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Thread: Real bricks and mortar?

  1. #1
    Site Caretaker Dave A's Avatar
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    Real bricks and mortar?

    This story or something similar has popped up on all the newsfeeds, which generally means everyone agrees it's pretty important. Here's the bit that has my attention in particular:

    The governor (Tito Mboweni) said: "I am concerned that our current account deficit is more than 6% (of GDP) ... when the rule of thumb (says it) should be around 3%."

    "What it means in practice is we are consuming far more than we are producing... we are importing more," he said.

    Noting that the Australian central bank governor had asked him why he was worried about it - as Australia and New Zealand had larger current account deficits - he said there was a "big difference" between South Africa and Australia.

    Australia attracted large amounts of foreign direct investment and it was not just made up of portfolio flows: it was "real bricks and mortar".

    As a consequence, Australia had been able to sustain a relatively large current account deficit.
    Now there's been a fair bit of fanfare around our economy's 6 year bull run. Was it always known that the underlying forces were a little fragile?
    The trouble with opportunity is it normally comes dressed up as work.

  2. #2
    just me duncan drennan's Avatar
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    It has been relatively well know and talked about that a lot of our current account deficit has been offset by capital inflows. Part of the problem with these is that they were not "brick & mortar" but paper money flows, i.e. emerging markets have been benefitting from capital inflows into equity, but now, as emerging markets seem to have lost their shine (due to various economic winds) international investors are being prudent and pulling their money out of them (which would make sense if you look at the current instability of the JSE).

    Interesting enough it creates a different type of cash inflow though. Taking the money out of the country (plus some other effects) creates a weaker rand, which bolsters exports which in turn help to combat the current account deficit. Now I'm no economist, so I don't know where the balance lies between all these factors.

    As business owners we need to move towards bringing capital into the country and "trapping" it in our businesses - i.e. the "brick & mortar". Obviously this also has its own cycle of investment, growth, jobs etc. and creates greater stability in our current and economic conditions - especially in times of uncertain global politics.

    We need to attract the right type of investors - long term builders of wealth, not speculative traders. The only way to do that is to create value through genuine solid growth.
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  3. #3
    Site Caretaker Dave A's Avatar
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    Spot on, Duncan. Agree completely.

    My point in this is that our government was taking massive credit for our "booming economy" when in fact the boom was founded on debt and transient investment.

    Hopefully we can now start building on more solid ground.
    The trouble with opportunity is it normally comes dressed up as work.

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