I trust this finds you exceptionally well as we start a new calendar year. I trust that you had some rest and some quality time out and are returning refreshed, revived, recharged, revitalized, rejuvenated and well rested for the challenges ahead. It is a somewhat quaint notion that, because of the Gregorian calendar and the fact that it is a “New Year”, that all of the old will be gone and the new will start (all of those resolutions – to lose weight, get fit, save money, etc etc).
I would have liked to have started the year with a clean slate, and shall indeed do so in this missive. Suffice to say that it is going to be (at best) a tumultuous year for Europe, the USA and China (maybe less so for China). [Those being the three biggest players in the world, I think that pretty much covers it]. We in SA are going to be impacted by all of this. I will expand upon this theme as the year unfolds, however, at this stage in the year, with golden memories of a wonderful summer, still lingering, we’ll avoid any in-depth analysis. I have, however, included a prediction for 2012 from Cees Bruggemans. (Not too many people will put their names to predictions as they tend to come back to bite one e.g. who could have predicted the tsunami in Japan last year or the Arab Spring – and the profound impact these two events had on the rest of the world).
Prediction commences:
- What to expect from 2012 at a time of great change globally, with fear of crisis upsets yet to fully subside and South Africa seen as not yet being out of the path of danger’
- Despite major fiscal austerity also gripping the US as its politicians try to reduce its budget deficit and arrest its debt spiral, the US economy will probably keep growing, if only modestly at 2%-3%.
- As a consequence, US interest rates will likely remain at zero and the Fed inclined to provide additional monetary stimulus through communication efforts or even bond buying, keeping the Dollar weak and supporting global asset markets, potentially still for some years.
- Europe and the Euro are not expected to implode. Nobody may after all leave the Euro, even though speculation on this score remains rife.
- Instead, countries with excessive debt burdens and/or little growth momentum such as Greece, Ireland, Portugal, Spain and Italy will probably redouble their reform efforts on both counts, where necessary assisted by strong EU countries, the IMF and ECB.
- Europe will probably not escape a mild recession, prompting the ECB to ease interest rates further nearer zero, providing liquidity to banks in need and keeping debt markets functional.
- China will probably keep growing at 8% or more, along with India providing growth leadership to EM space and global commodity producers.
- It is a worldview in which growth generally hasn’t died, inflation is being suppressed, rich country currencies may ease, EM countries will lead with superior growth, and global asset markets should continue to recover.
- This may favour South Africa with still good commodity export prices, from China for our iron ore, from India for our coal, from both for our diamonds and platinum, and from the struggling West for our gold.
- As our export composition keeps shifting away from Europe and towards fast-growing Asia, we may reap even some export volume growth.
- Meanwhile, oil and food prices globally are unlikely to subside, and rather modestly rise, along with domestic infrastructure tariffs (electricity, transport, municipalities) keeping upward pressure on our inflation towards a 6.3% peak in 1Q2012, thereafter largely 3%-6% target-bound again.
- Also, it likely will keep favouring Rand overvaluation in 6-8 USD and 9-11 EUR territory, at the expense of our trade competitiveness but favouring inflation-suppression and the real incomes and spending of households.
- Interest rates throughout are likely to remain low, possibly like in the US, EU and Japan still for some years due to slow growth and target-bound inflation.
- This is a world in which South African real incomes will keep growing modestly, supported by good commodity price gains, generous government patronage to some, strong union labour demands for their members, and high skill shortage premiums for others.
- Despite favourable global conditions and the anchor of ongoing consumption growth, fixed investment growth is expected to remain modest, held back in the public sector by financing and manpower issues and in the private sector by excess capacity, insufficient demand, crucial infrastructure bottlenecks (electricity, transport, credit) and relative lack of confidence.
- So we are looking at another year of 3%-3.5% GDP growth, inflation of 5%-6%, prime interest of 9%, a Rand still mostly overvalued and employment gains remaining disappointingly low (given slow growth and high real wage gains).
- It is an outlook allowing for much ongoing popular discontent with too little progress in service delivery, job creation and income inequality.
- It is a year in which the US and France (and Greece and Italy’) will elect new Presidents, and South Africa will hold another leadership conference in preparation for 2014 elections.
- It will be another crucial year, globally, politically, economically, also marked by the onward march of technology and its many social revolutions.
Prediction ends
It is that time of the year again and I am delighted to advise that, with our average fee increase, effective in February, has been limited to approximately six percent, when measured as a firm. We remain exceptionally cost conscious and monitor our costs and outgoings on a regular basis in comparison to our peers, to ensure that we are competitive in our costings and internal costs.
With regards to the ongoing disaster/ national embarrassment that is the CIPC, they seem to be deteriorating quite nicely in spite of multiple initiatives to staunch the bleeding.
As has been referred to on multiple occasions, SARS audits have increased significantly in scope and quantum and we are finding, in some cases, a complete disconnect between the amount of tax in question and the underlying reason for/ amount of time to be spent on the audit. There is now insurance available from QDos Consulting to cover costs relating to SARS audits. www.qdosconsulting.co.za. There is no recourse to SARS for the extra costs incurred if nothing else is uncovered.
August 1, 2012 By No comments yet Economic Commentary
I trust this finds you exceptionally well as we start a new calendar year. I trust that you had some rest and some quality time out and are returning refreshed, revived, recharged, revitalized, rejuvenated and well rested for the challenges ahead. It is a somewhat quaint notion that, because of the Gregorian calendar and the fact that it is a “New Year”, that all of the old will be gone and the new will start (all of those resolutions – to lose weight, get fit, save money, etc etc).
I would have liked to have started the year with a clean slate, and shall indeed do so in this missive. Suffice to say that it is going to be (at best) a tumultuous year for Europe, the USA and China (maybe less so for China). [Those being the three biggest players in the world, I think that pretty much covers it]. We in SA are going to be impacted by all of this. I will expand upon this theme as the year unfolds, however, at this stage in the year, with golden memories of a wonderful summer, still lingering, we’ll avoid any in-depth analysis. I have, however, included a prediction for 2012 from Cees Bruggemans. (Not too many people will put their names to predictions as they tend to come back to bite one e.g. who could have predicted the tsunami in Japan last year or the Arab Spring – and the profound impact these two events had on the rest of the world).
Prediction commences:
Prediction ends
It is that time of the year again and I am delighted to advise that, with our average fee increase, effective in February, has been limited to approximately six percent, when measured as a firm. We remain exceptionally cost conscious and monitor our costs and outgoings on a regular basis in comparison to our peers, to ensure that we are competitive in our costings and internal costs.
With regards to the ongoing disaster/ national embarrassment that is the CIPC, they seem to be deteriorating quite nicely in spite of multiple initiatives to staunch the bleeding.
As has been referred to on multiple occasions, SARS audits have increased significantly in scope and quantum and we are finding, in some cases, a complete disconnect between the amount of tax in question and the underlying reason for/ amount of time to be spent on the audit. There is now insurance available from QDos Consulting to cover costs relating to SARS audits. www.qdosconsulting.co.za. There is no recourse to SARS for the extra costs incurred if nothing else is uncovered.