Country FilesSouthCountry Profile 2014: SOUTH AFRICA

Fri,19Jan2018

Posted on Wednesday, 05 February 2014 09:48

Country Profile 2014: SOUTH AFRICA

The going gets tougher for Zuma

Although the imminent electoral test of May 2014 is likely to prove the toughest yet for
the ruling African National Congress (ANC) since 1994, no one realistically expects the party to lose
power. The ANC says it is confident of a crushingvictory, but other assessments predict a sharp fall in the ANC’s share of the vote. Global financial services group Nomura forecasts a drop from 65.9% in 2009 to a little over 55%, with the main opposition party, the Democratic Alliance (DA), increasing its share from 12.4% to 27%.

 

TABLE OF CONTENTS:

Top South African Companies

Top South African Banks

 

theafricareport-southafrica-72dpi-2The going gets tougher for Zuma

Competition intensifies within the ANC for the succession to the top job

Finding ways to stimulate more rapid economic growth is as elusive as ever

Although the imminent electoral test of May 2014 is likely to prove the toughest yet for the ruling African National Congress (ANC) since 1994, no one realistically expects the party to lose power. The ANC says it is confident of a crushing victory, but other assessments predict a sharp fall in the ANC’s share of the vote. Global financial services group Nomura forecasts a drop from 65.9% in 2009 to a little over 55%, with the main opposition party, the Democratic Alliance (DA), increasing its share from 12.4% to 27%.

While the DA seems certain to improve its share of the vote, the evidence suggests that many disaffected blackvoters view it as a predominantly white party. They may opt instead for Agang SA, a new party headed by Dr Mamphela Ramphele, which has a strong emphasis on anti-corruption and good governance. The DA will no doubt retaincontrol of the Western Cape and might also capture Port Elizabeth in the Eastern Cape, capitalising on bitter ANC infighting in the city and disaffected unionists in its motor industry. This would be particularly embarrassing for the ANC, which has renamed the city Nelson Mandela Bay.

 


FRESH FACES

Nomura forecasts 6% of the vote going to Agang SA, and 4% for another new party, ex-ANC Youth League leader Julius Malema’s Hugo Chàvez-inspired, radical leftist Economic Freedom Fighters (EFF). Malema wants the country’s mines to be nationalised without compensation and has proclaimed the DA a “strategic enemy”. DA leader Helen Zille seems to agree, saying that “the future re-alignment of politics in South Africa would see some in the ANC’s ideological broad church identify more closely with the rhetoric of the EFF, while others move closer to the DA”.

Given the strong likelihood of ANC victory, the bigquestion after the polls will be what President Jacob Zuma intends to do with his second, final term. He has said his main focus will be implementing the party’s National Development Plan (NDP), which aims to double GDP growth and slash unemployment, and driving forward anambitious infrastructure development programme. But if Zuma’s enemies have their way, his days in office will be blighted by a raft of legal cases, including a probe into why the National Prosecuting Authority dropped corruption charges against him back in 2009; whether Zuma personally authorised state expenditure in excess of R200mon his private home in Nkandla; and whether or not he gave the nod for guests arriving from India in April 2013 for a lavish wedding of the Gupta family– who have become extremely close to the president - to arrive atamilitary airbase and proceed to the festivities without clearing immigration, the affair now known as Guptagate.


FATE OF OFFICIALS

Kgalema Motlanthe is currently deputy president of South Africa but, having challenged Zumafor the presidency at the ANC’s general congress in 2012, is not expected toremain in the post after the 2014 election. The obvious replacement is ANC deputy president Cyril Ramaphosa, but according to Professor Susan Booysen from the University of the Witwatersrand “Ramaphosawon’t be the deputy president. Zuma’s people do not trust him”. If that proves correct, then the other likely candidates are ANC
treasurer Zweli Mkhizeand the African Union chairperson and the president’s ex-wife, Nkosazana Dlamini-Zuma.

