Africa Brief 15 January 2017
The South African Year 2017
by Cees Bruggemans words 530
Unlike Britain, which is consumed by Brexit expectations, or America which is looking forward with apparent equal measures of enthusiasm and dread to the Trump presidency take-off, South Africa hasn't quite the equivalent.
Instead, 2017 is in important respects a missing year, a leap year to get over with preferably as quickly as possible. Yet what awaits is a painful journey.
From Day 1 in 2017, the country is looking forward to the elective leadership conference in December. The period in between will likely be high on political slapstick but not on anything substantive supporting the economy.
Linked to it are the rating agencies and their downside outlook stories, possibly also coming to a point in December. As was the case in 2016, we can look forward to another year of endless speculation whether we will be junked or not.
If the other factors in the rate decision hang together (they probably still will), the outcome to the elective leadership conference could well decide our rating fate, for it looks increasingly a binary one: intensification of patronage and corruption and what flows from it; or a new leaf. Meanwhile, for a full year, this uncertainty will be hanging over our markets and economy, in breathless anticipation.
One can be forgiven for demanding to get over it with a leap year, alternatively opt for hibernation and waking up only on 31 December, foregoing the daily diet of speculation leading nowhere (if 2016 was any guide).
But none of this means to imply that 2017 is going to be a boring year. Both students and EFF likely will give repeat performances of previous years, possibly with even greater intensity.
In another context entirely, but not unrelated, many SA companies are finishing up their geographic diversification before this window finally closes. Instead, like in olden days, of taking money out of the country (so-called capital flight), today’s migration is a lot more sophisticated.
By buying overseas companies, often bigger than oneself, or injecting one’s SA corporate assets into foreign assets, either as total paper transactions or by raising gigantic loans against balance sheets, corporates are racing against the clock of changing their risk profiles and debt ratings, isolating themselves from the deteriorating SA prospect.
Not that we face a recession shortly, but our politics have shown our new reality rather starkly in recent years, and the economy struggles to perform normally against this backdrop. Nearly every quoted company apparently has absorbed the same message in recent decades, quietly beavering away to diversify their profiles, insurance for the long term it seems, against policy choices that may turn out to be very costly for private interests, unless after all surprised by a major change in leadership favouring different long term strategies.
That so many have been so active betting on another outcome for so long tells its own story, presumably. It will be a busy year completing grand strategies.
Meanwhile the economy may be expected to keep struggling without an unifying voice for a while longer. A pity real life doesn't do real leap years. It would be nice getting this one over with before it has even begun.
Bruggemans & Associates Consulting Economists