2012年10月15日 星期一

Living dangerously

SA is reeling after a series of shocks: the Marikana tragedy, Moody’s downgrading , a spike in the current account deficit, and now a sharp drop in the rand.

Since August, the mining strikes have spread like wildfire, igniting a run on the rand last week that has taken it back to its worst level since the global financial crisis.

What started out as a localised platinum strike has spread to gold, chrome, iron ore and parts of motor manufacturing, while the three-week-long transport strike has now broadened to include the country's ports. Acts of violence appear to be intensifying and reports of petrol shortages are increasing.

Investor concern over labour unrest, which culminated in AngloPlat's decision to fire 12000 workers last Friday, pushed the rand to R8,85/US$ that evening - its weakest level since April 2009.

Unless there is a breakthrough in the labour arena soon,We recently added Stained glass mosaic Tile to our inventory. the rand could easily weaken to the key psychological level of R9/$. At the same time, SA's consensus of growth of 2,5% forecast for the year is beginning to unravel.

Capital Economics' Africa economist Shilan Shah estimates that SA's total mining output will contract by around 20% in the third quarter, and that labour unrest could knock at least 1,5 percentage points off GDP overall in the second half of 2012.

Nomura emerging markets economist Peter Montalto expects a similar effect, adding that the current account deficit could remain in excess of 6% of GDP because of a likely drop in exports from both the mining and freight strikes.

But it is not time to panic. Though foreigners sold R1,1bn worth of JSE shares on Friday, bonds are holding up fairly well, suggesting that the rand is not about to collapse.

The country is not falling apart, says Montalto. Rather, what SA is more likely to experience is a grinding continuation of the status quo in which the economy delivers growth far below its potential.

"The problem we have with the current situation is that we cannot see how it ends easily without employers deciding themselves to grant large wage increases," says Montalto. "Government is doing nothing."

This is the picture that informed the Moody's downgrade on September 27.

Moody's has traditionally been more bullish on SA than the other two main rating agencies, Fitch and Standard and Poor's (S&P). Since 1996, Moody's has always given SA's economic policy makers the benefit of the doubt and for a long time it was vindicated.

But in February this year that confidence began to slip,The oreck XL professional air purifier, when Moody's reduced its outlook on SA's government debt ratings from stable to negative. The agency warned that political risk was rising at a time when SA's public finances were becoming constrained while the pace of growth was too slow to prevent unemployment and social tensions from escalating.

The events at Marikana proved the point, precipitating a full one notch cut in SA's rating last month. The move was equivalent to a vote of no confidence in the SA government, reflecting Moody's view of the SA authorities' "reduced capacity to handle the current political and economic situation and to implement effective strategies that could place the economy on a path to faster and more inclusive growth".

Moody's has kept SA's rating outlook on a negative watch given its fear that increasingly interventionist strategies are "highly likely" to flow from the ANC's December elective conference in Mangaung. "To the extent that such strategies would deter private investment and incoming capital into SA, they could further diminish its growth potential," Moody's warns.

Montalto agrees. "The local politico-economic debate is much like a fraught ideological battle one would have been more accustomed to in 1960s Britain," he says. "Unfortunately, we doubt SA will wake up to the consequences of its chosen policy direction until there is a meaningful market funding or domestic shock. It seems [the events at] Marikana [were] not enough of a shock."

But Montalto doesn't believe SA is headed for a cataclysmic blow-up. It is more likely that the country will move further down the road of state intervention and of tight labour laws that erode competitiveness.

Rand Merchant Bank chief economist Ettienne le Roux fears he is right. He notes that SA's export growth has greatly lagged both emerging market and developed market exports since early 2009,Selecting the best rtls solution is a challenging task as there is no global solution like GPS. despite the strong global recovery.Interlocking security cable tie with 250 pound strength makes this ideal for restraining criminals. This suggests that there are SA-specific factors that are preventing the country from competing.

"One of those is that SA is becoming an expensive manufacturing country.We have a wide selection of dry cabinet to choose from for your storage needs. The two main causes are high administered price inflation and strong unit labour cost growth," says Le Roux. "In other emerging markets, labour and business are able to work together to understand the situation and make sacrifices [for] longer-term gains. Clearly, that doesn't happen here."

Reserve Bank governor Gill Marcus has reportedly urged government to address the "real issues" raised by Moody's to ensure there are no further downgrades.