There is a fair chance of a split in 2014 in the Congress of South African Trade Unions (Cosatu), South Africa’s largest trade union federation, which is in a ‘tripartite alliance’ with the ANC and the South African Communist Party. The fight is ostensibly over the fate of its secretary general Zwelinzima Vavi, who was earlier this year placed on ‘special leave’ aspunishment for an affair with a junior Cosatu official, but is really about how critical the federation should be of government. Many on the left of the federation, led by Irvin Jimof the National Union of Metalworkers of South Africa (NUMSA), denounce the ANC’s NDP strategy as ‘neoliberal’ and are determined to oppose it, while others, likeFrans Baleni of the National Union of Mineworkers (NUM), are urging support. The government will announce its five-year plan for NDP implementation once the elections are over. The NDP may set a target of real GDP growth rates of 5% a year, but according to the IMF the figure for 2013 will be an anaemic 2%, rising to 2.9% in 2014, driven by improvements in the global economy and the impact of increased domestic spending on infrastructure.

The high infrastructure spending will put a strain on the country’s current account. The current account deficit is forecast at 6.1% in 2013, and the IMF expects it to remain at that level during 2014. The deficit will probably be fully financed by foreign capital inflows, but if Western monetary authorities, and the US Federal Reserve inparticular, begin to with draw their financial stimulus during 2014, foreign investors could get jittery and start pulling their money out of emerging markets like South Africa’s.

theafricareport-southafrica-72dpiEXPOSURE

Manufactured exports made up around half the national export total in 2002, but this had dropped to less than 40% in 2012, with commodity exports, mostly minerals and foodstuffs, contributing most of the balance. This increased reliance on commodity exports leaves South Africa more exposed to vagaries in international commodity price trends.

If metal prices drop on falling Chinese demand, export earnings will suffer and the country’s trade balance will widen. Real GDP growth in 2014 of 2.9% would have a negligible impact on South Africa’s
high unemployment rate, reckoned by the government at 25%, but estimated by independent analysts as being closer to 40%, if those who have given up finding work are included. The NDP proposes a
‘youth wage subsidy’ intended to encourage employers to take on new recruits by allowing them to pay less than the going rate, with the government making up the difference. NUMSA and others on the left are vehemently opposed to this, saying iten courages the perpetuation of cheap labour, and promise to do their utmost to wreck the plan. Nearly all the net employment increase since 2009 has been in the public sector, pushing up the government’s wage bill. The trend is set to continue in 2014, with public sector wages rising from 10.8% of GDP to 10.9%, according to government forecasts.

Consumer price inflation is expected to average around 5.5% in 2013, and the IMF expects a similar figure for 2014. This would be within the 3-6% range targeted by the South African Reserve Bank (SARB), and should enable it to keep interest rates – frozen since July 2012 - on hold. But if capital outflows and falling commodity prices cause the rand to tumble, this will push inflation higher, putting pressure on the SARB to increase rates. Higher interest rates would be welcome news for the country’s too-few savers, but would put further strain on the far larger number of highly indebted consumers.

Annual wage settlements have averaged at around 8.8% this year, higher than inflation, and are forecast by the IMF to be around the same level in 2014. After many bitter and prolonged strikes in the mining and manufacturing sectors recently, the chances are that the story will repeat itself in 2014.
Twenty years into democratic rule, the country’s labour relations remain as adversarial as ever, with Zuma and the ANC apparently unable to do anything much to improve them.

MUCH MORE ENERGY NEEDED TO BOOST GROWTH

SOUTH AFRICA USED TO HAVE among the cheapest and most abundant electricity in the world. But prices have risen 230% over the past six years, leaving them among the world’s highest, and domestic spare capacity has all gone, consumed by a decade of economic growth after 1994. There were prolonged power blackouts in 2007, but economic stagnation and voluntary reductions in energy consumption by industry have reduced demand since then, just about enabling the energy parastatal Eskom to cope.

