News in South Africa 10th March:

1. Ratings agencies doubtful of budget targets:

Ratings agencies doubt that finance minister Tito Mboweni will meet his 2021 budget targets, highlighting the various challenges faced by South Africa in trying to stabilise its debt.

Ratings agencies doubt budget targets will be met
Image taken by: Pixabay

Mboweni said that South Africa’s debt-to-GDP ratio will peak at 88.9% in 2023, down from estimates of 95.3% six months ago.

However, South Africa’s 2021 budget did not focus enough on economic reforms, making a sustained rebound in its gross domestic product unlikely, S&P Global Ratings said on Tuesday.

“There’s been some new momentum on pushing structural reforms … but it’s still reasonably thin, and again the budget was more a sort of fiscal control exercise rather than a structural reform exercise,” said S&P analyst Ravi Bhatia, during a webinar.

“So there is no reason to really expect a big, sustained rebound in the growth trajectory going forward. So that is concerning.”

2. Rand strengthens with good GDP numbers:

The rand strengthened to R15.37/$ this morning, after yields on US bonds calmed down yesterday, and SA’s GDP number for the fourth quarter was stronger than expected.

The SA economy contracted by 7% during 2020, as expected given the unprecedented impact of the Covid-19 pandemic on economies worldwide.

Statistics South Africa (Stats SA) on Tuesday released the 2020 fourth-quarter and full-year GDP results.

“According to the latest preliminary indicators, real GDP decreased by 7% in 2020 following an increase of 0.2% in 2019,” Stats SA said.

The fourth quarter reported growth of 6.3% on a quarter-on-quarter, seasonally adjusted annualised basis. The size of the economy grew by 1.5% on a non-annualised basis. The consensus expectation was for the economy to grow by 5.6% quarter-on-quarter on a seasonally adjusted annualised basis.

In the third quarter, GDP lifted by 66.1% on a quarter-on-quarter seasonally adjusted annualised basis, and Stats SA revised this to 67.3%. This does not mean the economy grew by two-thirds, but rather this is what GDP would be for the full year if the economy expanded by rates reported in the third quarter.

3. We are in ‘pre-crisis’:

While many people think South Africa is in crisis, economist and deputy chair of the South African Institute of International Affairs, Moletsi Mbeki says that the country is in fact in a ‘pre-crisis’ position.

For political economist Moeletsi Mbeki, deputy chair of the South African Institute of International Affairs, it is important to remember that South Africa inherited its economic system from British colonialism.

He also believes BEE and affirmative action are the main drivers of corruption in SA. Mbeki was one of the speakers during a webinar hosted by the Institute for Security Studies (ISS) and News24 on Tuesday.

He said he was sceptical of the possibility to develop a social compact in SA because, in his view, a lot of painful steps still need to be taken in SA before one can start talking of a social compact.

“We were a colony. We are a hugely conflict-ridden society. In SA one of the biggest conflicts – if not the biggest – is between the political elite and the business elite, which lost political power in 1994,” said Mbeki.

“There is a war between the political elite and the business elite. Only these two sections in our society have real power and somebody must win this particular war. The consequence is the flight of capital and taxpayers leaving the country. Many people think SA has a crisis, but SA is rather in a pre-crisis situation.”

In the short-term, South Africa should pull out all the stops to prioritise economic growth, according to Jakkie Cilliers, chair of the board of trustees of the ISS.

“The only way to reduce unemployment in SA is to grow the formal economy especially. There is a big difference between investment in human capital and what is happening now of just handing out social grants because of the failure of service delivery,” he said.

4. MTN reports profits:

This morning, MTN reported its results for last year – which showed a 52% increase in its headline profit, with a 12% rise in service revenue to R170 billion. Its number of subscribers increased by 28 million to 280 million across 21 markets.

But the company didn’t pay a final dividend for last year as it focussed on reducing its debt burden of R43 billion. It also has a new strategy, called “Ambition 2025”, which will involve “structurally separating” its infrastructure assets and platforms, such as fintech, to attract third-party capital and partnerships into these businesses, over the medium-term.

5. Growthpoint reports grim numbers:

Growthpoint, SA’s largest listed property group, reported a grim set of results for the six months to end-December. Some 18% of its office space is now vacant, and more than 8% of its industrial properties. The company, which owns 434 properties in South Africa valued at R71 billion, saw its distributable income per share fall by 31%.

The company, which owns 50% of the V&A Waterfront, says that the centre suffered “disproportionately” to the rest of the South African portfolio due to its strong reliance on international and local tourism and heavy weighting to the hotel, retail and restaurant trade.

All information sourced from articles posted by: BusinessTech, Business Insider, Reuters, Fin24, and MTN.

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