Category Archives: media update

September 13, 2011

Pushing up VAT ‘the least damaging way to fund NHI’

By *media update*

(this article got quite a few comments – please click here to link directly to the Mail & Guardian website to read the original article…)

An increase in Value Added Tax (VAT) would go a long way in helping to meet the government’s goal of funding an effective National Health Insurance (NHI) within 14 years, experts say. 

Several economists who spoke to the Mail & Guardian on Monday feel that raising the tax on all purchased goods would be the most effective way of financing the NHI.

“It is the least damaging way of funding the NHI as our income and company tax is already too high,” says Dawie Roodt, chief economist at the Efficient Group.

These thoughts are echoed by Stanlib chief economist Kevin Lings, who feels the cost burden of a comprehensive health scheme should be borne by the whole population.

“There is no doubt that the government needs to increase its coffers to pay for this and it’s not an unreasonable suggestion, seeing as though all will benefit from NHI — this way everyone will pay,” Lings says.

Consumption drives consumption
Chris Hart, chief economist at Investment Solutions, says the cost of NHI would be significantly offset by raising VAT: it would tie funding to the nation’s ability to spend.

“VAT is driven by consumption, which is exactly what the NHI is. The costs can be offset to a certain extent within the consumptive chain,” Hart tells the M&G.

The comments follow a report in the Times on Monday that the treasury’s is apparently warming to the idea of an increase in VAT.

The department’s chief director of economic tax analysis and tax policy, Cecil Morden is quoted as saying that “a higher VAT rate could be justified on efficiency grounds” and that at 14%, South Africa’s VAT rate is “relatively low when compared to the worldwide average of 16.4%”.

This is the first sign that government is seriously considering the idea of a higher VAT rate. Finance Minister Pravin Gordhan has so far remained mum as to how the scheme will be funded.

It is expected that NHI could cost in the region of R125-billion in 2012 and R214-billion by 2020, according to a government’s green policy paper on the issue released in August.

Based on recent financial data, this would equate to 6% of the country’s Gross Domestic Product (GDP) in 2012.

An NHI pilot project is expected to be launched across the country in 2012, following the conclusion of an audit currently being undertaken at the country’s about 4 200 health facilities. If VAT were to be increased, it would be the first time the tax has risen since 1993 after it was first introduced in 1990, at a rate of 10%, as a substitute to General Sales Tax (GST).

Don’t target the poor
The Congress of South African Trade Unions (Cosatu) is strongly against the idea of raising VAT, as this would put those who are most economically vulnerable at risk.

“It’s something we will continue to have an issue with. The NHI aims at accessibility and affordability but if you rely on VAT, it defeats the purpose by placing pressure on those with the least money. Those who are supposed to benefit will suffer the most,” Cosatu president Sdumo Dlamini tells the M&G.

Dlamini believes that although the NHI has become a non-negotiable goal for government, its cost must never “fall on the shoulders of the poor”.

Hart counters this argument with a suggestion that VAT should only be increased substantially on luxury or non-essential items.

“I don’t see anybody who buys a flat-screen TV having a problem with a portion of the VAT included on the item being increased to fund NHI — so the poor won’t be affected,” Hart says.

Article courtesy of Mail & Guardian – please click here to see original article

 

Leave a comment | posted in development, economic growth, fiscal policy, media update, taxation

August 11, 2011

Investing during increased volatility and uncertainty: Chris Hart, David Shapiro and Simon Brown

By *media update*

‘Find companies that are selling something to China, because…China’s growing well..’ – David Shapiro

HILTON TARRANT: We welcome Chris Hart of Investment Solutions to the programme. Chris, a number of interventions by governments around the world – the latest of these, the Federal Reserve in the US signalling that rates will effectively be fixed for the next two years to take us to mid-2013. We’ll hear from John Stopford of Investec as to the impact on the bond market in a couple of minutes. From where you are sitting, this latest signal from the Fed – the prospect of QE3 on the horizon – has this fixed anything at all?

