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On My Mind

– Rearranging the deckchairs (again)

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Daniël Kriel

Former CEO of Sanlam Private Wealth

The first half of 2017 saw a global market rebound despite heightened geopolitical uncertainty (thanks to North Korean missile tests, Brexit negotiations and growing Chinese influence, not to mention the idiosyncrasies of Donald Trump). South African market returns have been disappointing by comparison – and they’re likely to remain in the doldrums until our country gets its political house in order.

Global equity markets have continued to rally since the start of the year, supported by robust economic recovery in most regions of the world. The MSCI World index returned 9.4% in US dollar terms year-to-date (over the past year, it generated 15.4%). The Eurostoxx 600 returned 13.9%, and the S&P 500 7.4%. Whereas other emerging markets performed well (the MSCI Emerging Markets index returning 13%), the JSE did not follow suit, however – the All Share index delivered 6.8% in US dollars to investors year-to-date (and at 1.2% in rand terms continued its sideways trajectory of the past three years).

In our last On My Mind column in June, we spoke about political instability being the main factor derailing any chance South Africa may have had of benefiting from the broad-based global economic uptick. Since then, a six-day ANC policy conference has, while generating much noise and hot-tempered excitement, offered no glimmer of hope to appease investor sentiment. There was an unconvincing show of unity after days of intense debate but in the end, it appears all the event succeeded in doing was to rearrange the political deckchairs (again) without contributing anything of import to solve our country’s current woes.

Last week, Finance Minister Malusi Gigaba unveiled a short-term, 14-point ‘inclusive growth action plan’ to boost our economy, currently in a technical recession. In his announcement, Gigaba admitted that South Africa needed to take advantage of the opportunities presented by the global economy, including strong capital inflows into emerging markets. His ambitious plan wasn’t met by much enthusiasm beyond the ruling party, however, since once again it lacks substance and offers nothing new – and it’s not very clear how it will be implemented.


One proposal that emerged from the ANC policy conference that has set investors on edge is the possible nationalisation of the South African Reserve Bank (SARB). The rand immediately took a knock after ANC Economic Transformation Commission Chair Enoch Godongwana told a media briefing that it was an ‘anomaly’ for the SARB to be under private ownership – but that its ‘independence should be guaranteed’. He said the proposal would be tabled again at the ANC’s leadership conference in December.

SARB Governor Lesetja Kganyago was quick to point out that a change in the shareholding of the SARB wouldn’t amount to more control over the central bank, which would continue to derive its mandate from the Constitution. He had earlier slammed a recommendation by Public Protector Busisiwe Mkhwebane for constitutional changes to enable the bank’s mandate to be amended.

In court papers filed in the Mkhwebane matter, Kganyago states that the Reserve Bank makes a critical contribution to the stability of our financial system, ‘which is central to sustainable growth and development, job creation, the reduction of inequality and poverty alleviation’. We couldn’t agree more – as a central pillar of our economy we need to be focusing on strengthening the SARB and other institutions, not undermining them, as the rating agencies have warned time and again. Whether the SARB is partly privately owned or totally state-owned, the operational independence of our central bank needs to be defended at all costs.


Several of the ‘areas of intervention’ in Gigaba’s economic plan relate to state-owned enterprises (SOEs), including plans to recapitalise and speed up the reform of some of these beleaguered institutions. The recapitalisation of both the South African Post Office and South African Airways (SAA) is due to be finalised by August, for example. In the case of SAA, Treasury recently issued a further guarantee to assist the ailing airline in repaying loans of R2.3 billion.

There are countless other examples of government bailouts of parastatals over the years – Denel, PetroSA and Eskom spring to mind. The financial wastage on some of these is staggering. We keep talking about radical economic transformation, and yet we persist in frittering away funds to these embattled institutions – billions of rands – which could have gone a long way toward effecting such transformation. Do we honestly need a national carrier? Or a state-owned arms manufacturer? Could the funds being drained into these loss-making ventures – which are contributing nothing to our economy – not be better spent on infrastructure and uplifting the poorest in our country?


Also protected by our Constitution is the right to a strong, independent and free media. It’s therefore of grave concern that this right is being severely compromised by the harassment of journalists going about their daily task of keeping South Africans informed. There have been several incidences of journalists being targeted of late – some have received death threats. Earlier this month, for example, the South African National Editors Forum (Sanef) felt compelled to take legal action against Black First Land First (BLF) over attacks on journalists reporting on alleged state capture.

We salute the journalists of our country who are bringing us the news in extremely challenging circumstances. In an open, democratic society, they play a crucial investigative role in uncovering excesses, malpractice, bribery and corruption where they find it – and they should be able to do this without fear of reprisal. Far more needs to be done to ensure they can continue their critical function of telling South Africa’s story and exposing the truth without interference.


The second half of 2017 is unlikely to deliver much in terms of implementing programmes for meaningful economic reform, despite Gigaba’s plans – the factions within the ANC will be far too busy garnering support in preparation for the crucial electoral conference in December. We can but hope that at that time, sanity will prevail and a change in leadership is effected that will steer our country out of the doldrums.

Much damage has been inflicted our economy, not least of which our junk rating by two major rating agencies, and being taken down a notch by a third. South Africa’s story may yet change for the better, however – if the anti-Zuma camp emerges victorious in December it may result in a much-needed change in investor sentiment. Both consumer and business confidence are likely to receive a boost, and our country can correct its course back towards joining the other emerging markets currently benefiting from the global economic recovery.

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