Global economic sentiment is showing signs of improving in the aftermath of the US election and the positive clinical trial results of two Covid-19 vaccines.

And there is a degree of renewed hope among some in South Africa about our economic future. In recent weeks, South Africa has come up with new plans to deal with the growth in public debt, and President Cyril Ramaphosa has launched an Economic Reconstruction and Recovery Plan.

Is there now a basis for optimism?

Over the past month, the Rand has strengthened against the US dollar and foreigners are showing renewed interest in SA government bonds. The JSE has been buoyant since the start of the month, and the markets are now looking to the end of lockdowns. Some analysts, such as J.P. Landman, believe that there is now the political will and leadership in South Africa that is key to solving the country’s deep problems.

The end of the pandemic could be in sight and, with that, investors are prepared to expose themselves to greater risk and place more of their portfolios in emerging markets. Hence the slightly greater interest that is being shown in South Africa and other emerging markets.

The optimists point to Finance Minister Tito Mboweni’s commitment to curbing the growth in public debt through spending cuts and freezing civil servant compensation. The unions have said they intend to fight this, but at last there are some signs of the problem being addressed.

There is good news in the fight against corruption. One of the most senior ANC officials, the party’s Secretary General, Ace Magashule, has been charged with corruption and will appear in court in February next year. There have also been charges against officials further down the food chain. Meanwhile, the Zondo Commission on State Capture continues and may pave the way for further corruption charges.

Ease the pressure

Ramaphosa has a plan for new jobs and a mega infrastructure programme. There are also plans to allow more independent power producers to enter the generation market, which should ease the pressure on Eskom. The CEO of Eskom, André de Ruyter, says there will be an end to load-shedding in 18 months’ time.

Is all this sufficient for new positive thinking about the country’s future?

This new environment could allow Ramaphosa and his ministers to perhaps give a more bullish view at this week’s third annual SA Investment Conference. Government says it has already raised billions, and investors are on board.

What undermines the government case is that much has been planned over the years but very little implemented. We are now told that the reconstruction plan is all about implementation, although questions about financing are unanswered.

Before it embarks on grand schemes, South Africa will have to bring down its public debt as a percentage of GDP. This is currently at over 80 percent and the budget plan is to allow this to peak at around 95 percent in four years’ time. Without debt consolidation, the government will be highly constrained in raising capital for electricity production and infrastructure programmes, or in implementing a successful public jobs programme.

South Africa needs to grow to carry its high debt burden, and fast growth in the immediate future is out of the question. There will be an economic contraction of around eight percent this year and growth thereafter will face the primary constraint of load-shedding. All this puts tax revenue under pressure and therefore limits debt-service capacity.

Government is in a Catch 22. It cannot raise significantly more debt or offer massive debt guarantees for infrastructure projects, crucial for energy production, yet economic growth depends on these investments.

Yet to act decisively

Finance Minister Tito Mboweni has given many warnings about overspending and debt levels over the past three years, but has yet to act decisively. Cuts are promised in the budget to be presented next year. But will he be in a position to act on his warnings?

The government would like to freeze civil servants’ pay, and negotiations are presently under way. But what if the public servants, who are highly unionised in government, do not agree to a cut?

It is positive that the issue of public sector remuneration is now at least on the agenda, but it will have to be addressed for optimism to be well-grounded.

It is positive that the government is allowing Independent Power Producers an expanded role, but there is a trap, here. To raise finance, these producers will require government guarantees. Guarantees are part of the public debt burden and, given the existing commitments, the state is highly constrained in its ability to extend additional guarantees.

It is highly unlikely that load-shedding can be solved in the absence of Eskom turning around the mega disaster projects that were meant to be its state-of-the-art generating plants at Kusile and Medupi. Much of the Eskom coal-powered fleet is ageing and will have to be retired within the next decade, so Eskom’s base load will be highly dependent on these. Well-founded optimism would be based on convincing efforts to bring Medupi and Kusile to full capacity.

Hesitant and partial effort

So far, there has been no mention of reforms to the labour market, indicating a hesitant and partial effort.

Much of the ANC agenda – such as prescribed assets, nationalisation of the Reserve Bank, a National Health Insurance scheme, and a Basic Income Grant – seems to have been put on hold. But a month before the Investment Conference, the Expropriation Bill of 2020 was published in the Government Gazette. The big worries are that, under an Expropriation Act, municipalities would be able to determine the price of the property to be seized and the very limited rights to appeal of property owners. That cannot be good for investor optimism.