Still, economists reckon energy supply constraints shave 0.5% off GDP growth per year – bad news when growth is below 3%. But when energy output picks up, so will growth, forecast by the IMF at 3.6% in 2015 on the back of improved power supply.

The blackouts prompted a rush of new investment in supply, some of which should come on stream
soon. Construction at the controversial Medupi coal power station in Limpopo, which will burn 40,000
tonnes of coal a year for 40 years, is running behind schedule due to strikes, but some power production is expected in 2014. South Africa is already among the world’s dirtiest power producers and Medupi will put it higher in the ranking. Eskom is finally investing in renewable energy; in May it received a licence to construct its first wind farm, generating 100MW.

 

> Top South African Companies

 

Rank 2012Rank 2011CompanySectorCountryTurnover (Thds $)Turnover changeNet profits
33SASOLCHEMICALSSOUTH AFRICA17,493,990-4.89%2,431,099
44MTN GROUPTELECOMSSOUTH AFRICA14,969,793-13.24%2,549,006
55THE BIDVEST GROUPDIVERSIFIEDSOUTH AFRICA14,552,050-11.90%434,629
66ESKOMELECTRICITYSOUTH AFRICA14,094,8232.45%1,627,488
77SHOPRITE HOLDINGSRETAILSOUTH AFRICA8,879,613-12.44%308,251
89VODACOM GROUPTELECOMSSOUTH AFRICA8,220,220-10.72%1,247,360
910IMPERIAL HOLDINGSDIVERSIFIEDSOUTH AFRICA7,942,401-1.21%314,665
1018DE BEERS CONSOLIDATED MINESMININGSOUTH AFRICA7,378,00025.54%978,000
1116SAPPIPAPERSOUTH AFRICA7,286,00010.86%-1,478,000
1214VODACOM SOUTH AFRICATELECOMSSOUTH AFRICA6,992,3880.18%0
1311PICK N PAY STORESRETAILSOUTH AFRICA6,795,692-13.05%49,791
158SANLAMINSURANCESOUTH AFRICA6,666,424-34.15%744,903
1613MASSMART HOLDINGSRETAILSOUTH AFRICA6,503,331-8.90%107,725
1715ANGLO AMERICAN PLATINUM CORP.MININGSOUTH AFRICA6,278,190-9.33%441,047
1817BARLOWORLDDIVERSIFIEDSOUTH AFRICA6,119,261-0.38%124,908
1920KUMBA IRON OREMININGSOUTH AFRICA5,963,2792.41%2,093,098
2019ANGLOGOLD ASHANTIMININGSOUTH AFRICA5,876,8140.59%1,385,655
2230SAB MILLER SOUTH AFRICABEVERAGESSOUTH AFRICA5,815,00021.73%0
2421TRANSNETTRANSPORTSOUTH AFRICA5,637,438-1.27%505,896
2712STEINHOFF INTERNATIONAL HOLDINGSDIVERSIFIEDSOUTH AFRICA5,286,173-26.86%630,804
2831GOLD FIELDSMININGSOUTH AFRICA5,143,3098.30%863,019
2938DATATECICTSOUTH AFRICA5,033,39416.97%80,846
3028NASPERSMEDIASOUTH AFRICA4,849,793-2.57%355,441
3122MTN SOUTH AFRICATELECOMSSOUTH AFRICA4,740,484-12.04%0
3223SPAR GROUPRETAILSOUTH AFRICA4,723,498-9.90%116,998
3335GRINDRODSEA TRANSPORTSOUTH AFRICA4,407,427-3.01%71,749
3525AVENGDIVERSIFIEDSOUTH AFRICA4,215,625-17.54%144,584
3640IMPALA PLATINUM HOLDINGSMININGSOUTH AFRICA4,069,2726.29%815,279
3727TELKOMTELECOMSSOUTH AFRICA4,062,763-19.28%-26,529
3834ARCELOR MITTAL SOUTH AFRICASTEELSOUTH AFRICA3,863,057-15.05%983
4129MURRAY & ROBERTS HOLDINGSCONSTRUCTIONSOUTH AFRICA3,750,284-22.01%-213,105
4439EDGARS CONSOLIDATED STORESRETAILSOUTH AFRICA3,424,713-11.03%-245,517
4548TRANSNET FREIGHT RAILRAIL TRANSPORTSOUTH AFRICA3,396,956-0.13%0
4745LIBERTY GROUPINSURANCESOUTH AFRICA3,353,232-2.30%373,127
4841OLD MUTUAL LIFE ASSURANCE CO.INSURANCESOUTH AFRICA3,238,395-14.23%403,587
4951SOUTH AFRICAN AIRWAYS*AIR TRANSPORTSOUTH AFRICA3,182,000NA109,000
5044WOOLWORTHS HOLDINGSRETAILSOUTH AFRICA3,141,981-10.73%202,776
5446ALLIED ELECTRONICS CORP.ELEC. EQUIPMENTSOUTH AFRICA2,894,008-15.67%21,371
5649NETWORK HEALTHCARE HOLDINGSHEALTHCARESOUTH AFRICA2,852,003-15.65%198,600
5855MEDI CLINIC CORP.HEALTHCARESOUTH AFRICA2,700,321-3.63%149,963
6253TIGER BRANDSAGRIBUSINESSSOUTH AFRICA2,509,237-13.66%317,355
6457MASSCASHRETAILSOUTH AFRICA2,410,183-8.03%0
67-BLUE LABEL TELECOMSTELECOMSSOUTH AFRICA2,218,691NA52,990
6863SANTAMINSURANCESOUTH AFRICA2,174,774-8.83%172,562
6964PIONEER FOODS GROUPAGRIBUSINESSSOUTH AFRICA2,069,901-12.54%89,490
70113MMI HOLDINGS (ex MOMENTUM GROUP)INSURANCESOUTH AFRICA2,068,41265.66%204,250
7360LONMINMININGSOUTH AFRICA1,992,000-20.54%321,000
7556NAMPAKPACKAGINGSOUTH AFRICA1,942,840-30.37%111,471
7772JD GROUPRETAILSOUTH AFRICA1,933,310-2.83%85,114
7990AFRICAN RAINBOW MINERALSMININGSOUTH AFRICA1,829,15810.31%406,657
 

