Volume 19 Issue 7 – August 2021
“Never interrupt your enemy when he is making a mistake” – Napoleon Bonapart.
COMMENT AND OUTLOOK – The Rule Of Law Failed
The incarceration of former president Jacob Zuma, in early July, was used by his supporters and opponents of President Cyril Ramaphosa’s reform initiatives as an opportunity to cause unrest and disturbances that resulted in the worst public violence, looting and destruction of property ever seen in South Africa. The fact that the unrest was deliberate and aimed at compromising the state, is clear. It is also clear that those that started the unrest lost control of it and the result was lawlessness on a scale not seen before. The looting was not about poverty, it was about greed and opportunism and was blatantly criminal. The destruction of property was criminal vandalism supposedly aimed at harming big business. The tragedy however, is that those most affected by what happened will be the workers who have lost and will lose their jobs, the small business owners who will not be able to reopen their businesses and the communities who have lost access to shops, banks and ATM’s. The owners of large shopping malls, warehouses and distribution centres will be covered by insurance. A lot of the affected small business owners will not be covered. Large parts of KZN and Gauteng were impacted as main transport routes and the Durban port were closed. The economic impact of what happened is a setback for the country just as there were some real indications of an economic improvement starting to gain traction. The loss of over 300 lives during the unrest is another tragedy. All of this supposedly in the name of a man who is where he deserves to be.
Another aspect of the unrest that is concerning was the inability of the country’s security forces to anticipate the unrest and then deal with it. The fact that the army had to be placed on the streets to curb the criminal activity highlights the extent to which the police service and the intelligence services were woefully inadequately equipped to deal with the situation that arose. Communities stepped into the breach to protect property and lives and in some instances, this too became criminal as vigilantism resulted in many deaths. It was also ordinary South Africans who got together to clean up after the unrest showing that most citizens want peaceful lives. The performance of the government during the unrest and in the aftermath of it was sadly well short of what could reasonably have been expected. Security cluster ministers contradicted and blamed each other for not anticipating or dealing with the events that happened. The world watched all of this happening and there is no doubt that investor sentiment and confidence in the country has been dented. Those who were behind the unrest must be held accountable, whoever they are. President Ramaphosa must also take the next big step in his drive the reform the ANC and the country and reshuffle his cabinet to get rid of incompetent and underperforming ministers. It will also send a message that the country matters more than his party.
The Rand reflected the negative sentiment that the unrest caused, and it fell quite sharply at one stage to over R15 per USD but has since recovered to below R14.40 per USD. The country’s trade surplus in June was once again significant at R57 billion and this is helping the Rand. Inflation in SA dropped slightly to 4.9%. In spite of the turmoil experienced in the country investors in the JSE did not react and the JSE had a strong month led mainly by the mining stocks which have been driven by the commodity price boom. South Africa was in fact the only emerging market that had a positive month in July as most other emerging markets retreated. Markets is the East were particularly hard hit as Chinese authorities imposed a crackdown and curbs on Chinese tech stocks. This impacted on Naspers locally as a result of its significant investment in the Chinese listed Tencent. Chinese tech stocks were down 22% for the month are down over 40% for the year to date. Markets in the Developed Markets, with the exception of the UK had gains in July and US markets remain at historically high levels. Quarter on quarter economic growth in the US in the 2nd quarter came through strongly but was below expectations. US inflation remains elevated at 4.5% annualised but US 10 year Treasury interest rates dropped during the month which indicates that the market anticipates that US inflation will drop back to the US Federal Reserve’s target rate of 2%. The oil price fell below USD 70 per barrel at one stage during the month but has risen above that level again. The main oil producing countries seem quite happy with the current demand supply balance in the oil markets which is keeping prices at these higher levels.
Government has announced that a wage deal has been concluded with public servant unions. It is well below what the unions were demanding and will help in slowing down the rise in the debt to GDP level. Government has also announced that there will be a re–introduction of the basic income grant which given the levels of unemployment and poverty is a necessary step. The funds for this will come from the tax bonanza that the commodity boom is providing. Take note RET anti–capitalists.
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