But what are investors saying?

Moody’s and Fitch, the credit rating agencies, gave South Africa a negative outlook, which points to further downgrades after the February budget. Come Friday, these two agencies are likely to actually downgrade South Africa. That means they are increasingly worried about the country’s ability to repay debt and are not persuaded by the October budget statement or the president’s recovery plan.


The bond market reflects these worries about South Africa’s longer-term ability to grow and repay debt.

Currently, the South African ten-year bond trades at nearly 4.67 percentage points above the two-year bond. That is way over the margin at which ten-year bonds trade over two-year bonds in Brazil (3.57 percentage points), and India (1.76 percentage points).

In short, the bond market is saying: ‘Bang vir die toekoms’.

[Picture: enriquelopezgarre from Pixabay]

The views of the writer are not necessarily the views of the Daily Friend or the IRR

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  1. Ramaphosa excels at talks and plans and grand visions.
    And thats about it.

    For the ability of the comrades to build or implement anythjng the Kusile and Medupi elephants already cited is the only example you need.
    Still being built, still running up the bills.
    Further exhibits cpuld include housing projects that consist of nothing more than foundations and RDP houses that run away before the first winds blow.
    Collapsing roads, railways, half the countru’s sewer plants dont work and water and electridity infrastructure are crumbling.. dams are choked by weeds, wetlands are disappearing. So much for simply maintaining what you were given on a silver platter.
    We have no rule of law.
    The comrades ability to manage businesses buklt before them would include Denel, Transnet, SABC, SAA and the list of bailout bunnies goes on.
    The comrades excellence at creating new business enterprise is more succesful with thousands od bureaucrats employed to supervise Black Elite Enrichment policies.

    The only thing South Africa has going for it is an exceptional amount of delusion.
    The ability of citizens to soldier on despite the comrades best attempts to destroy any ability of people to provide for themselves is running out of road.
    I am not optimistic.

    • The only thing South Africa has going for it is an exceptional amount of delusion.

      the single minded truth right there in a single sentence

  2. It frustrates me that journalists can be so blind as to what is right in front of their eyes. Ramaphosa is the worst president SA has delivered, on almost every metric, by far. You can choose to be optimistic about that if you wish.

  3. In the short term this mayor may not be be true, but there are other problems on the horizon for SA’s economy. By 2050 economic disaster and industrial decline is a looming possibility.

    1. The current exponential rise in the unskilled black population if it continues to rise as it is doing poverty will simply swamp the economy where the technical skills base has flat lined.

    2 The rise in automation and 3D printing will force closure of many of our auto and component plants as there will be more advantages of placing production where the large markets are.

    If by 2050 the prediction made in an engineering study by joint team from GM, Ford and Chrysler in Detroit in the late 1950’s is correct factories will be place where the dominant market is not where the labour and raw materials are. SA has about 30 years to re-plan its industrial economy, unfortunately leadership is oblivious to this impending economic doom.

    • At the rate government is going, we’ll be lucky to make 2030 before becoming an entitely failed state

      What emerges from that, being hyperinflation, sucessive currency collapses, social instability and repression, still under tha ANC, can persist for decades.

    • re-plan… contains the verb “to plan”. …oh well. it has been a good ride on another mans toil for as long as the built up resources lasted – some 25 years. Well planned back there, just needed to be maintained when it was dropped into the lap… oh sorry yes that too meant to plan.

  4. I am not pessimistic, when things get bad it brings out the best in people. If allowed the economy will heal itself and we can improve our condition. There is enough money in the country to take us through this situation all that is needed is the right climate and support to do it.
    The government must make it worthwhile to invest in the country, remove the barriers set by the non functional affirmative action and racism rules and the clamp by the unions on businesses, allow for investment encouragement by means of tax incentives and reduce red tape.
    Obviously the fingers must be taken out of the cookie jar and corruption nipped in the bud. Government spending must be focused on projects with a positive return.
    This can be done, I only doubt the willingness of the government to do this as long as we have an ANC government that is divided in it self.

