Short Note 30 November 2016
Providing national guidance
As President Zuma winged north to attend the funeral of Fidel Castro, the RMB/BER business confidence index for the 4Q16 was released (a drop to 38 from 42, meaning nearly two-thirds of business executives expressed a lack of confidence) while the NEC (the national executive committee) announced its interpretation of what had happened during three days of intense deliberations.
There are no known links between these events, but they still raise questions. Only the NEC presumably knows what was discussed and what it means. What matters is the upshot: President Zuma continues in office after the most serious challenge to his regime. Business managers, surveyed a couple of weeks ago, expressed the very opposite view about being confident in what they are doing. And Zuma is presumably happy doing what he likes doing most, overseas travel away from these pesky domestic troubles.
True, it has been a difficult ten days for Zuma, in parliament and what have you. One wishes him some rest and recreation on those famous Cuban beaches, like deputy-president Ramaphosa last year, when holidaying there. Come back rested and ready for the next round, whatever it may be.
It wasn't quite obvious from the media briefing (is it ever in a time of spin?) what exactly had been discussed and decided. Time will presumably pencil in what was missed in translation. But despite agreeing to let Zuma continue, this is hardly the vote of confidence in national leadership the country needs to escape its lethargy. That is, if the leading party seeks such an outcome.
As things stand, the public sector could be run better, and the private sector is apparently given little grounds for confidence, given its responses. This also a week after two rating agencies spelled out our 2017 downside, with the third reporting tomorrow on our state of fitness.
None of this is due to an excess of imagination. Instead, it is hard fact. Our growth may be lifted a little by better commodity prices and less drought effects, and fewer repressive effects (households presumably can't keep extending the car replacement cycle indefinitely?). But that isn't a sound basis for expecting a healthy bounce in economic activity. Instead, this continuing split in vision of what is wanted compared to what is needed.
We await the return of the President, and his next move. And are left wondering where it will lead.
Bruggemans & Associates, Consulting Economists