 

Top South African Banks

 

Rank 2012Rank 2011Bank nameCountryTotal assetsNet interest incomeLoansDeposits
11STANDARD BANK GROUPSOUTH AFRICA183,349,2583,540,53298,416,649107,685,751
22STANDARD BANK OF SOUTH AFRICASOUTH AFRICA100,919,8432,608,82075,063,28584,507,775
33ABSA GROUPSOUTH AFRICA96,624,8285,629,08661,840,23854,158,707
45NEDBANK GROUPSOUTH AFRICA79,602,9584,107,83862,336,67764,008,257
54FIRSTRAND BANKING GROUPSOUTH AFRICA75,742,4801,450,38152,706,23860,600,125
11-FIRST NATIONAL BANK SOUTH AFRICASOUTH AFRICA27,410,2311,200,56626,130,07825,630,078
3737AFRICAN BANKSOUTH AFRICA6,189,2681,877,0584,310,8590
6879CAPITEC BANKSOUTH AFRICA2,901,235408,3192,071,1172,172,939
7376LAND AND AGR. DEV. BANK OF SOUTH AFRICA*SOUTH AFRICA2,752,88576,9022,151,3080
117115SOCIT GNRALE SOUTH AFRICASOUTH AFRICA1,419,92211,1771,356,6701,350,897
159134MERCANTILE BANKSOUTH AFRICA748,02032,473535,309524,806
186172SASFIN BANKSOUTH AFRICA537,12423,407286,537149,281
199178BIDVEST BANK*SOUTH AFRICA488,7348,60499,188177,247
 


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