    • Why are you optimistic? Serious question as I would like to know what I am missing (I too am not pessimistic – but I hope to think that I am realistic)

      Turkeys don’t vote for Christmas (but Christmas still comes).

      Your suggestions may well be what is required BUT: Why would Gov remove AA? They won’t. They are incentivised by its near term benefits of keeping them in power despite its long term negative outcome on the populace. Why would Gov “clamp down on unions”? They won’t. They need them for their votes to keep them in power close to the trough. Why would Gov reduce tax and red tape. They won’t. They need to “eat” your tax and “red tape” is the outcome of “employing” more than a million bureaucrats – also to keep them in power. Why would they “nip corruption in the bud”? Are you mad? That is the sole purpose of getting into power! Why would Gov spend on projects with positive return? This goes 100% against their self interest. Their entire raison d’etre is to increase proximity to power in order to feather their own nest.

    • There is enough money in the country to take us through the situation, according to Niel. On what do you base that ridiculous statement? We are running on empty, pal. Corruption & mismanagement has put us in this situation. I am not an accountant. I am a retired BSc Mech Eng so maybe I missed something.

    • WOW! and astonishing perspective considering the facts, evidence before us, current affairs, the ANC’s NDR trajectory, tabled policies in parliament and 25 plus years of experience. Truly astounding.

  5. This morning’s happenings with and by the taxi ‘industry” should remove from anyone and all, any and all optimism. A lawless country at all levels and a lack of personal respect and tolerance for one another at all levels, negates any and all good-will.

    • exactly and tomorrow like yesterday there will be other and further examples of the same.

      but lets rather focus on private high school functions and have race confused Chapter 9 institutions like the SAHRC and the courts condone race instigation and repeated threats of genocide of minorities because ‘PDI’

      at present and based on past experience and current trajectories forward we are in a word EFF’d

  6. Unless the ANC can have enough money in their coffers to keep SASSA afloat each month plus also pay their Civil ( if you can call them that) Servants in salary each month we are looking down a barrel of high velocity bullets. Imagine some 16m SASSA folk with no payout and now no food for them. Imagine no Civil Servants with no salary also looking for food. Gift of The Givers won’t stand a chance. All these plans are meaningless if you have no money. And we have NO MONEY left.

    • In addition the trend is the wrong way. More and more grant folk. Kids having kids.
      Among female youth 19.2% had had an adolescent pregnancy, and among male youth 5.8% had impregnated a girl when they were an adolescent (12–19 years), 16.2% of the women ever had an unwanted pregnancy and 6.7% had ever terminated a pregnancy.
      We are doomed.
      If you can leave -> LEAVE

    • . . . . . Even worse.
      Over-stacked civil service and thus posts that are really needed.
      Then do not fill vacancies in trying to cut salary bill.
      Result? “We can’t function because of the number of vacancies that exist!”
      Solution: First eliminate the excuse of vacancies by scrapping those posts ?????
      Or is that too easy to “komprihent” ??????????

  7. The largest elephant in the room is still being ignored. Expropriation without compensation is not exactly an incentive to invest, neither is that fool Malema, neither is talk of nationalising the Reserve Bank nor is the salivating over Pension Funds & other financial institutions. Never say die! Earlier this week there is huge interest in interfering in the last viable industry………mining!
    Sorry folks we won’t be open for business for some time yet, our ideologies have got us snookered!

    Please tell me I’ve been smoking wacky cigarettes again & I’m seeing only the down side! Anybody?

    • I think you are bang on the money. JP Landman is completely wrong on just about every prediction he makes so I would take an opposite view on anything he predicts as a matter of principle.

      As you mention, property – of all types including intellectual – has no value in a world of EWC/Legalzied theft. I would also expect the US to take a hardline against SA, even under a Biden admin given our track record of siding with known enemies of the US. Perhaps more of that from the EU as well.

      WE are in for some very hard times, ahead. Cyril is a useless tosspot that has been exposed now that he does not have a competent board of actual business people around him to make him look good.

    • Agree Graham. ROI is return ON investment, but many international (and local for that matter) investors worry about a different type of ROI: return OF investment. Why would I invest in SA? What level of return would I require. The author is right, the bond market never lies!

      Another one for the optimists in their responses: why have some of SA’s most successful entrepreneurs and corporate managers left to other markets if SA’s market is so fertile for investment?
      I remain realistic. As long as a socialist ideology (eg the NDR) is the foundation of SA’s policy, there can be no sustainable development. SA government is fast “running out of others people money”.