CHRIS HART: No, I think it signals that we are going to have yield and growth a premium. That I think is important. The other big factor that’s going to be important, especially with what’s unfolded in the US, is solvency. That’s why I’m not too pessimistic about South Africa. There will be problems. We give yield, we give growth, and we’ve got solvency on our side, and I think those are going to be critical investment characteristics that we are going to need.
Effectively what the Fed has signalled is that we are not going to pay interest for a long time, because the interest rates are [near]…zero. That anchors it, because the US is of course the kingpin and the centre pin of the global financial system. And that means we are running the same risk as in 2003, 2004, when yield was at a premium. That’s where subprime originally started. You had this desperate search for yield and you could sell subprime into the market because it gave you a yield pickup in a very low-yield environment. And of course, the situation of yields being very low is going to dominate.
As to the solvency problem – bonds are not an obvious place to put money any more, because the value just seems to be fairly poor, and it may well be that shares – like for instance where they say Apple has got more money than the US government at the moment – shares that offer growth and yield at a good multiple jurisdiction, and within the South African context, like British American Tobacco and South African Breweries and that kind of thing, which manufacture things that are recognised as strong cash flow, strong balance sheet, etc, may well be the case to actually beat.
But obviously another big factor is your precious metals, and your Swiss franc has become the safe haven. …The dollar/euro hasn’t moved too much, but both have actually weakened against the Swiss franc and gold in this thing. I think we’ve had in gold about a 10, 12-year bull market. I think what’s going to happen now is that the pace of that bull market is going to pick up, and the Fed has basically indicated that…dollar cash is certainly not going to be able to compete with gold, especially if we see QE3. You can’t debase gold.
And at the end of the day I think we are going to see different safe havens emerge through this particular time.

HILTON TARRANT: David, listening to what Chris said about those diversified blue chips, it’s a theme that I think is consistent. Chatting to Theo Vorster of Galileo Capital just earlier this afternoon, he said this is a yield market – you need to focus on the shares that will be paying you dividends over the next three, four, five years.

DAVID SHAPIRO: To put what Chris says into context, if we look at the US 10-year treasury, it’s trading at about 2.25% at the moment. I think it was down as low as 2% yesterday. But let’s say it’s kicked up a little, so it’s 2.25% – I can find at least 150 companies in the US, in the S&P 500, that are paying higher dividends or giving you higher yields than 2.5%. So where do you want to be in 10 years’ time? OK, admittedly you’ve got to look at each one of those companies, but I agree 100% with Chris. Find companies that are selling something to China, because if you look at US trade numbers today, China’s growing well. The trade numbers, record exports and record imports, etc, just show you that, funnily enough, there’s another part of the world that’s doing OK. We seem to be so centred on Europe and the US. I agree, British American Tobacco, Richemont – which is luxury goods, which sounds odd but they are still buying – SABMiller. I still like the iron-ore companies like Kumba because they have such massive margins, 70% margins. Even if the iron-ore price comes down, they are still going to be paying 6, 7, 8, 9%, as we are now, or 10% dividend yields. You can add Exxaro, which is coal.

HILTON TARRANT: Let’s bring in Simon Brown now. He’s with JustOneLap. Simon, a day-trader short-term trader, how on earth would you begin to trade a market like this where one day a stock’s up 8%, the next day it’s down 10%?

SIMON BROWN: Thanks, Hilton. This is challenging trading, and let’s distinguish the intraday from the guy who might hold a position for maybe a couple of days, for maybe a couple of weeks. At the moment the short answer is that tradings are down. So when things are going up and looking green, you are looking for opportunities more than anything to actually enter new short positions. By that I mean short positions making money on the downside. And you don’t just go crazy. You would look for classic patterns, weakness on the buying side or something, and you wait for that to start to capitulate, wait for it to start to weaken, and then take that position. The wild swings we’ve seen at the moment – they are quite large and they are quite spooky. But if you are trading it you can do all right in it. You just need to catch the bit in the middle. You don’t need to take the complete extremes from it.

