South Africa’s Dangling Discipline Dodges

South African shares doubled yearly losses to 25 percent on slumping growth and fiscal signals and the “trial” of firebrand ANC youth leader Malema, who faces punishment for inflammatory race and nationalization rhetoric as President Zuma struggles to define his party and business community positions. His diplomacy has also come under fire as advocacy at the African Union for continental solutions sided with the status quo Qaddafi regime including refusing access to confiscated funds before the rebels took key centers. His call for a cease-fire and “inclusive” government was overtaken by events and challenged national liberation credentials at the same time militant labor and political flanks are promoting massive job creation and wealth redistribution schemes. However mining and manufacturing stagnation aggravated by strikes has pulled GDP growth below 3 percent as inflation and the budget deficit touch 5 percent. The central bank has been on hold with the repo rate at 5.5 percent as foreign bond-buying halves from last year’s pace with net outflows for equities. The rand has fallen back to 8 to the dollar on ambivalent support and the European crisis connection, and the sovereign BBB+ rating could be undermined by new calculations of near-term public debt reaching 45 percent of output with another 20 percent in quasi-sovereign obligations, mainly from electricity company borrowing. FDI was a meager $1.5 billion in 2010 and the collective bargaining pact for the textile industry which dropped thousands of jobs this year will set a tone for union relations and competitiveness that could seal the fate of multiple sectors that have already relocated elsewhere in Africa and other regions

Big Sub-Sahara destination Nigeria had been down 20 percent through September as more banks were taken over and the central bank continued to hike rates to keep inflation under 10 percent and preserve a narrow naira-dollar bond around 150 for exchange rate stability. A parallel market premium has resurfaced despite reserve rebuilding to $35 billion which noticeably lags the oil revenue surge. Governors are fighting the replacement of the excess crude account that had been emptied prior to elections with a formal sovereign wealth fund, and argue they are further burdened with a recent minimum wage increase that could send the eventual fiscal gap to 4 percent of GDP, excluding a request from the asset management agency AMCON for additional bad loan resolution resources. President Jonathan, upon winning office in his own right, has assembled a so-called economic dream team at the ministries of Finance, Trade and Petroleum to advance reforms, but the Nigerian World Bank Vice President for Africa regularly refers to the nightmare of “vested interests” against their vision.