    • It is the delusional thing many have going for them. eg EWC is perceived by them as The ANC expropriating ‘stolen land from thieving rich racist white farmers who exploit their workers, and run around in khaki’s at night killing them from the back of their bakki’s” and so they deserve it really.

      No thought that the change in legislation has in its target, ALL property, Land is the least lucrative as you mention IP, Housing where it is wanted – in towns and cities, businesses, What are BEE regulations other than expropriation of another mans efforts and input? All the way down to your every possession. Even rudimentary knowledge of the ANC’s NDR make this quite clear.

    • You are going too far… Take a break with more close-to-ground events. A person erects ILLEGAL structure on the place that he HAS NO RIGHT to do it. ILLEGAL structure burns down in an unfortunate event. A judge orders CoCT to erect another ILLEGAL structure on a place that such structure is not legally allowed…If you think that legalized theft called EWC or BEE are our big problems, have a look around, we are stuck with plain insanity.

  8. The only thing a person can be optimistic about in SA is that the anc is going to destroy the country with corruptcr leading the charge.
    He is a pathetic spineless human controlled by kopdoek zuma and ace

  9. I, for one, won’t be be holding my breath to see this prediction come true, I’ll turn blue before anything useful happens.

    If the past nearly 27 years have taught us anything, it is that the ANC are the best dreamers in the world. They dream up all the most wonderful ideas and plans, usually in time for an election, but very few, if any, of those dreams ever become reality.

    One of the biggest drawbacks for economic recovery, not even mentioning growth at this point, is the Black Elite Enrichment, along with Affirmative Action, policy of the ANC.

    It alone is the largest contributor to poverty in this country, and unfortunately most of those poor people happen to be black.

    However, it does prove the Marxist principle that in order to ensure the masses are under control, the state must keep them poor and uneducated. And we have to admit, up till now, it has been working well for the ANC.

  10. Sadly I think hope for dramatic improvement is a naive illusion. The fundamental communist, socialist ideology of the ANC cannot bode well and the damage done already is too severe. The role models that it chooses (Venezuela, Russia, Cuba, China) are hardly ideal compared to other more successful models. One of the biggest red flags is to appoint the head of the communist party as minister of education….a guarantee for the longevity of the ideology! Massive efforts by a few well meaning individuals can lead to short term improvements after the devastation caused by industrial scale corruption but the long term trajectory is unstoppably downwards. A change of government to a non racial free market driven ideology that copies the best the world offers would help but would take many lifetimes to implement.
    The future looks much like Malawi, Zambia, Zimbabwe, Mozambique, Congo etc so adaption to the expectation of that would be realistic.

  11. Criticism of the ANC’s track record – of anything – and reservations expressed regarding promises of future improved performance are all valid. The political/social/economic fiasco is invariably a result of cadre deployment and disregard for institutional memory and international best practice as sanctioned by anti-constitutional and discriminatory BEE legislation.

    It’s really astounding how political parties, institutions and individuals correctly identify and criticize the ANC’s performance but ignore racial discrimination that is the genises for incompetence and corruption that has become synonymous with ANC governance.

    Perhaps those who have the luxury of observing and criticizing are financially secure against the ravages of the ANC or simply agree with the reasons for discrimination by the majority against the minority. Perhaps they think they can sway the ANC on performance matters but believe that commenting on black majority discrimination against particularly the tiny white minority is unpalatable.

    The rejection of race and pursuit of merit based equality of South Africans should be not only be limited to the DA.

  12. I see little hope for our economic future. From the recent outpouring of support for ANC members like ACE the government under Cyril and his results about ridding all Government levels of persons implicated with dishonesty, corruption and theft is not likely to succeed.
    International relations and much of foreign investment is lost or restricted because of a collapsing government structure that has no moral compass and can only dismantled over 30 years that which was built and created over 300 years.
    Yes the past was not the best method to get things done but that is not the reason to destroy that which is to be relied on to support the future aims and aspirations of all the people of the Country.
    Burning bridges such as the slogan “we don’t want white capital money” as is frequently shouted, lends little hope that Cyril will get success with his attempts to secure funding from international governments without harsh and strict conditions to loans and investments. However dreamers may be lucky with their brown collar tactics with America who the Government has always been negative about in comparison to eastern countries.
    Maybe China and Russia have seen the joke and no longer wish to give donations to support a government that cannot function, forcing a turn to America and Joe Biden in hope of relief.