HILTON TARRANT: The message is pretty clear – find companies that are diversified, find those companies that will give you a decent dividend yield over the next couple of years. Find those companies that have a lot of cash on their balance sheets.

DAVID SHAPIRO: You can find them, Hilton. You don’t need to be a genius, you don’t need to be a nuclear scientist to look for them. It’s very simple. Just do your own homework, find them. I like what Chris says there – yield and growth are going to be at a premium, so don’t set the bar at 15%. Set it much lower.

HILTON TARRANT: And ignore these drops of 5% or 10%.

DAVID SHAPIRO: This is scary stuff, and I think also a lot the background to this is that investors have lost confidence, they’ve lost confidence in Obama – I’m using this in an American context – and in Congress, and also in the Fed. So no-one’s coming out with a proper plan. We are very long on what’s wrong, but we are very short on solutions.

 

Article courtesy of MoneyWeb.co.za – please click here to see the original article

Leave a comment | posted in investment, media update

August 5, 2011

S.Africa better placed to meet external shocks than in ’08

By *media update*

JOHANNESBURG, Aug 4 (Reuters) – With foreigners holding 27 percent of all rand-denominated debt, South Africa is heavily exposed to an exodus of capital in the event of a eurozone debt default, as affected banks dump overseas assets to shore up their balance sheets.

However, this scenario — essentially a reprise of the 2008 financial crisis, which knocked 39 percent off the value of the rand — is far from certain given the growing view that risks in established markets may be just as high as in emerging ones.

“It’s not clear to me that a deterioration of the Europe situation will lead to a sell-off,” said Chris Hart, economist at Investment Solutions, a Johannesburg-based fund manager.

“If anything, investors will need to park their money somewhere and emerging markets, with their high yields, could be the place.”

South Africa’s budget deficit is 5 percent of GDP for 2011/12, which is too high, but the government has outlined a credible plan to cut that to 4 percent by 2013, and its total debt stock is just over a third of GDP, making it relatively attractive to investors fleeing, say, a Greek default.

The fact South African bonds are performing so strongly at present and the rand hit a two-month high of 6.625 to the dollar last week suggests some are already making this calculation.

“I’m not advocating that South Africa would continue to rally if things deteriorate but it would not be a crisis,” said Di Luo, regional fixed income strategist at HSBC, adding that real yields made South Africa an appealing option.

“I don’t think investors would punish South Africa indiscriminately.”

PREPARED FOR THE WORST

True to form, those overseeing Africa’s biggest economy are bracing for the worst, with Finance Minister Pravin Gordhan saying in a newspaper column last month that South Africa would not escape unscathed from a deeper euro crisis.

Similarly, new Treasury Director General Lungisa Fuzile warned this week of a spike in borrowing costs — now at 9-month lows — should the debt situation in Europe deteriorate.

Sharply higher bond yields would put pressure on the central bank to raise its benchmark lending rate from three-decade lows of 5.5 percent, potentially killing off an already sluggish economic recovery.

Analysts, however, think policymakers may be over-doing the doomsday scenario.

“The Reserve Bank and Finance Ministry are overplaying the risk. South Africa is much more of a safe haven than these other countries,” said Peter Attard Montalto, emerging markets analyst at Nomura International.

“I don’t think they’ll be selling their debt because of what happens in Europe,” he added. “The fiscal situation and debt levels make South Africa more of a safe haven.”

That is not to say Pretoria can relax.

As an economy, South Africa is far too reliant on foreign portfolio flows, the lion’s share of which goes into liquid assets such as stocks and bonds, which can easily be dumped, rather than bricks and mortar, which cannot.

For example, in 2010, offshore funds poured 107.9 billion rand ($16 billion) into South African stocks and bonds, compared to just 11.4 billion rand in direct investment.

“Unfortunately in this sort of global environment where South Africa — like other emerging markets — has been the beneficiary of sizeable foreign flows the risks are heightened because the country still faces this big mismatch of foreign direct investment and portfolio investment,” said Razia Khan, head of Africa research at Standard Chartered.

