I love South Africa. Charles and I maintain properties there, and we frequently visit. But I find myself in the company of many who are increasingly alarmed by the direction SA is heading. Newspaper and television headlines about state capture and the deteriorating value of the currency is a constant reminder that all is not well. International ratings agencies, the World Bank and the IMF are also concerned. Sporadic good news – such as the recent election of a new ANC president – provides temporary hope, but the long term prognosis remains bleak.
Politics, poor leadership, corruption, mismanagement, lack of policy, low growth, unemployment, high crime, labour unrest, disastrous education system; these are all problem areas that have long been identified with SA. What’s new is the soaring deficit: too high spending on a bloated, inefficient and corrupt government, whilst tax revenues are dwindling. How will the authorities respond to this crisis?
The three “Venezuela concerns” of SA expats are:
- Tax increases on assets that will affect non-residents (we have already seen capital gains taxes raised!)
- Prescribed investments by captive investment funds including pension funds, to shore up government and SOE borrowing (Transnet, Eskom, SAA?)
- Tighter exchange control regulations to prevent funds from leaving the country, either via reduced allowances or penalties (Remember the 80’s?)
If SA follows the Venezuela spiral, then the future ability to get one’s investments out of the country could diminish rapidly. My aim in this section is to post selected information that is current and relevant to expats – the economy, the Rand, etc. There is a blog on specific subjects on the left hand side and curated media articles on the right. Do let me know what you think, and if there are specific topics that you would like to see covered.
Expat Interests Blog
Welcome to our blog! Our aim is to provide polemical comment on the SA political economy, the state of the Rand, emigration news, and other matters of interest to Expats.
When it comes to its credit rating, SA had been circling the drain for some time before Standard & Poor's Global Ratings eventually pulled the trigger after the firing of Pravin Gordhan as Finance Minister. Fitch Ratings followed suit soon after. The third...
It is often said that a currency is like a country’s share-price. Investors push up the value of a share if they have confidence in its long-term performance. There are many outside factors that effect currency values, but in general a currency will strengthen (or at least remain stable) when an economy does well, and weaken (or become less stable) when it performs poorly.
The issue of increased controls placed on foreign exchange transactions by the SA Reserve Bank is not only of concern to investors and business in general, but also a cause of great anxiety amongst Expat South Africans who still have investments back in the country....
Professional managers refer to upside versus downside when it comes to the management of investment risk. Probability. Confidence. South Africa has undoubtedly arrived at a political crossroad, and each investor needs to take stock of their financial interest in the...
A number of commentators – including local politicians and labour unions – have sought to apportion blame on the South African Reserve Bank for the state of the SA economy and the value of the SA currency. Is this a fair assessment? What tools do the SARB have at its...
The euphoria at the election of Cyril Ramaphosa as the new leader of the ANC – replacing the corrupt Zuma faction – is starting to wear off as reality sets in. Ramaphosa has his work cut out. His first task is to clean house by getting rid of the corrupt cabal that captured the state, then he has to restore confidence in the economy by way of policy corrections and fixing the mess at the bleeding State Owned Enterprises as well as SARS. It remains to be seen if he will be successful at execution with the remaining baggage of corrupt cadres in the National Executive Committee of the ANC. The article below appeared in the Business Day back in November, and it is worth reflecting on now. The editor pointed out the anomaly of a weak currency and low inflation, and a lack of economic growth. He asked some pointed questions, which now need to be answered by Mr. Ramaphosa.
Standard & Poors delivered a scathing verdict on the management of the SA economy in their downgrade report. In the accompanying article the editor of the Business Day newspaper explains that South Africa has a growth problem, the result of an overly aggressive focus on redistribution. The golden goose – the part of the economy that created the wealth to be distributed in the first place – has been killed by neglect and mismanagement. Chillingly, it does not matter who takes over from Zuma in December, the problem will not go away.
Few risks put the heeby-jeebies in the average retirement product investor like government prescribed investments – particularly if the prescribed investments are poorly managed, corrupt state companies, when the government itself is finding it too expensive or impossible to find external, non-captive investors…
The effect of junk bond status is starting to hit home – as predicted. The expectation of further downgrades based on political uncertainty, low growth and a fast expanding deficit (escalating costs, dropping tax revenue) is making it more and more expensive to borrow.
Could this result in the government looking to other ways of securing revenues? Prescribed Assets?
In this article the editor of the Business Day newspaper points out the curious state of the South African economy: weak currency, low inflation, high interest rates, low growth. Is neglect and economic paralysis a word going to continue after the ANC elective conference in December?
It has long been the contention amongst political and financial pundits that South Africa is a very different country to Zimbabwe, that the economy is too big to fail, that it is too developed and too sophisticated, that there are too many vested interests to allow it to fail, that it is too important to the world. However the Zuma era has exposed a number of fault lines in this argument. I recently discovered the review by Hermann Giliomee of the book “South Africa and the Case for Renegotiating the Peace”. He ends his review on a less optimistic note…
The stakes are high for the country: will the ANC elect Ramaphosa or Dhlamini-Zuma at their conference in December? Will it matter? The article below (an older one, worth revisiting) explains the depressing success of the Zuma government in doing everything it can to divert attention away from its own failings (outlined in the daily press). Here Dr Sean Gossel of the UCT Graduate Business School does a good job of explaining the gulf in understanding between the average voter and the economic reality facing the country.
The South African passport is facing more and more restrictions, the New Zealand government being the latest to impose travel restrictions on SA citizens. The article below, dating back to May, explains how corruption at Home Affairs is assisting international terrorist groups.