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Short Notes

Short Note                                                                            30 September 2016

New headwinds    

by Cees Bruggemans          words 500

Just when you least expect it, new head winds for the SA economy, from a long dormant corner. For eight years, the oil producers couldn't get their act together, from mid-2014 the Saudis threw the rudder, boosting production in order to protect their market share, and oil prices halved, and then halved again.

That gave the world a useful boost in 2014-2015, and SA also hugely benefitted. But Brent didn't stay at $30, global demand and supply kept recalibrating, with the price bouncing back a bit, but as yet without active producer intervention.

Short Note                                                                            19 September 2016

Rating agencies to strike back?    

by Cees Bruggemans          words 550

One senses the disappointment, with the apparently intensifying government war breaking out into the open, (as Ramaphosa so accurately worded it), like a rotting carcass finally exploding on all sides, with the further loss of economic growth momentum (as so long accurately predicted by private forecasters), by some private credit suppliers to SOEs closing their taps on dubious governance grounds to which not getting wanted answers, even as electricity supply has improved (on better maintenance). Grounds for shortly junking the whole sorry lot of them?

But then, hey, keep those horses, will you, this is only a partial list of things happening. There has been the August local election shake up, pregnant with deeper meaning about what's coming, there is the relentless court action, political, NGO & media driven, aimed at ferreting out unfit public civil servants, reinforcing public protector and constitutional court efforts on an even grander scale during the year, ever since 12/11 Nenegate send us critical, directly addressing state capture and successfully rolling it back, step by tiresome step.

Short Note                                                                            15 September 2016

Counting SA blessings    

by Cees Bruggemans          words 770

Perhaps this Spring it is difficult to start counting blessings, with the Cape dam levels still well below last year’s average, and summer rainfall regions parched and waiting, but in other respects there are a few things to be grateful about.

One is the balance of payments, where after a long time of waiting the current account is finally showing evidence of shifting sands, exports outreaching imports, and the current account deficit starting to erode away. Meanwhile, the Fed is preparing to move rates higher, but in such a manner that it will probably signal an even flatter rate trajectory going forward, something that should not unduly shock risky assets and allow us to carry on without incurring undue global risk premiums (this in contrast of what we will still impose on ourselves).

Short Note                                                                              9 September 2016

The Captain Hook economy    

by Cees Bruggemans          words 300

Intrigued? What hook? Last three years, since end 2013, our GDP data has been all over the place, with two vicious downdrafts and two vicious upper cuts, the latest this +3.3% chinless wonder of 2Q16.

And these downdrafts and uppercuts nowhere else to be found in the SA data, except perhaps in inventory adjustments, the traditional source of such disturbances, except that few of us have these jerks front-and-centre, and find it therefore difficult to connect such GDP data with the economy we know – adrift, not quite giving the ghost, but certainly skimming the zero line rather than showing massive jerks.

Short Note                                                                              8 September 2016

The Zuma Interview    

by Cees Bruggemans          words 500

On Tuesday, our esteemed president Zuma gave an interview on CCTV. He was interviewed by the leading CCTV anchor lady, a very competent person in her own right who posed a series of friendly, well-formulated questions, probing what we think we are doing and hope to be doing in SA. And no better person to ask than SA president Zuma visiting China for G20…..

It turns out what we are doing isn't quite what most of us understand to be the SA economy, a mix of hyper-modern private economy, a large public sector and a big informal sector populating large sophisticated urban centra. The Chinese interviewer clearly became more bewildered as the interview progressed, as there didn't seem clear cut answers, only vague airy descriptions without any content. One was left wondering deeply what kind of country SA really was.

Short Note                                                                              1 September 2016

SA Pontius Pilate    

by Cees Bruggemans          words 600

SA has entered again a period in which so-called “normal” or fundamental economic influences aren't the only ones or even primary ones working in on our financial markets (Rand, bonds, equities) and by extension on the SA economy. Instead, the non-usual or political risks now seem to predominate and are acquiring an independent life of their own, with no rhyme or reason as guiding motive, except destructiveness as the SA state seems to increasingly wage war on itself, the ANC apparently engaged in a process of self-destructing.

We have to go back 30 years for a similar set of circumstances starting to drive our financial markets. It isn't, in other words, the first time this has happened. Then it was President PW Botha who crossed a 1985 Rubicon, in the process laying down views no longer acceptable to a larger world. The next thing was deeper market revolt, and ultimately pulling of our foreign credit-lines, triggering a debt default resulting in a standstill arrangement with foreign creditors that would take a decade digesting.

Short Note                                                                                   26 August 2016

SA holding back?     

by Cees Bruggemans          words 400

With the 2Q16 having bounced back, and most sectors keeping this up through the 3Q16 as well, there is as yet no actual evidence of a fatal output sagging, but also no real indication of a new growth liveliness. Instead, slow continuity skimming close to the zero-line.

On the supply-side, the primary sector may lift a bit, the industry and services sector continue at slow speed, trade and income supported, infrastructure or labour disruption not intruding massively. Tourism has done well out of the weak Rand, farming is into recovery (wheat crop at 1.7mt some +17% on last year, latest maize crop estimate 7.3mt, but USDA expecting 13mt for summer 2017 – full recovery), even as the motor trade is in deep doldrums, reflecting a strong unwillingness to take on big-ticket commitments where existing value remains adequate.

Short Note                                                                                   25 August 2016

Being-left-behind anger    

by Cees Bruggemans          words 630 

Modern economic development dating from the 1600s has been a turbulent, dynamic affair. A continuous stream of new change agents appearing, even as old interests became outflanked or overwhelmed, some eventually giving way.

The adjustment costs of change can be huge, especially for those poorly fitted to respond to the challenges offered up. When certain livelihoods are destroyed, businesses go into terminal decline, one has to reinvent oneself.

Short Note                                                                                  19 August 2016

A very careful Fed   

by Cees Bruggemans          words 500

A very careful, thoughtful Fed riding herd, deep in thought, examining incoming evidence from every angle, preferring to stick with neutrality, prodding lightly here, holding off there, moving the herd along, keeping it going but not wanting to start a whiff of panic, just wanting a steady undertone as she keeps coming on. Prudently patient.

What kind of talk is that? The US economy is steadily absorbing more labour, but its demand growth apparently not strong enough to excite much inflation upside. The focus of that growth is steady consumer spending expansion, supported by a recovering housing cycle, and rising asset market wealth effects, but it is facing an uncertain world struggling to replicate this feat. Primary risks lifted out are Brexit, uncertain European developments, especially exposed Italian banks, questions about China, and what to do when shock were to intrude when so near the lower bound (on interest rates).

Short Note                                                                                   17 August 2016


Big Bile Rising   

by Cees Bruggemans          words 440

On a nice day you can see forever, they say. That's true enough. But once the denials have been shaken out of the tree, what is left staring us in the face? Today’s Big Bile Rising?

There is palatable uncertainty worldwide concerning a crop of major events or deepening crises approaching us, this further reinforced by our domestic SA foibles weakening us steadily. It makes even blessed optimism to count its remaining luck. Where's this heading?

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