South Africa’s Retouched Portrait Strokes
South African securities were buffeted by angry demonstrations by ANC loyalists after an artist’s unflattering depiction of President Zuma, which seemed to cross the free speech boundary into criminal slander in an episode recalling former youth wing leader Malema’s denunciations which resulted in party expulsion after he labeled the administration a “dictatorship.” His suspension lasts five years but does not preclude a government challenge at the upcoming December congress to pick the next election’s candidates. Malema had been warned about angry ant-imperialist and pro-nationalization rhetoric before the action, as dissatisfaction with political management has spread both internally and externally. A passage in Nedbank’s annual report gained wide circulation in citing “leadership degeneration and unaccountable democracy” as business risks. Ratings agencies have referred to populist and corruption drags in downgrading the sovereign outlook which otherwise suffers from a bad brew of low growth, high unemployment, and a chronic current account deficit. Inflation at the upper target has settled at 6 percent, and the latest budget reiterated discipline commitments but the fiscal deficit is projected at 4.5 percent of GDP as public debt moves past 40 percent. Trade unions continue to remind the President’s team of their 5 million job creation goal and recently gutted a wage subsidy scheme as insufficient and overturned a toll road plan in Guateng province that would hit truckers and workers. The reversal spurred an immediate downgrade in the transport agency’s 20 billion rand debt and added to the contingent liability burden already prominent with power monopoly Eskom. The saga coincided with reports of massive fraud in social welfare grants which now are quadruple the taxpayer rolls and the run-up to June public sector salary negotiations which are expected to again prompt strikes and walkouts. The groups also still advocate for greater currency intervention as the rand has erased previous dollar strength with Eurozone and commodities fallout. The combination of negative factors outweighed the country’s entrance into well-known global bond indices as a fractional component joining other emerging markets Malaysia, Mexico and Poland.
Elections in independent enclave Lesotho pose another hazard as the longtime incumbent faces real opposition in a race marred by sporadic violence. Basic health and sanitation are lacking and one-quarter of adults have HIV-AIDS. Aid and remittances drive the economy, with textiles also contributing under US free trade treatment. Polls may likewise be imminent in Zimbabwe after rumors that President Mugabe was on his deathbed during a visit to Singapore. He has vowed to dissolve the shaky coalition and bring one last victory to the Zanu-PF party, which has enforced the indigenization law with community bequests from financial and mining companies trying to clarify the investment picture.