“Just because we have not seen a correction in recent times means that sell-off may be great in its magnitude when it does take place.” ($1 = 6.771 South African Rand) (Editing by Ed Cropley, Ron Askew)

Article courtesy of Reuters.com – please click here to see the original article

Leave a comment | posted in currency, economic growth, markets, media update, speculative

July 14, 2011

Economists warn of effects of fuel shortage

By *media update*

Although the immediate impact of the petroleum industry strike and fuel shortages may not be put in monetary terms just yet, the economic ramifications will be dire, economists have warned.

Freddie Mitchell, an economist with Efficient Group, told I-Net Bridge/BusinessLIVE that “some lower economic activity” should be expected following reports of fuel shortages at some filling stations, especially around Gauteng.

Fuel was not being delivered to filling stations due to a strike by the Chemical, Energy, Paper, Printing, Wood, and Allied Workers Union (Ceppwawu), the General Industries Workers’ Union of SA (Giwusa) and the South African Chemical Workers Union (Sacwu).

Union demands included a wage increase of between 11% and 13% across the board, a minimum wage of 6,000 rand per month and a ban on labour brokers. Employers offered between 4% and 7%.
Mitchell suggested that without fuel, economic and trade performance and “anything related to moving goods from one point to another” would be affected.

Chris Hart, an economist at Investment Solutions, referred to the strike as a “difficult set-up” because the strike was “snowballing”.
Fuel shortages would increase inefficiencies, Hart added.

Contracting other workers to deliver the fuel to filling stations by fuel retailers carried some risks, Mitchell and Hart suggested.

“One may have to resort to contracting, but there’s quite a bit of intimidation and violence associated with strikes,” Hart said. Mitchell said even those not participating in the strike and would like to help out by delivering the fuel were hesitant as “you’re not sure you’re going to make it back”.

Jac Laubscher, group economist at Sanlam, said it was difficult to make “definitive” statements on the kind of impact the fuel shortages would have on the economy, but noted that fuel was a basic input in transport and that any shortages could be “very disruptive if we see them on a large scale”.

Article via Business Live – click here to view original article

Leave a comment | posted in 3rd world, media update, service sector

July 9, 2011

Labour

By *media update*

One dead, six injured, nine arrested in countrywide strikes

A worker died, six were injured, and nine arrested during the country-wide strikes this week.

The engineering, gold, chemicals, and coal sectors were negotiating with employers for higher wages.

During the engineering sector strike a worker died when he was hit by a car in Germiston, National Union of Metalworkers of SA (Numsa) spokesman Castro Ngobese said on Friday.

Two people were injured when a supervisor at an engineering company in Krugersdorp shot at striking protesters who were assaulting working employees on Friday, Gauteng police said.

The supervisor and the two protesters, who were taken to hospital, were arrested.

Four Numsa members were also injured after police fired rubber bullets during a strike in Krugersdorp, west of Johannesburg on Thursday.

There were also claims that police had harassed, intimidated, and shot at strikers in Bellville and Germiston.

Numsa and the Congress of SA Trade Unions (Cosatu) condemned the “police brutality” and called on Police Minister Nathi Mthethwa and National Police Commissioner Bheki Cele to take “drastic action” against the policemen.

However, the Steel and Engineering Industries’ Federation of SA (Seifsa) said pockets of strikers were moving from company to company to find and intimidate non-strikers, damaging property, and trespassing.

Ekurhuleni metro police said nine Numsa members were arrested for public violence in Germiston on Thursday.

Constable Mashudu Phatela said they were allegedly burning tyres and throwing stones at passing motorists.

Over 117,000 workers in the metal and engineering sector downed tools on Monday in pursuit of between 10 and 13 percent wage increases. Employers were offering seven percent.

Workers were striking in Johannesburg, Port Elizabeth, East London, and Cape Town. Mpumalanga and KwaZulu-Natal workers held demonstrations on Monday, while workers in the Free State and Northern Cape started their work stoppage on Tuesday.

