South Africa’s EMEAnacing Glare
South African securities were caught in the Europe-Mideast pincer movement of fund managers’ standard cross-regional pairing with stocks and the currency off 5 percent as the central bank also reported near $1 billion in bond outflows. 3.5 percent GDP growth is behind other members of the newly-joined BRIC club, and the perennial current account deficit may double from last year’s on oil import dependence despite higher mining export revenue. The ANC’s militant youth arm continues to demand industry nationalization or majority state control after a revised black economic empowerment charter was approved to gradually cede existing private multinational stakes over time. The petroleum cost spike diverted attraction to neighbors Nigeria and Ghana with respective longstanding and fresh finds. The former stock exchange is flat heading into presidential elections, although its budget excess crude account which had been emptied by anti-crisis spending has revived with the commodity at over $100/barrel versus the $65 originally programmed. International reserves as well are up after 2010’s 20 percent fall even as monetary authorities reaffirm their intent to keep the naira within a narrow corridor. Ghana’s bourse has spurted almost 10 percent as GDP growth will exceed 10 percent this year according to the IMF, with inflation also veering toward double-digits. After a comprehensive study of other countries’ experience with sudden oil wealth, initial plans call for a portion of proceeds to be kept in a sovereign allocation fund modeled on Norway’s example.
In Europe Turkey, which had previously escaped peripheral Europe fallout, has been swept up by MENA woes as a core universe geographic proxy, particularly with Egypt’s long trading suspension. It too is a notable oil importer and portfolio inflow-reliant due to a large trade imbalance, while inflation is also expected to rise and fiscal policy loosen in the upcoming election period. The Arab world took one-quarter of its exports in 2010, and construction companies won big infrastructure project awards. Banks had looked to expand their networks there while also maintaining ties with Iran in the broader crescent despite UN and US commercial sanctions against the regime. To support local and international activity, institutions have recently increased short-term cross-border borrowing lines after they were restored post-crisis. In the Balkans, Romania has been in recession with high inflation and private sector overseas liabilities as it secured a 2-year precautionary IMF accord extension. The shaky coalition is regularly subject to no-confidence votes that may soon feature as well in next-door Bulgaria, with ruling party approval under 25 percent, amid spreading worker protests in response to budget-balancing enterprise restructuring efforts as area interests balk at long-promised changes.
