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Still no-one links the rand's decline to politics

As I've written before: It is my experience that economists (including forex economists) often choose to "ignore" the factor confidence in their forecasts for economic growth and market movements in general. Why, I don't know. Most likely, because it's an unquantifiable factor, which only serves (in the eyes of the economists) to make their "hard forecasts" (and their profession?) soft.

Anyway, this has been happening again in South Africa in the recent past, where the politics has been extremely volatile, and the rand has been dropping steadily (at least against the Euro, which I follow closely) from around the R9.70 level to the R10.18 level (where it stood at the time of writing this observation). All throughout this (roughly) 6-week period not a word was dropped by any commentator about the possible political connection to the decline. (In this period SA interest rates were increased, while rates elsewhere dropped, which should (theoretically) have worked as a support for the rand - but didn't.)

But, tomorrow is "D-Day for Economic Policy" in South Africa (as I see it) and I'll put my cock on a block that we'll hear a lot about the link between the rand and the political situation before the day is out. And about the words "confidence" and "uncertainty". For the mere reason that there will (very likely) be a BIG move in the rand tomorrow - up or down. My bet is on down, because I expect a clear "jump to the left" in SA's political environment tomorrow.

Let's wait and see....
7.1.08 20:49


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The jump to the left...

If the SA media are to be believed, the "jump to the left" hasn't materialized (read article below) and Mbeki and Zuma didn't lock horns over the handover of power. The forex market also hasn't shown any nervousness to date. In fact, it's been very calm, climbing slowly to R10.07 yesterday and circling around the R10.08 mark today.

So, it might seem as if my fears (see below) were all just, well, nothing. Misplaced, as they say in the classics.

Today's "assurance" by Trevor Manual that he was "not concerned at all about fiscal policy under Zuma" might be more proof that my fears were misplaced. Or, it might not.....

Come to think of it: Why would Trevor sign his own death warrant in public...just by the way...as a side-comment to a Sapa journalist? Of course, he'll stay positive in public. And, if he must make a comment in public, he'll choose his place and time. So, this Reuters article unfortunately doesn't put the fears to bed.

The crunch is still to come.
10.1.08 22:35


Time to take stock...

Time to look again at observations made by me recently and to forecasts based on those observations...

Firstly, the rand. I thought the rand could be put under pressure by the Mbeki/Zuma fight and the victor's liberal economic ideas.

In fact, the rand was put under downward pressure this week by foreign investors who took their short-term money out of the JSE (and SA), as the financial market crisis took a few turns for the worse in the US (and even in Germany) and stock markets everywhere responded with what one could describe as a "minor tumble". The rand moved from R10,03 to the Euro on Monday to R10,31 to the Euro at the time of writing this (Friday night).

Since (I think) the political "push-down effect" is still lurking in the shadows, and since I also think we've seen nothing yet of the financial market crisis (there's still lots to come), the rand could be hit from all sides in coming months. In short, R11 to R12 is not out of the question.

A side-thought: This will increase the already big inflationary pressure present in the SA economy. Meaning, the big Zuma "acid test" is just around the corner! This test looks like this: If Tito Mboweni does not increase rates in response to the rand decline, the international financial markets will interpret that as a sign that the central bank has lost its "independence from the politicians" under Zuma, and start punishing the rand. (Just a reminder: Zuma and his ally Cosatu believe rates should be low, because that's in the interest of "the people". As if run-away inflation is....!!) That's when the political "push-down effect" will start kicking in.

But, let's move on to my other observation....the one about the ANC which will sooner or later bring their own newspaper on the market (dated 8/12/2007).

Here is an excerpt from a letter Zuma published on the internet today. It's Zuma's first as president of the ANC and he devoted his first letter to ANC members to the issue of the media:

"Those with power, particularly economic power, are keen that the media serves to reinforce their privileged position, while those who seek a more equitable distribution of resources campaign for a media that serves the cause of a more equitable society.

"The media, viewed in its totality, should be as diverse as the society which it serves and reflects. This is clearly not the case in South Africa today. At times, the media functions as if they are an opposition party.

"In part, this can be explained by the structure, culture and values of the media inherited from apartheid, and by the commercial forces that drive most media institutions," he said.

For this reason, last month's ANC national conference had called for the movement to develop its own media platforms.

"This needs to take place alongside the effort to transform the South African media environment so that it becomes more representative of the diversity of views and interests in society, more accessible to the majority of the people, and less beholden to commercial interests."

So, there you have it: The ANC government is going to start a newspaper. And it's probably going to use taxpayers' money to compete against the private sector publishers of newspapers (although that's just my inference.)

As I said back then, this thing has been coming for years. So, it probably won't surprise many in the mainstream media now it's finally here.

The only thing to hope for now, is that the ANC does not publish a printed newspaper, but rather invest in internet infrastructure (to make it faster and cheaper and accessible to "the people"), hand the new childrens' laptops - manufactured in Germany for a few euros each - out to every household in SA and then publish an online newspaper.

It'll cost the taxpayer much less and might even make a profit sometime in future - an ANC newspaper never will.

Well, well. I'm so naive....I still headlined my story: The long walk to (taking press) freedom (away). I should have realised then that it'll be just "a short walk" - with Zuma around.

A final footnote: This letter gives a very clear look into what lies ahead for SA. Read it and decide for yourself what the message is...

(You'll find it on the ANC's official website.)
18.1.08 23:37


Why wasn't it reported at the time?

I'm still with the Zuma letter. And specifically this paragraph: "For this reason, last month's ANC national conference had called for the movement to develop its own media platforms."

I can't resist asking the question: Why did the news come as a surprise to me? Why did the mainstream media not report on this "call" at the time? Did the big Mbeki/Zuma fight perhaps wash over everything else said at the conference? Or, are the mainstream media to silly to see a big story when it stares them in the face?

The whole thing perplexes me - the news and the non-reporting thereof. With a little luck, I just read the wrong newspapers at the time...
19.1.08 00:28


Staying with the letter...

"The letter" will become a big thing. I'm referring to Zuma's online letter as ANC president, the second of which was published yesterday.

Why? Because Zuma is going to be SA's next president and since the financial markets know very little about him and especially his economic ideas, this weekly letter will be read very carefully in coming weeks, to try and form a picture of what lies ahead for South Africa and its economy.

In fact, the interest in Zuma's letter could (and should) be much bigger than it had been in Mbeki's letter. Not only because the one came from "the known factor", while the other will come from "the unknown factor".

There's another reason, namely the way these letters are written. The Mbeki letters often rambled on and on, with lots of words, but no message. Or, a message which was only very difficult to make out. In comparison, Zuma's first letters were (relatively) short, to the point and without trying to look academic.

(In fact, one just has to look at the way he signs his name at the bottom of the letter to know that he can't look academic, even if he wanted to.)

Maybe, Mbeki's letters were a bit like his public speeches and his whole presidency: He said it very well, but what did he say?
19.1.08 16:23


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