Numsa, which represents about 120,000 workers, was joined by five other trade unions — the Chemical, Energy, Paper, Printing, Wood, and Allied Workers’ Union (Ceppwawu), the Metal and Electrical Workers’ Union (Mewusa), United Association of SA (Uasa), Solidarity, and the SA Equity Workers’ Association (Saewa).

Cosatu president Sdumo Dlamini on Wednesday said the engineering sector strike was only the beginning of workers’ fight for a living wage.

Economist Chris Hart on Friday said strikes over wage negotiations were becoming routine, which suggested there was policy and regulation failure.

The violence associated with South Africa’s strikes also had an implication.

“The violence suggests that there is a lack of control which is not good for investment,” he said.

“Labour instability does nothing for job creation; if anything it damages it from an investment point of view.”

Two “victims” arose from non-productivity during strikes. The customer, who ended up paying more, and the unemployed, he said.

The protests by workers also reduced South Africa’s competitiveness with the rest of world.

The solution was productive negotiations between unions and employers, Hart said.

“…but we [South Africa] are not there yet.”

About 5000 Ceppwawu members went on strike on Tuesday over a salary dispute.

The union wanted a 13 percent salary increase on the grounds of rising daily costs.

The gold and coal sectors declared disputes with their employees over wage negotiations.

The Chamber of Mines was negotiating on behalf of employers in both sectors.

Workers in the gold sector threatened to go on strike next week if wage negotiations with the chamber came to a deadlock.

The National Union of Mineworker (NUM), Uasa, and Solidarity were representing unionised employees working for chamber member companies such as AngloGold Ashanti, Harmony Gold, and Goldfields.

The NUM and Uasa hoped to raise the chamber’s offer from 4.2 to 14 percent. Solidarity members wanted 12 percent.

Solidarity said it submitted the lower figure in light of the current production environment and 4.6 percent consumer price inflation.

It felt the figure, although still above inflation, would help retain skilled employees.

Although inflation was at 4.6 percent, workers faced hefty electricity and rates increases, food price increases, and the imminent introduction of road tolls.

The chamber recently said production in the gold mining industry had consistently declined and it faced pressure from the high costs of electricity, water, and fuel.

Chamber negotiator Elize Strydom said it had increased its offer to five percent for the lowest paid employees and 4.5 percent for the rest.

The coal sector started salary talks on Thursday.

Coal companies have offered a 4.5 percent increase for the lowest category employees and 4.2 percent for all others.

A full-blown strike in the petroleum and pharmaceuticals sector will kick off on Monday, Ceppwawu said.

About 70,000 workers are expected to go on strike.

This would include members of the General Industries Workers’ Union of SA (Giwusa) and the Tissue and Allied Union.

Workers wanted a wage increase of 11 to 13 percent across the board and a minimum wage of R6000 a month.

Article via The New Age – click here to see original article

 

Leave a comment | posted in 3rd world, economic growth, household, labour, media update

June 18, 2011

Moody’s warns on SA debt

By *media update*

‘Maybe Greece will be solvent if you put their retirement age at 85.’

ALEC HOGG: I write a column every week, Wayne. It’s distributed to about 20 000 people who subscribe to it onMoneyweb, and it’s also published in The Citizen and theWeekend Witness. And this week I’ve had a look at Greece and I think, if you are going anywhere around the world, that is the big story of the moment, isn’t it?

WAYNE McCURRIE: Well, ja, it is, and it’s not a new story. Quite frankly what’s been happening in the market has actually been around for a long time. This Greece story has been around for a very long time, and before that Ireland. Then the worry about Portugal and then the potential worry about Spain. So this is not new news. It just seems to have come to a head today with the resignation and the appointment of a new finance minister in Greece, and all of the riots that they are having there. They need more money and, quite frankly, they are going to get it.

