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Tag Archive 'rand'

May 07 2009

Getting ready for the “jump to the left”

Published by under Opinion,Top Stories

Media reports about a Commission of Economic Policy being planned in the Office of the President, are worrying. The mooted Commission is an attempt of trade union Cosatu and the SA Communist Party (SACP) to wrestle control over the money purse from the Ministry and Department of Finance. As described by The Economist in this article. [Read on]

One response so far

Dec 13 2008

Why I’m so negative on the rand – Part IV

Published by under More News,Opinion

This article was first posted to my old blog on 10/12/2007. I’m republishing it here as part of the on-going migration to my new blog. 

I’ve alluded to the “frail-Mandela factor”, the “populist-Zuma factor” and the “let’s-get-rid-of-Trevor-Manuel factor” as grounds for being bearish on the rand in the next 12 months. There are more reasons for being negative, of which the most important is the “let’s-get-rid-of-Mboweni factor”. This factor has the potential to destabilise the rand in the coming months like no other. 

(And strangely, to date the SA media have hardly mentioned it….) 

Tito Mboweni has been president of the SA Reservebank (central bank) since 1999 and has done an excellent job protecting the value of the rand, which is the primary goal of the central bank according to section 224 of the new Constitution of South Africa. 

The president of the SA Reservebank is appointed by the president of the national government for a 5 year period. Mboweni’s second 5-year term will come to an end in 2009, but the decision about the renewal of his contract for another 5-year period will most certainly have to be made already in 2008 – while Mbeki is still in the chair. 

How this decision is made and who is appointed as president of the SA Reservebank for the period 2009 – 2014 could be a major destabilising factor for the rand throughout 2008 – if it’s not handled carefully. 

For instance, if Zuma is selected as ANC president in the next few weeks and the appointment of the president of the SA Reservebank is NOT made by Mbeki next year, but postponed until Zuma is in the chair, this will make the forex markets nervous no end. 

And then, of course, there is the scenario where he is not appointed again, but a “more populist” candidate is appointed instead. Now, that would really cause instability. The worse case scenario: Trevor Manuel and Tito Mboweni go within months of one another. 

No, no, there is still another (even) worse case scenario: Mboweni, Manuel and Mandela all leave the stage within a few months of each other. But, let’s not sound alarmist. 

I couldn’t find anything in the Constitution, the Reserve Bank Act, or the regulations thereto, prohibiting Mboweni from accepting a third term. As far as I could make out, Mboweni could go on as long as he wanted to. And really, there is no reason to throw out a man who obviously knows what he’s doing. And is still very young. South Africa simply hasn’t got so many “potential central bank governors” hanging around, to just throw Mboweni out – and with him the government’s hard-won market credibility. 

Nevertheless, at this point it seems very, very likely to happen. In fact, in the next 18 months South Africa could be without it’s 2 best functionaries in the Mbeki era, namely Manuel and Mboweni. 

If the prospect of this happening doesn’t make the forex markets nervous in coming months, I’ll eat my hat.

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Dec 12 2008

Enter the new rand-killer

Published by under Opinion,Top Stories

A year has passed since I suggested politics would start asserting downward pressure on the SA rand. Since then the rand has weakened by about 30% – mostly due to the financial markets crisis. The political factor hasn’t really come into play yet. But, I expect it to start happening soon. And I have friends in high places to back me up, such as the Economist Intelligence Unit (EIU). [Read on]

2 responses so far

Dec 11 2008

The blogger’s adrenalin kick

Published by under More News,Opinion,South Africa

This blog is really about hard news. More specifically, news made by South African businesses in Europe. But, every now and then I indulge in an opinion piece, or crystal ball gazing. And then get a helluva kick when my “forecasts” later turn out to be spot-on.      [Read on]

2 responses so far

Sep 18 2008

Nederburg winners laughing all the way

Published by under Companies

Let’s hope Distell covered the exchange rate risk inherent in its R2 million Nederburg competition running (until 31/12/2008) in the UK.

Because, if it hasn’t, Distell risks being a lot poorer than budgeted. [Read on]

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Sep 12 2008

About Trevor, the Budget and inflation

Published by under Opinion,South Africa

First published on my old blog on 12/3/2008. 

I’ve been busy with forecasts on my blog lately, I noted today. Too busy. It’s never good to forecast. The risks are too high.  [Read on]

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Sep 12 2008

Budget 2008/09: No sign of populist pressure

Published by under Opinion,South Africa

First published on my old blog on 21/2/2008. 

Trevor’s 2008 Budget is another reason to believe “populism” or “socialism” will not rule in South Africa under Zuma, after all. It was another solid, balanced Budget in the mould we’ve come to expect of the man.

[Read on]

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Sep 12 2008

Only if the rand doesn’t drop further

Published by under Opinion,South Africa

First published on my old blog on 31/1/2008. 

Experienced journalists quoted clever economists today saying they were “OK” with the central bank’s decision not to increase rates, because “inflation is on it’s way down anyway” and the “rand’s recent drop won’t seriously impact the inflation scenario”. 

Well, only if you don’t expect the rand to stay where it was today (at R11,22 to the Euro, or 10% lower than 4 weeks ago), but to recover somewhat. And definitely not if you think the rand still has a long way to fall (like I do). [Read on]

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