South Africa’s Mooted Mandela Moment

South African shares pared their double-digit gain on anxiety over a weekend “nationally important” announcement inviting rumors of new capital controls or mine nationalization, despite the ANC’s rejection of such policy at its latest gathering in favor of gradually higher taxes or state control. President Zuma, after unveiling record infrastructure spending despite the 5 percent of GDP budget deficit to combat 25 percent unemployment, instead revealed a fresh currency design that will replace game animals with portraits from the life of apartheid opponent and former two-time president Mandela. While the change was popularly applauded in honor of the nonagenarian hero, the inconsistency and secrecy surrounding it repeated a frequent business community criticism of the government at a time when the rand in particular now around 7.5 to the dollar is regularly buffeted by both domestic and global risk sentiment. The ruling party tried to strike a compromise with militants over commodities expropriation, but industry leaders remain wary especially after the launch of a public exploration company last year and labor union insistence that pension funds take more activist controlling stakes in big private multinationals. FDI is lackluster in the sector, where the country ranks just a few notches above neighbor Zimbabwe in international attractiveness comparisons. The macro-economy for engagement is likewise ambivalent with GDP growth due to fall under 3 percent this year and inflation currently at twice that figure leaving the central bank 5.5 percent benchmark rate intact. With close Eurozone links and a recent sovereign downgrade external commercial borrowing will be kept to a minimum, as contingent liability stress from the state power utility also mounts. At the ANC’s founding centenary officials again embraced the causes of anti-corruption amid headline scandals and of education reform after an applicant stampede to get a university place, but participants also widely noted the vast unfinished agenda to attain better living standards.

Namibia, which has a rand peg and was recently reclassified as an upper middle-income country, is also under harsher investor scrutiny after its maiden sovereign debt issue in 2011. Mining earnings from diamonds, uranium and other endowments will bring 4 percent GDP growth, but international reserves are below the minimum threshold three months’ import cover and the jobless rate is 40 percent. Fiscal stimulus may be too expansionary according to the IMF, and housing prices which were up 20 percent last year mainly from cross-border capital flows may place the South African-dominated banking system under pressure. Although the securities market is tiny, non-banks have proliferated and a consolidated supervisory agency awaits additional enforcement powers to display its own metal bearing.