ALEC HOGG: Well, the thrust of my column is they need to start working – working as in stopping having a bit of a holiday – and putting their heads down and taking the austerity package
Chris Hart is an economist at Investment Solutions and he joins us now. Chris, the whole story that’s going on in Greece and the possibility that it’ll have a domino effect – is there anything that we as South Africans need to be concerned about?

CHRIS HART: There is, because there’s no doubt this is what one calls a “sovereign Lehman” kind of effect. Effectively what’s happening in Europe is that the political will to bail countries like Greece out is waning rapidly. In other words there is a very serious negative political consequence that politicians are finding at the polls, particularly that the Germans are finding. Very unpopular to bail them out, and the austerity package is very unpopular. So within Greece you can lose your political career by backing austerity plans, and you can lose your political career in Germany by backing the bailout. …I think at this stage they’ll probably pony up the money to keep Greece going a little bit.
I think what’s happening in Europe is effectively similar to the Berlin Wall falling in ’89, etc. I think we are getting to the stage where the welfare state concept is about to keel over in bankruptcy. I think it’s simply not sustainable.

ALEC HOGG: Fascinating that, because even the Brits are now going to be called on to put in a billion euros. And certainly the headlines in England, from their tabloids, are: “Why the hell should we bail out the Greeks?” So they are expanding the net, not just from the euro monetary zone, but from everyone in the EU.

CHRIS HART: Everybody in the EU. You can imagine in Britain, where they’ve already gone into austerity, and there’s big cuts in various things, and there’s already been protests in Britain, just for them to come up with money I think would be extremely difficult from a political point of view.

ALEC HOGG: It’s good that we aren’t involved there, or part of the European Union.
But we did get a report today from Moody’s, which had a cautionary note in it. Chris, I don’t know if you had a chance to look at that.

CHRIS HART: I didn’t see the Moody’s report, unfortunately.

ALEC HOGG: It gave a stable outlook for the country. We’ve had an A3 grading from Moody’s. But what it does say is that it’s a little bit worried that the debt dynamics are not on a favourable trend. In other words, our debt is now starting to grow a little bit too rapidly.

CHRIS HART: I think they are right to flag that. But in my opinion there is one thing that is not well understood in terms of the debt dynamics. In Europe you have massive shortages in unfunded pension liabilities, which is not really even coming onto the table. That’s one of the reasons why you’ve got that bankruptcy. In South Africa our government pension fund scheme is fully funded, and that is unusual in international terms. And to my mind that already puts South Africa in a much, much better position than the US or Europe, which is facing ageing populations and these unfunded pension liabilities. The only way you can actually resolve that is to start jacking up the retirement age by quite a bit in Greece from 50 or whatever they are retiring at. Maybe Greece will be solvent if you put their retirement age at 85 or something like that. ALEC HOGG: [Chuckles] They don’t want to work, anyway. What are the chances of taking their retirement age from 50 to 85?

CHRIS HART: You know something, it’s when people are on the public [benefit], you cannot damn well get them off it. I know the Greeks in South Africa – they work damn hard, because they know there is no state support for them. But when you’ve got a situation that has built up in Europe, and Greece is particularly bad, the same in Italy and Spain, etc, where you’ve got these enormous benefits of entitlement that the state gives, and effectively a mismatch between what politicians have promised and what taxpayers can deliver, I think that mismatch is something that’s got to be righted, otherwise these countries are going to actually continue to fall back.

ALEC HOGG: Chris Hart is an economist at Investment Solutions

Transcript via Moneyweb.co.za – click here to view original content

Leave a comment | posted in household, media update, speculative

May 20, 2011

Gautrain is a catalyst for development: economist

By *media update*

Gautrain, the rapid transit rail commuter service that goes into full operation in just over a month, provides an economic backbone for Gauteng, SA’s wealthiest province, according to Chris Hart, economist at Investment Solutions.

Gautrain, which links Johannesburg, Pretoria and OR Tambo International Airport, will officially start to run its full operation from June 28.