  13. Optimistic?! Short answer, NO! – longer answer, virtually every other comment, criticism and realistic analysis of government action, inaction and deceit.

  14. Not a single mention of nationalisation being off the table. Not a single mention of not stealing our pensions. So no, not a single thing to be optimistic about. Nothing has changed on our dear mister president’s side, so nothing changes on our side.

  15. You have to pick one, you can’t have both:
    > Mboweni’s commitment to curbing the growth in public debt through spending cuts and freezing civil servant compensation.
    > Ramaphosa has a plan for new jobs and a mega infrastructure programme

    Either you curb public debt and spending, or you incur more debt and spending by means of mega infrastructure and magical jobs falling from the sky programmes. I know which one they are likely going to choose, and unfortunately, that is the ‘bang vir die toekoms’ route.

  16. Let’s be realistic, US elections are far from over, there is a number of court cases waiting to be heard. So, on that front we are still sitting with uncertainty.
    On the domestic field, things are bit more clear. Independent power producers, if ever allowed to sell electricity, will bring instability into the failing Eskom network to the extend that we never experienced. This is not some wild guess, it is experience from Australia, they have major blackouts just if weather grants some clouds. UK have similar problem, but they are luckily connected to German coal and French nuclear plants. (I feel sorry for the whales and dolphins that kill themselves hitting their heads in the green power wind turbines)
    Second major issue we are facing is the lack of economic stimulus, racist, Marxist, anti-development regulations are still in place with no intention of removing any of them.
    So, no, there is no place for the optimism. It does not mean we should wrap in a blanked and cry, but no, SA economy has passed its sell by date.

  17. The ANC will stay in power so long as they give grants and rdp houses.
    Over population is one of our biggest problems. So long as the Zuma/Ace faction destroy our economy, no one could be positive about our future. We will see what happens if the clown with the red cap become the president in the future.

  18. Nobody mentioned the statement from the EFF that they are going to bus in numerous red T-shirt looters on Friday to Brackenfell to prevent those matriculants from writing their exams.
    To top it all, neither the ANC Government nor the police nor the DA Politicians (or any other political party) in the WC have stated that this intrusion into the WC would be unlawful as would be the effect of preventing those matriculants of writing their exams – just shows you the lack of any actions to prevent further aggravations – all talks and no actions on all fronts.
    The only positive thought for the WC (yes I stay in it), is that the current quakes that we have experienced recently, increase and the mass of land naturally separates (“segregates”) itself from the rest of the RSA and that the sea would then form a natural divide between some area of the WC from the rest of the RSA – this could at least allow the separated portion to start doing its own thing.
    Anyone who thinks that Joe Biden, if he ends up becoming the USA’s president would care about the RSA or aid it, expects most probably that he/she would become a $-billionaire by betting a 5c piece in a single spin at Sun City – dream on like the millions that vote for the ANC/EFF.
    Even China will start to only invest in exporting millions of their citizens into the RSA without any real money or workable solutions, i.e dumping some of their overpopulated citizens here in future.
    Not only the top 5% of rich white citizens of the RSA are leaving, those 5% of rich people leaving are of all races.
    ‘Nuff said.

  19. There is no will within the ANC other than to use the EFF to create the racial divides so that the ANC can continue it’s race-based justifications for it’s legal moves, and then subsequently to loot the country and burn it to the ground.

    As much as the liberals and optimists live in a world tinted by their imagination of possibilities, the realists see it for what it is.

    The reality is that the ANC is unable to govern anything effectively and they have legally enabled their rapacious corruption through the catastrophic policy of BEE that has been ineffective in everything that it was purported to solve.

    As sad as it may be, South Africa is a far poorer place than it was under the National Party government. For all the bad policies that the Nats had, they at least ran parastatals well and administrated government departments effectively. They even had better policing, healthcare, and schooling.

    The ANC’s political focus through it political action-arm, the EFF, has been to create uncertainty, promote racism, and destroy. All in an effort to detract from their utter, utter incompetence and rampant looting.


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