the answer in Africa is civil war! I hope this won’t be the case in SA, but our time is up!

Proof that the ANC and it’s policies has caused as much negative sentiment as APARTHEID! History really does repeats itself.

Great comment. Cyril and the ANC are like rabbits in the headlights. Frozen into inaction and unable to move in any direction.

Exactly what we don’t need at the moment

I’m quite sure that the government STILL does not know what they are doing wrong. You can ‘redistribute’ wealth for only so long and with an increasing population there are less per person every year. At some point you need to stop BEE and let a climate conducive to business principles prevail. You need to generate new wealth so that there is more money per person going around in the country.

“Policy uncertainty” a phrase being bandied about quite frequently.
Ironically the ANC have demonstrated quite the opposite.
There is certain policy which they support:
– Prescribed assets for pension funds.
– Will definitely implement NHI.
– EWC.
– Bailing out failing SOE’s continuously.
– Providing double more funding from our tax for social grants compared with education and/or health care.
I can go on but to me the ANC is crystal clear on their policies.
Policies that will lead to the destruction of this once beautiful country…will go down in history as one of the biggest travesties in the world ever.
Sigh…

Quite right! No uncertainty there. It is what it is.

(The way business/media/society interpret policy “uncertainty” seems weird to me. It’s like confronting armed burglars during a home invasion, where the family gets tied up & then they demand the keys to the safe, etc.
Then the home-owner asks: “If I hand you the keys to the safe & car, will you still kill me in the end?

Home invader will say: “Yes, you will still be killed!”

Home owners replies: “Oh thanks…phew…now I feel much MORE AT EASE. I just wanted to have CERTAINTY.”

Good news: The National Prosecuting Authorities are making good progress on 300 State Capture cases – claiming back R28bn.

……satire before the Friday “numbing”

As they say for Africa, “previous African leaders always took the cherry and icing of the cake, current leaders gobble the sponge”

My personal CI is below the line because the ruling party, who is quite capable of destroying things and taking what others have created, is not capable of creating anything of note. Creating a reasonable economic environment is beyond their capabilities and remember they aren’t pro-capitalism (preferring a failed system that guarantees abject poverty but equality). You cannot rectify problems when you cannot acknowledge them such as xenophobia. I hope I’m wrong but much, much worse is to come and the difference between Zimbabwe & Venezuela and South Africa is our people are enthusiastically lawless and violent!

This data confirms that a free and democratic ANC that enjoys the goodwill of the international community, as well as a supportive and accommodative international trade environment, is worse for the economy than an undemocratic and restrictive National Party that was hamstrung and hobbled by sanctions and trade restrictions.

This situation confirms the old lesson in politics, a lesson the Chinese have learned the hard way. If you have a democratic system and the voting majority receives more from the State than what they contribute in taxes, then those voters will use their power over the legislature to redistribute the assets of the minority who contribute more in taxes than what they receive from the State.

This is the foundation of politics. If you have a democracy and your middle class is collectivist, unemployed, without property or assets, then your economy is doomed. This phenomenon has engulfed the business environment like a tsunami. Entrepreneurs are running for the high ground, into cash and offshore.

South Africa is a realtime socio-economic experiment, and so far, the data does not look good.

I would say the ANC is asd bad for the economy as the Nats where and as RW Johnson has pointed out quite a few times, ANC is in exactly the same position the Nats were in the second half of the 80s. Either continue on the same trajectory and go bust in 5 years or make some changes.

Could the Nats have gotten a better deal from the ANC? Not really when they finally started negotiating. If they negotiated much earlier when they actually held more cards and when they had more runway, defintely.

But it is a fallacy to maintain that things were so much better under the Nats. We would have been bankrupt before 1994 if we did not negotiate. Apart from the fact that nobody was prepared to lend us any money anymore we had the greatest spending on defence as a portion of GDP in the WORLD at that stage.

This is before we even bring into consideration that Apartheid was an immoral, vile system and that they Nats were a bunch of perverted Calvinists sucking the joy out of everybody’s life.

It is not a zero sum game. ANC is bad yes, but that does not equal Nats good. The sad reality is that SA has had the misfortune of suffering some of the worst, morally bankrupt governments basically forever.

Sorry if your intention was not too cast the Nats in a positive light, I just think a lot of people look at our horrible past through rose tinted lenses. That does not make the present utopia however.

I arrived at the conclusion that there is actually no solution that will work in practice for SA a while ago and unfortunatelly I think I am being proven right.

Good point about democracy not working in our situation, I believe Rwanda is an example of a country with a political system that is working for the people in Africa.

Great if you have a benevolent dictator but pretty scary if a guy like Malema got a sniff of power.

Another problem is that the world does not act against governments that go beyond what is reasonable in terms of best taxation practices.

The NATs could negotiate with the ANC against the backdrop of the cold war. The ANC will end up negotiating with the IMF against the backdrop of Zimbabwe and Venezuela.

Something of fact that is also interesting is the following: Every time business confidence was that low in the past, a big growth phase in the markets followed, and every time people thought that it was the end of the world and there was no hope. I am not saying/suggesting anything, just throwing a fact in here.

Also, it was ’99, ’09 and now ’19…

All the nines!

(I am also pretty sure ’89 wasn’t great haha)

@Ken..what do you mean “89 wasn’t great”?

There were bands like DEPECHE MODE and ROXETTE lifting our spirits! *lol*

To borrow a term from the crypto world, I think too many news readers nowadays are looking for FUD (Fear uncertainty and doubt)

And some media outlets are more than willing to oblige in return for your screen time, it inevitably becomes a doom loop, where the only content you see is the content that you “want” to see and that happens to be bad news.

Let me just be clear, I am not saying things are not dire (they very much are) but I still think that there are places that are having a much harder time lately than we have had.

Johan, assuming there’s always an up after a down, what happened to Venezuela’s expected up-trend?

SA’s dealing with slow structural decline. There will be some ups, but possibly more sideways movement…of some ups during long-term down trend. Remember the SA economy is a shadow of it’s former self. Trend to continue.

@MichaelfromKlerksdorp

I agree with you 100%, where is Zimbabwe or Venezuela’s upside?
Will it come, most likely, as history has showed us these things operate in cycles, the question is thus, how long is the downward cycle?
5 year? 10 years? 20 years? 50 years?

One can look at Zimbabwe and say it started with vigour in 2000, with the government pressing ahead with its Fast Track Land Reform programme.

In the case of Venezuelan it slowly started with the Venezuelan general strike of 2002–03 followed by things like the Venezuelan banking crisis of 2009–10 which transformed into the so called “Crisis in Venezuela” in 2012 and still ongoing.

Argentina had the December 2001 riots (aka Argentinazo) followed by the assassination of two piqueteros by the police that caused political commotion. Shortly thereafter followed by the unprecedented discount of about 70% on most bonds, paid off debts with the IMF.
Which was followed by the 2004 energy crisis and since then it’s been one bad political decision after another.

Currency weakness against USD in 30 years:

Zimbabwe
ZWD->USD: 16 032 077% (since 12/09/1989)

Venezuela
VEB->VES: 6 295 095 974 173 548.00% (since 12/09/1989)
VEF->VES: 358 037 438 011.99% (since 31/05/2000)

Argentina
ARS: 118 065.61% (since 12/09/1989)

South Africa
ZAR: 420.12% (since 12/09/1989)

When I think of these countries I can’t help but think of these words.

“How did you go bankrupt?”
“Two ways. Gradually, then suddenly.”

― Ernest Hemingway

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