Already, the multibillion-rand rapid rail commuter service is drawing interest from businesses, underscoring its potential for galvanising Gauteng’s economic activities.

Hart says Gautrain’s 10 stations would prove to be developmental hubs and add a new dimension to how cities are developed and designed.

Stations, he says, have increasingly become central points of urban planning, highlighting the Gautrain’s role as the “backbone of economic development”.

There are office and residential nodes around stations, which will ultimately create work opportunities.

Presently, the Gautrain commercially operates on the route linking Sandton and Oliver Tambo International Airport. Some feeder bus services are available.

It is clear that Gautrain’s ticketing has been priced to attract regular commuters, Hart says, adding that the rapid transit system will help speed up the movement of people around and between the major cities of Johannesburg and Pretoria.

The Bombela Concession Company, which will operate the Gautrain for the next 15 years, says there is interest in the Gautrain from businesses in Gauteng, some of whom are already utilising the current operational service to and from the airport.

Although Bombela does not have figures, it is keen to engage with businesses on Gautrain service offerings, it says.

The Gautrain has made its mark, in particular, when it comes to socioeconomic advancement, such as empowerment and job creation.

Black-owned businesses hold 25% shares in Bombela.

During construction, more than 5.08 billion rand was spent on procurement from, and sub-contracting to, black entities.

The Gauteng Management Agency, which is overseeing construction of the Gautrain on behalf of the provincial government, says 34,837 jobs were created for South African-based workers.

Unskilled staff and semi-skilled staff attended more than 15,080 courses to improve their skills levels, Gauteng Management Agency says.

But Hart poses a question, asking whether the Gautrain model would inspire the rejuvenation of Metrorail to also catalyse further development.

Metrorail is a national passenger rail service that is part of the Passenger Rail Agency of South Africa (Prasa).

Article via Business Live – click here to see original article

Leave a comment | posted in development, economic growth, media update

April 13, 2011

High hopes for Brics meeting

By *media update*

A high-powered government delegation is gearing up for a meeting of the powerful alliance between Brazil, Russia, India and China that South Africa is now officially part of.

By Troye Lund

The CEO of Frontier Advisory Consultants, Dr Martyn Davies, has commented on our country’s first meeting of the so-called ‘Brics’ countries.

He believes South Africa’s economy is not too small to participate in this grouping as it has always punched above its weight.

President Jacob Zuma, government officials as well as some business people will attend the Brics summit in China later this week.

While government has expressed its elation at the honour of being invited to join Brics, the question on everyone’s lips is what tangible benefits the South African delegation will leave with.

While economists like Investment Solutions’ Chris Hart cautions that South Africans should not expect too much from this meeting, he says South Africa’s involvement could evolve into something significant over time, especially as stronger business ties are made between companies in each country.

article via ECR.co.za – please click here for original article

Leave a comment | posted in media update

April 12, 2011

SA “not too small” to be BRICS member

By *media update*

The country is “not too small” to be a member of the BRICS (Brazil, Russia, India, China and lately South Africa) grouping, according to Dr Martyn Davies, CEO of consultancy Frontier Advisory.

“SA has the corporate muscle to compete with other economies in BRICS,” Davies said.

“We punch above our weight and yes, SA is a relatively small economy but look at the multinational corporations we’ve spawned such as SABMiller, Anglo American and Sasol amongst others.

“So when it comes to multinational corporations, we may even be ahead of other members of the grouping,” Davies added.

President Jacob Zuma – as well as other members of government – will on April 14 attend the BRICS summit at the Chinese resort of Sanya on the island off Hainan.

While warning that SA should not expect too much from the BRICS summit, Investment Solutions economist Chris Hart said that the grouping “could evolve into something significant over time for the country”.

It would help open links and focus people’s minds in terms of business opportunities, he added. “I strongly believe that our economic relationships with India and Brazil are way below what they could be.”

Last week, International Relations Minister Maite Nkoana-Mashabane, said that SA, as the newest member of BRICS, was “quite honoured and elated” to have been invited to join “this very, very, important global grouping”.

