South African 2020 budget may delay Moody's downgrade

2020 ◽  
Keyword(s):  
South African ◽  
Civil Servants ◽  
Structural Reforms ◽  
Short Term ◽  
Content Type ◽  
Political Contention

Significance While the measures have been welcomed by investors, they depend on Pretoria reaching a deal with civil servants, whose unions have denounced the government’s plans. Impacts Despite commitments to a series of growth-boosting structural reforms outlined last year, progress will likely remain halting. Renewed funding for embattled South African Airways (SAA) will be a recurring source of public and political contention over the short term. Debt costs could rise further if a ratings downgrade sees investors demand even higher yields on South African debt.

Further South African interest rate cuts are unlikely

2018 ◽  
Keyword(s):  
Interest Rates ◽  
South African ◽  
Structural Reforms ◽  
Short Term ◽  
Content Type ◽  
Reserve Bank ◽  
Capital Outflows ◽  
Repo Rate ◽  
Low Levels ◽  
Domestic Inflation

Subject South African inflation dynamics. Significance South African Reserve Bank (SARB) Governor Lesetja Kganyago highlighted in a May 8 speech the increasingly unpredictable global environment and risks to inflation. Domestic inflation has been at unusually low levels in recent months, surprising the market and SARB on the downside thanks mainly to currency strength and moderating food price pressures. On March 28, the SARB cut the benchmark repo rate for only the second time in six years. However, international factors have seen the currency come under pressure recently, reversing the gains seen following President Cyril Ramaphosa’s ascent to the ANC leadership in December. Impacts With monetary policy likely proving cautious in the short term, pressure will grow on Ramaphosa to push through structural reforms. Holding interest rates constant will help to mitigate capital outflows and provide some support for the currency. Barring a currency crash, the next interest rates move will likely be up -- late this year or next year.

Politics set to slow Pakistan's divestment drive

2016 ◽  
Keyword(s):  
Public Sector ◽  
Economic Reform ◽  
Prime Minister ◽  
Structural Reforms ◽  
Short Term ◽  
Content Type ◽  
Reform Agenda ◽  
Political Patronage ◽  
The Government ◽  
Core Condition

Subject Pakistan's divestment drive. Significance Prime Minister Nawaz Sharif's government describes divestment of public sector enterprises (PSEs), involving 69 firms, as an essential part of its 2013-18 economic reform agenda. Progress thus far is limited, but the government faces rising pressure from the IMF, which made divestment a core condition of its 6.6-billion-dollar, three-year loan in September 2013. Impacts Another government led by Sharif would continue gradual divestments after 2018. Since PSEs are an important vector for distributing political patronage, structural reforms will face stiff resistance. Divestment of profitable PSEs defeats the purpose of the exercise, but the government will use them for a short-term cash boost.

South African lockdown easing will only do so much

2020 ◽  
Keyword(s):  
South African ◽  
Short Term ◽  
Content Type ◽  
The Government ◽  
Do So ◽  
Alcohol Sales

Significance President Cyril Ramaphosa, who had been under escalating pressure from business and organised labour to reopen the economy fully, justified the relaxation by citing reductions in new case figures. There are indications that all provinces may have reached their peak of infections by end-July. Impacts Despite the scale of the crisis, the government appears still to lack urgency in formulating a substantive economic response. Government's withdrawal of an appeal to a 2018 declaratory order will raise hopes for greater flexibility with miners in the short term. Lockdown-related drops in reported crimes will likely prove short-lived, given renewed alcohol sales, growing joblessness and hardship.

South African mining could ride out lockdown period

2020 ◽  
Keyword(s):  
South African ◽  
Power Supply ◽  
Economic Impacts ◽  
Policy Uncertainty ◽  
Short Term ◽  
Community Based ◽  
Content Type ◽  
Financial Position ◽  
Cast Doubt ◽  
The Government

Subject South African post-lockdown mining. Significance Three weeks into its COVID-19-related lockdown, the government allowed certain mines to ramp up to 100% capacity (coal and opencast operations) and others to 50% (underground operations), making it the first non-essential industry allowed to resume full or partial operations. This particularly benefits smaller, more marginal mines, as larger ones were already in a relatively resilient financial position. However, more fundamental issues continue to weigh on the industry, such as costly and erratic power supply and ongoing policy uncertainty. Impacts An extended lockdown and the economic impacts of the COVID-19 crisis could see a rise in community-based protests interrupting operations. A surge in COVID-19 infections at mines and subsequent closures will cast doubt over the feasibility of the industry's short-term strategy. The growing financial stress on workers may prompt more militant demands during scheduled coal wage negotiations later this year.

South African relief plan will not halt further slide

2020 ◽  
Keyword(s):  
South African ◽  
Structural Reforms ◽  
International Financial Institutions ◽  
Severe Damage ◽  
Public And Private ◽  
Content Type ◽  
Social Fabric ◽  
Tobacco Sales ◽  
Legal Challenges ◽  
Public And Private Sector

Subject South African relief package. Significance A 500-billion-rand (28-billion-dollar) socio-economic relief package that President Cyril Ramaphosa announced last week will use public- and private-sector funding to provide some assistance to businesses and households impacted by the COVID-19-related crisis. However, many details have yet to be clarified, implementation is a risk and the package will not prevent severe damage to the economy and social fabric. Impacts With or without support from international financial institutions (IFIs), Pretoria will be forced to undertake some structural reforms. The country will emerge from the crisis even more heavily indebted, and dependent on IFI lending in a way it never previously was. Social tensions could grow over contentious lockdown measures, such as bans on cigarette and tobacco sales (which face legal challenges).

