South Africa’s Shirked Load Shedding
South African shares tried to stay positive as state power company Eskom’s rolling blackouts were due to shave already meager 1-2 percent GDP growth half a point as the PMI dipped below 50 in January. Foreign investors sold bonds as the rationing began, as the central bank is reluctant to ease despite inflation dropping to 4 percent with lower energy and food costs for fear of further rand upset as it heads toward 12/ dollar. President Zuma has instructed Vice President Ramaphosa with his extensive business background to clean up the electricity mess as well as losses in government airline and mail operations. His approval numbers continue to fall as the investigation drags on into $20 million in construction spending at his private home along with tax inquiries into alleged violations during the re-election campaign. Suspicions have increased as agency law enforcement officials have turned over and been dismissed and ruling party ANC dissidents have called for his resignation as they also demand greater wage hikes and mining industry controls. The business community was relieved however as the President objected to public ownership provisions for future natural resource finds in a proposed bill. The tougher commodities climate may likewise prompt a rethink of the higher copper royalty regime in SADC neighbor Zambia, where the incumbent Patriotic Front eked out a victory over a newcomer challenge. Finance Minister Chikwanda was retained and may restart IMF program talks as the fiscal deficit remains at 5 percent of GDP and reserves cover less than three months imports. The Chamber of Mines warned that doubling taxes would lose thousands of jobs and deter FDI needed also to support the currency. The presidential contest will be repeated next year which would have been the end of the deceased Sata’s original term. Poll risk took another form in Nigeria, as the Buhari-Jonathan match was postponed until the last week of March due to security concerns in the North according to the formal explanation. Stocks shed another 10 percent on the MSCI Frontier with the delay as the naira broke 200/dollar which may force the central bank to devalue before balloting occurs. Ratings agencies have imposed negative sovereign outlooks as the GBI-EM suspension is still pending despite moves to improve local bond liquidity. A Buhari win could roil the mix with the former general’s hard line against Boko Haram expected to sharply boost military outlays.
Francophone neighbors Cameroon, Chad and Niger have joined in cross-border counterattacks against the terrorist group as Cote d’Ivoire enters its own election cycle with plans to issue a $1 billion Eurobond. President Ouattara is favored for another mandate despite ailing health as post-war GDP growth is set at 7 percent this year. However the budget deficit continues at 3 percent of GDP with contractor and pension arrears outstanding as the army went on strike for overdue salaries heading into the loaded historic juncture of smooth civilian transfer.