“We believe we belong in BRICS because to complete the grouping they needed a country on the African continent and we thought we were the right candidate.”

article courtesy of Business Live – please click here to see the original article

Leave a comment | posted in economic growth, media update

March 27, 2011

Zuma banks on Kganyago

By *media update*

Lesetja Kganyago’s appointment as deputy governor of the Reserve Bank has been applauded by market-watchers, but he leaves a big gap at the national Treasury.

President Jacob Zuma announced on Friday that Treasury director-general Kganyago would, on May 16, become the Reserve Bank’s third deputy governor for five years.

The position has been vacant since Renosi Mokate left the bank at the end of July last year.

Albeit somewhat premature, Kganyago’s departure did not come as a total surprise. His contract at Treasury was renewed for two years in January last year, but he indicated then it would be his last term.

While analysts welcomed his appointment at the bank, the biggest question was: who will be appointed in his place at Treasury?

Pravin Gordhan, the Minister of Finance, said on Friday there was a “clear process” to fill vacancies within the government and gave no indication of whether an appointment would be made from within or outside of Treasury.

“We have to advertise, give people time to apply, and have a panel do interviews. And as soon as we are ready, a successor will be announced. The whole aim of exercise is to ensure a smooth transition from one DG to the next,” he said.

One of the possible replacements is Ismail Momoniat, head of tax and financial sector policy at Treasury.

“He is well regarded, but they might want to recruit externally,” said Razia Khan, an economist at Standard Chartered in London.

Khan said Treasury might also look at some of its former officials who now work in the private sector.

“Kganyago’s role at the Treasury has been so pivotal that there will be much more speculation on his replacement than there was about the vacancy for a deputy governor that existed at the Reserve Bank.”

Investment Solutions economist Chris Hart said Treasury would be diminished by Kganyago’s departure.

“Treasury is in a good space where they have quite a bit of good talent,” Hart said. “But at that level there are quite a lot of political imperatives in appointments.

“So we will have to see whether the left of the (governing) alliance assert their influence to get one of their people in.”

Another analyst said on Friday that Gordhan was probably making life difficult for some ministers by keeping them on the narrow road – and Kganyago supported him.

“The removal of Kganyago could undermine Gordhan as well,” the analyst said.

Khan said Kganyago’s appointment would be interpreted positively by markets as he is known to investors.

“He has been the face of SA policy to investors. He has been the guy reassuring them at all the bond road shows and they have known him for over a decade. He would be seen as a proponent of inflation targeting and taking the same centrist line as the rest of the Reserve Bank.”

When asked whether Kganyago might be groomed as a possible replacement for Reserve Bank governor Gill Marcus, who was appointed in November 2009, Zuma said there was no “hidden agenda” behind Kganyago’s appointment.

But, Hart said, with Kganyago’s skills and capabilities he could well be governor in the future, just as he could follow in Gordhan’s footsteps as finance minister.

Dawie Roodt, economist at Efficient Group, said Kganyago was a fiscal expert, not a central banker.

“The good thing about his appointment is the new blood and new ways of thinking it brings to the bank,” Roodt said. “The downside is he does not know monetary policy.

“As someone from a fiscal environment he might have a softer stance on monetary policy. His real test will come when interest rates have to start rising towards the end of the year, but that will also be Marcus’s first real test.”

Who is Lesetja Kganyago?

Kganyago was born in Alexandra township, north of Johannesburg, in 1965.

He began his career in accounting at First National Bank, subsequently working for Cosatu and the ANC.

He studied accounting and economics, receiving a BCom from the University of South Africa in 1991 and a master’s in economics from London University 1994. He spent two years at the Reserve Bank between 1994 and 1996 as an investment manager and joined the national Treasury in 1996 as director of international commercial financing.

In 2001 he was appointed the head of the economic policy and international financial relations division.

He has been serving as director-general of Treasury since February 2004, when he replaced Maria Ramos.

article courtesy of Business Live – please click here to see original article

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