Friday, 4 September 2015

The Ecomomist: ANC is "clueless and immoral"

  The Economist

Clueless and Immoral

A country that symbolises human rights and freedom is turning its back on both

Sep 5th 2015

TO UNDERSTAND how far South Africa has strayed from Nelson Mandela’s legacy, one need only peruse the latest foreign-policy paper drafted by grandees of the ruling African National Congress (ANC). The fall of the Berlin Wall, it reads, marked not the freeing of captive nations in Europe but a regrettable triumph of Western imperialism. The pro-democracy protests in Tiananmen Square in China were an American-backed counter-revolution. Russia’s invasion of eastern Ukraine is a conflict “directed from Washington”. America’s policies in Africa and the Middle East have “the sole intention” of toppling democratic governments. As “part of the international revolutionary movement to liberate humanity from the bondage of imperialism”, South Africa should seek to have American military bases thrown out of Africa.

If this were a spoof, it might be amusing. Yet the document is entirely serious: its contents are to be debated at the ANC’s policy conference in October. Its authors include several serving and retired cabinet ministers, including a former foreign minister. South Africa risks becoming a laughing-stock, not least in Africa itself.

When Mandela became South Africa’s first post-apartheid president, he led the country out of isolation. He promised a foreign policy in which “human rights will be the light that guides”. Granted, he and his successor, Thabo Mbeki, applied the principle inconsistently. South Africa called for sanctions against Sani Abacha, Nigeria’s brutal dictator, and was a vocal advocate of the International Criminal Court (ICC). Yet it also coddled dictators such as Muammar Qaddafi, whom Mandela called “my brother leader”, propped up Robert Mugabe even as he led Zimbabwe to ruin, and sided with Russia and China in opposing sanctions on Myanmar.

Dalai Lama, no. Bloodstained despot, yes

Under Jacob Zuma, the current president, the country’s foreign policy has drifted even further from its previous ideals. When the Dalai Lama was invited to attend a meeting of Nobel peace laureates in South Africa, the government refused him a visa. Yet it welcomed Omar al-Bashir, the president of Sudan, despite his indictment by the ICC for orchestrating genocide and mass rape in Darfur. And rather than let a fellow African leader face such impertinent charges, Mr Zuma’s officials whisked him away just before a South African court ordered his arrest.

All countries struggle to balance principles and national interests. Yet South Africa’s revolutionary foreign policy serves neither. On principles: South Africans may be grateful for the Soviet Union’s opposition to apartheid, but they are also proud of their constitutionally guaranteed human rights. Few buy the ANC’s argument that Vladimir Putin’s Russia is a victim and Barack Obama its cruel oppressor.

What about self-interest? The ANC wants to draw closer to the BRICS, a club that also includes Brazil, Russia, India and China and seeks to create an alternative world economic force. Fair enough; trade with China, especially, is important. Yet Europe is still South Africa’s biggest trading partner, and America, which gives South African textiles and manufactured goods preferential access to its markets, comes third. The ANC seems to think that commerce with China will flourish only if South Africa is hostile to the West. This is nonsense: many countries trade profitably with China while staying close to America.

The ANC thinks South Africa should stand up for Africa. But Europe and America are not Africa’s enemies. Quite the opposite. A single American aid programme, the President’s Emergency Plan for AIDS Relief, has saved millions of African lives. None of the BRICs can make similar claims. Nor did they step up—as Western countries did with soldiers, equipment and intelligence—when jihadist militias almost overran Mali or the north of Nigeria.

South Africa’s peaceful transition to democracy offered hope to a continent long tormented by despots and ideologues. If the ANC now rejects South Africa’s liberal friends and throws in its lot with some of the world’s nastier regimes, it will be doing Africans a grave disservice.

Sunday, 30 August 2015

South African Rand - Trends and Forecasts

South African Rand

According to Rand forecasts on the Trading Economics website, the Rand should strengthen to R10 to the dollar in 2020 and R8.51 in 2030.

Conversely, economist Cees Bruggemans predicts R22.50 by 2018.

R22.50 to the dollar by 2018?

The Trading Economics website forecasts are based on the following:

South African Rand Forecasts are projected using an autoregressive integrated moving average (ARIMA) model calibrated using our analysts expectations. We model the past behaviour of South African Rand using vast amounts of historical data and we adjust the coefficients of the econometric model by taking into account our analysts assessments and future expectations.

However, looking at the 1 year, 5 year and 10 year history of the Rand shows a near 45 degree angle whereby the rand has gradually deteriorated.

Since 2010; the Rand has lost almost 100% of its value against the US Dollar and UK Pound Sterling. This means that the Rand has lost approximately half its value in 5 years.

Furthermore, the accelerated devaluation of the Rand began during the prolonged trade-union strikes in the mining sector, and subsequent Lonmin Marikana Massacre. This has been exacerbated by an electricity shortage, continued uncertainty of industrial action and proposals for harsher regulations and bigger percentages to be allocated to BEE partners and share-holders.

The above factors are also coinciding with a rising budget deficit. The main risks of a rising deficit is that it increases the chances of a lowering of SA's sovereign credit-rating.

Standard & Poor's credit rating for SA is currently at BBB-.

This is one notch above "junk status" and "non-investment grade".

The budget deficit does not show any near-term probabilities of shrinking; due to rising unemployment, rising population, low tax base of less than 5 million, public sector pay increases, social grants increases and low GDP growth. Five million people are therefore supporting the entire population of approximately 55 million. In the long-term, this is not sustainable if one considers that with low GDP growth of under 2% and rising population and unemployment numbers; the tax base is not growing at a rate which can keep up.

Furthermore, the potential of a $1 Trillion nuclear power-station deal with Russia is increasingly becoming a reality. Such a deal would considerably increase SA's deficit, which in turn could increase the likelihood of a credit downgrade.

On the political side, the influence of the SACP within the ANC and its appointment of members to key positions has increased. The rise of the EFF has arguably also increased their perceived 'need' for anti-white rhetoric as well as the intensification of Black Economic Empowerment (BEE) and 'economic transformation' in order to prevent losing more black voters. Sentiments such as these do not inspire investor confidence and only fuel uncertainty in regards to the economic future of SA.

The Rand is already one of the most volatile currencies in the world, ranging from top 5 to the most volatile. Furthermore, the currency is susceptible to "speculative attacks" via major banks as occurred in 2001; when the currency reached its previous record lows. Political uncertainty, increasingly anti-white and foreign business legislation, electricity shortages and trade-union threats do not help provide stability to an already volatile currency, nor do they contribute positively to overall economic growth.

USD\ZAR Exchange Rate:

1 Year:

South African Rand

5 Years:

South African Rand

10 Years:

South African Rand

40 Years:

South African Rand

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