Immigration to linger as South African flashpoint

2015 ◽  
Keyword(s):  
Economic Growth ◽  
South Africa ◽  
South African ◽  
Rapid Response ◽  
Customs Union ◽  
Short Term ◽  
Content Type ◽  
International Firms ◽  
Gateway Cities

Significance President Jacob Zuma cancelled a state visit to Indonesia to lead government efforts against the violence. However, popular perceptions of uncontrollable inflows linked state incapacity, a porous asylum system and continued weak economic growth mean that anti-immigrant sentiment will persist. Impacts In the short term, South Africa is likely to refrain from reforming the regional customs union out of fear of antagonising its neighbours. Reputational damage from the attacks is likely to undermine Zuma's efforts to create a 'rapid response' regional peace-keeping force. This reputational damage may encourage international firms to base their SSA headquarters in non-South African 'gateway' cities.

Economic crisis will sustain unrest in Zimbabwe

2016 ◽  
Keyword(s):  
South African ◽  
Economic Crisis ◽  
Credit Rating ◽  
Civil Servants ◽  
Content Type ◽  
High Unemployment ◽  
Finance Minister ◽  
Fund Development ◽  
The Government ◽  
Sovereign Credit Rating

Significance Discontent over President Robert Mugabe's mismanagement of the economy is deepening, particularly over high unemployment and severe cash shortages, which have caused the government to delay paying civil servants' salaries. Impacts Pretoria's demands that Harare drop its restrictions on South African imports will likely increase bilateral tensions. Smugglers will take advantage of the region's porous borders to circumvent these rules, eg by routing goods via Mozambique. The mines and minerals amendment bill, which requires mining firms to list on the local bourse, will likely deter investment. Tensions between Finance Minister Patrick Chinamasa and leftist ministers could result in further policy reversals. Plans to gain a sovereign credit rating and issue Eurobonds to fund development will remain unrealised, at least for several years.

Italy’s populist government will hold together for now

2019 ◽  
Keyword(s):  
Migration Policy ◽  
Structural Reforms ◽  
Short Term ◽  
Yield Spreads ◽  
Content Type ◽  
European Elections ◽  
Government Relations ◽  
Bond Yield ◽  
Five Star Movement ◽  
The Eu

Subject Italy's government relations. Significance Italy’s coalition partners agreed on January 10 to take in a dozen stranded migrants from the Sea Watch 3 NGO ship in Malta after the two parties initially took divergent stands on the issue. Migration has been a source of growing division between the anti-immigrant League party and the anti-establishment Five Star Movement (M5S), among other issues such as the environment and tax. However, in the short-term, staying in government is in the interest of both parties. Impacts Government stability should see bond yield spreads between Italy and Germany stabilise. Longer-term structural reforms are likely to go unaddressed as the coalition partners turn their focus to European elections. The EU could be forced to accommodate Italy’s migration policy, particularly with respect to the redistribution of migrants.

South Africa's Mboweni will aid Ramaphosa reform push

2018 ◽  
Keyword(s):  
South African ◽  
Credit Rating ◽  
Short Term ◽  
Content Type ◽  
Rating Agencies ◽  
Reserve Bank ◽  
Freedom Fighters ◽  
Left And Right ◽  
The Government

Significance A former South African Reserve Bank (SARB) governor and minister of labour, Mboweni faces a crucial first few weeks in his new post as the government attempts to placate rating agencies and engineer an economic turnaround. Mboweni’s initial moves may be determined by Moody’s credit rating review expected today. Impacts In the short term, Mboweni’s appointment will be a boost for Ramaphosa’s bid for fiscal consolidation and growth. In the medium-to-long term, Mboweni will likely prove a more polarising figure inside the ANC than Nene. Allegations linking the Economic Freedom Fighters with a major banking scandal could give Mboweni and the ANC an early political 'win'. Mboweni's previous social media utterances could be further exploited by opponents, both left and right, in the months ahead.

Angolan oil sector reform will require innovation

2018 ◽  
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Oil Price ◽  
Structural Reforms ◽  
Medium Term ◽  
Short Term ◽  
Sector Reform ◽  
Content Type ◽  
Oil Sector ◽  
Oil Company

Subject Sonangol priorities. Significance Early structural reforms by new President Joao Lourenco and more positive economic projections for 2018 suggest a potential uptick in Angola’s fiscal fortunes. Since assuming power in September, Lourenco has overhauled the leadership of state-owned oil company Sonangol and dismissed several prominent officials associated with his predecessor Jose Eduardo dos Santos. Separately, Lourenco has moved to tackle the overvalued kwanza. While this will raise debt-servicing costs, this will be partly ameliorated by the recent oil price of over 60 dollars per barrel. Impacts Scrapping the dollar currency peg will help ease the foreign exchange crisis and end payment constraints in the aviation and oil sectors. A more realistic exchange rate will fuel inflation in the short term but will likely improve medium-term economic prospects. Urban support for the People's Movement for the Liberation of Angola (MPLA) could decline further if reforms remain elite-focused.

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