Economic thoughts and impact

[cyppokagain]

During the past year+ the undercurrents were the following.

Mining prices for gold other metals more or less fell and stabilized.
Power/Strikes in SA reduced output more or less.
Rand lost about -17% against the dollar .115 to .096 about.

Two very bad currents. The power dynamic needs to splinter ergo if there were more parties with none dominant there could be some reform pushed through.
Due to the amount of BEE and other laws and crap in general the amount of consolidation top vs middle vs bottom has been probably growing. Ergo more uneven society. I think corporate control has been leveraged quiet a lot especially if you take into account the amount of capital extraction done due to BEE and other things that tried to "redistribute" capital. Ergo there is a higher dependency on capital now then there was and it will not stand for "sharing". All of this BEE stuff will go away along with political slogans and other things that ostrasize investment, otherwise there will be none and there is a desperate need because of all the prior outflows that compounded with people leaving as well.

[Dave A]

Not much to argue with there.
GDP growth has slowed to a trickle.
Manufacturing and mining have gone backwards - hurt by strikes even more crippling than usual.
Exports have been hammered.
Commodity prices have slipped a little.
The current account deficit has widened - pretty much doubled year on year.
Capital inflows have slowed.

When it comes to the big picture, not much to be thrilled about this year at all (unless you rate not slipping into a recession as a positive).

All of this BEE stuff will go away along with political slogans and other things that ostrasize investment, otherwise there will be none and there is a desperate need because of all the prior outflows that compounded with people leaving as well.

BEE is set to become even more demanding during the coming year.

And possibly not the only excitement that might nudge things the wrong way in the coming year.
SARS is looking at a few tax changes that might not attract a positive response from foreign interests.
Established trade unions will probably still feel threatened enough by new players to feel the need to take a hard line at negotiations.
And we've got an election coming up, which might also heat things up some.

One of the bright lights coming though is the introduction of the youth employment subsidy. I've looked at the details, and I do think it's going to help some.
Also, given the disruptive strikes, ultimately we did fairly well to have any growth at all. So it's probably quite possible for the economy to do quite well next year relative to this year.

We might just surprise on the upside.

[cyppokagain]

http://www.bloomberg.com/news/2013-10-13/bmw-s-investment-strike-threatens-south-african-economy.html

you probably saw this one.

By the time car assembly and auto-component employees agreed on Oct. 6 to accept a 10 percent wage increase for next year, BMW had lost 13,000 cars in production, missed supply targets on several export contracts and took a decision to stop expansion in South Africa.

The strike at factories owned by seven carmakers, including Toyota Motor Corp. (7203) and Volkswagen AG (VOW), cost the industry at least 20 billion rand ($2 billion) in revenue, according to the National Association of Automobile Manufacturers of South Africa, or Naamsa. The damage to the economy may be even more severe as foreign investors threaten to scale back expansion plans as labor instability worsens.

Last year I might have posted a graph of food production going down vis a vis population growth. Once you have to import grain or white maize in SA case the instability will magnify. Right now its periodic wheat shipments though.
http://www.bloomberg.com/news/2013-1...onth-high.html

http://www.iol.co.za/business/markets/commodities/white-maize-rises-to-highest-in-14-months-1.1615547#.UqN55n-z7xU

In its first output forecast in February, the CEC had anticipated South Africa to harvest a bigger maize crop this year than the 12.12 million tonnes reaped in 2012.

But a drought in Free State and North West provinces, which together produce more than half of the country's maize, affected yields.

Last week, the North West province declared a drought across its whole territory.

Dry conditions and low levels in dams needed for irrigation will raise concerns about planting as farmers prepare fields.

South African maize is usually sown in the early stages of the summer and rainy season from October to December. - Reuters

subsidies in my view always amplify the distortion of dynamics.

My feeling is the way capital is treated in SA will change. Actual capital investment does not occur there is simply recouping of old capital and trying to exit out to see when the rules improve.

That BEE and extra-BEE are irrelevant to a global investor or company who care about rand denominated bonds returns in real worldwide purchasing power or capital deployed multiples and recovery.