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Africa Brief                                                                             25 December 2016

Counting Christmas blessings     

by Cees Bruggemans                    words 780

It was the year in which Zuma could have tried various nuclear options on the SA economy. Shuffle his cabinet in order to be rid of Gordhan, causing financial market mayhem and a further lowering of business confidence. Declare a state of national emergency, supposedly to contain the spreading student unrest but really intended to suspend parliamentary democracy. Declare a social media nuclear winter, like in Ethiopia in force since September, enforcing silence of critics of the regime.

None of this happened. Instead Zuma lost court case after court appeal, and lost a lot of ground in the local elections, with the NEC closing off the year with three days of enclave deliberations, like the good cardinals that they are, agreeing to postpone the inevitable for another year (or something like that, one can never be sure with these people). It actually gave some lift to hope in watching people, though yet to be truly reflected in confidence indicators.


Is this really what it looks like, the beginning of the end and regime change next? Or is it merely the end of the beginning, with the cunning regime still readying to extend its grip on power, just following a different time table?

Much is therefore still to be divulged in 2017, and it may be too early to draw definitive conclusions, despite wanting to do so. So even with Eskom getting ever closer to pushing the nuclear button, everything is as yet far from clear.

Just as this local outcome was difficult to predict at the start of the year, so few have foreseen a Trump presidency, never mind announcing the start of a new nuclear arms race into the bargain. Is that his idea of a wrapped Christmas gift to the Russian people?

It certainly sounds very much like Reagan in the 1980s. We will outcompete the evil empire until nobody is left standing. Putin three decades on has just as weak an economy as then, in no condition of starting or sustaining such an arms race. So Putin’s “Amen, brother” is a bit of exasperation as the game suddenly is no longer quite going his way. What follows is probably not regime change, but still one can see the chess pieces being rearranged, on Europe’s eastern flank and in the Middle East.

And Trump isn't even president yet. A strange beginning indeed.

So whereas we started this year with the merest hint of nuclear corruption pervading the Zuma regime, we are ending the year with an awful lot more nuclear buttons, either already pushed or still in the running.

This makes forecasting ever more difficult. For what is one supposed to assume?

Despite our local political choices being mission critical for the rest of our lives (want to imagine Zuma regime extension by 20 years, like has happened in Zim?) the larger global canvas cannot be ignored, for it too has definitive implications for us.

The American ship is turning sharply. Europe may want to try a similar maneuver, and here I am not so much thinking Le Pen but more Fillon/Merkel. Putin may have been checked before he has really begun (on Europe’s eastern flank), while the Middle Eastern implications are more muddy, with Israel of late coming into focus, but Trump likely wanting to play Iran & Saudi.

Do geopoliticals matter for economic performance? It may to the extend that it shapes or destroys confidence. There is in any case so much change on the table economically (regulation, fiscal, monetary) that the playing field is likely to be reshaped in major ways. None of it yet certain, for we don't know how the new Republican power concentrations in Congress will vote on the wilder Trump proposals. And even these have yet to take final shape as policy proposals.

So we are still a long way from fully grasping how things are changing, immediately in America and over a longer time frame in Europe, with China and Russia on the receiving end. And all this also impacting the commodity sphere, oil especially, with yet more feedback loops.

Meanwhile the Rand is nicely steadying near 14:$, far removed from the wilder propositions of earlier this year, SARB remains quietly vigilant (which can mean anything), Treasury will keep the budget on course, some compensatory relief will come from falling inflation (keeping an even keel in a worsening storm), and thus the SA consumer’s usual wild abandon last week at retailers was to some degree warranted, and likely to keep spilling over into the New Year.

Despite the many nuclear buttons, the SA public likely will remain levelheaded. At least until something goes seriously wrong.

Merry Christmas & prosperous New Year.


Cees Bruggemans                                                                          

Bruggemans & Associates Consulting Economists



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