I trust this finds you exceptionally well as the first half of the year draws to a close. If anything, the pace seems to be picking up. Further, the interesting times that we live in (old folklore saying/ curse),are becoming more interesting as each month passes. On the international front, Europe continues to lurch from crisis to crisis – as the other dominoes rattle. A Greek debt haircut is ever more on the cards (to my mind – when, not if). By way of precedent, the United Kingdom is the only country in recorded history that has recovered from a debt to GDP ratio in excess of 150%, and that was at the height of the British Empire. Greece has hit 150% of debt to GDP….………. and kept right on trucking. I keep referring to this as Europe is South Africa’s biggest trading partner and the Greek and (and its impact on the) European situation will have an impact on South Africa, if not directly, then on our business counterparties.
The Greek, Irish and Portuguese debt issues (and one cannot cure a problem of too much debt with more debt) are going to take a back seat compared to the other unfolding issues. Belgium’s and Italy’s debt have been downgraded and there is increased anxiety around Spain.
The ruling Socialist Party was given a bloody nose in the recent elections as the electorate are angry about austerity measures and the official 20% unemployment rate (by way of comparison, South Africa has a 25% official unemployment (albeit closer to 40% actual)).
I wouldn’t put any credence on any of the soothing words being issued by the European politicians, as they have electorates to appease, jobs to keep (their own and their electorates) and I can’t see that they have the wherewithal for an elegant and timeous solution. Something has to, and will, give.
On the local front, the all-new CIPC has replaced the much-maligned CIPRO. The all-new CIPC, however, is making the much maligned, truly awful, and now defunct CIPRO look like a sleek and efficient organization. There is much frustration amongst practitioners as it is impossible to get anything done – expect major delays.
Further, there are some big changes which have taken place due to the new Companies Act which became effective on 1 May 2011. A significant point to note is that thousands of companies have been de-registered (arguably incorrectly but that is another story). It is, however, very important that, before contracting with a company, a check is performed to ensure that the company is still registered or the contract may be unenforceable against the company.
The tsunami impact on Japan is being felt in any number of industries, with far-reaching implications in electronics related companies, one of which has already pulled out of South Africa (with no fanfare) and vehicle industries, some of which, remain severely impacted. This needs pro-active monitoring to ensure no impact upon yourself.
The Middle East and North Africa is likely to continue wobbling unstably and perilously along for the foreseeable future, with the oil risk premium being hiked as events unfold. As has previously been mentioned, there are many factions with different agendas all battling for supremacy (religious/ sovereign/ ethnic/ democratic/ military) and it remains to seen how this will play out. Looking at the unfolding situation, it is likely that the pre-Jasmine revolution Middle East tensions will appear to be a walk in the park, as opposed to the current morass of issues which are likely to emerge.
On the other side of the pond, QE2 is coming to an end (or, at least approaching a “Wait and see, before QE3”). I would suggest that the American issues, whilst not, at this point, of the magnitude of European issues, remain nonetheless significant – house prices down between twenty and thirty percent in real terms and dropping, some (depending upon source) six to ten million jobs evaporated with very little fiscal or monetary stimulus realistically possible. Political deadlock and an upcoming presidential election are about to start kicking into high gear. Mr Obama’s “Yes we can” is looking more along the lines of “But we didn’t”. To be fair to Mr Obama (along with Mr Cameron in the United Kingdom), he picked up the biggest hospital pass of all time (if there was ever a time NOT to win an election, that was it). An added issue facing America is the timing of the Al Quaeda revenge counterstrike – also a “when, not if” and its scope (or the many smaller counter-strikes).
Whew, in spite of all the issues in SA, based on the above, it looks like a very good time to living at the tip of Africa.
Information is power and there is no meaningful impact that South Africa or South Africans can have on any of the aforementioned. All we can do is be aware of the issues so that one is not caught short (by way of example: counterparties with European/ American exposure going down in flames).
June 8, 2011 By No comments yet Economic Commentary
I trust this finds you exceptionally well as the first half of the year draws to a close. If anything, the pace seems to be picking up. Further, the interesting times that we live in (old folklore saying/ curse),are becoming more interesting as each month passes. On the international front, Europe continues to lurch from crisis to crisis – as the other dominoes rattle. A Greek debt haircut is ever more on the cards (to my mind – when, not if). By way of precedent, the United Kingdom is the only country in recorded history that has recovered from a debt to GDP ratio in excess of 150%, and that was at the height of the British Empire. Greece has hit 150% of debt to GDP….………. and kept right on trucking. I keep referring to this as Europe is South Africa’s biggest trading partner and the Greek and (and its impact on the) European situation will have an impact on South Africa, if not directly, then on our business counterparties.
The Greek, Irish and Portuguese debt issues (and one cannot cure a problem of too much debt with more debt) are going to take a back seat compared to the other unfolding issues. Belgium’s and Italy’s debt have been downgraded and there is increased anxiety around Spain.
The ruling Socialist Party was given a bloody nose in the recent elections as the electorate are angry about austerity measures and the official 20% unemployment rate (by way of comparison, South Africa has a 25% official unemployment (albeit closer to 40% actual)).
I wouldn’t put any credence on any of the soothing words being issued by the European politicians, as they have electorates to appease, jobs to keep (their own and their electorates) and I can’t see that they have the wherewithal for an elegant and timeous solution. Something has to, and will, give.
On the local front, the all-new CIPC has replaced the much-maligned CIPRO. The all-new CIPC, however, is making the much maligned, truly awful, and now defunct CIPRO look like a sleek and efficient organization. There is much frustration amongst practitioners as it is impossible to get anything done – expect major delays.
Further, there are some big changes which have taken place due to the new Companies Act which became effective on 1 May 2011. A significant point to note is that thousands of companies have been de-registered (arguably incorrectly but that is another story). It is, however, very important that, before contracting with a company, a check is performed to ensure that the company is still registered or the contract may be unenforceable against the company.
The tsunami impact on Japan is being felt in any number of industries, with far-reaching implications in electronics related companies, one of which has already pulled out of South Africa (with no fanfare) and vehicle industries, some of which, remain severely impacted. This needs pro-active monitoring to ensure no impact upon yourself.
The Middle East and North Africa is likely to continue wobbling unstably and perilously along for the foreseeable future, with the oil risk premium being hiked as events unfold. As has previously been mentioned, there are many factions with different agendas all battling for supremacy (religious/ sovereign/ ethnic/ democratic/ military) and it remains to seen how this will play out. Looking at the unfolding situation, it is likely that the pre-Jasmine revolution Middle East tensions will appear to be a walk in the park, as opposed to the current morass of issues which are likely to emerge.
On the other side of the pond, QE2 is coming to an end (or, at least approaching a “Wait and see, before QE3”). I would suggest that the American issues, whilst not, at this point, of the magnitude of European issues, remain nonetheless significant – house prices down between twenty and thirty percent in real terms and dropping, some (depending upon source) six to ten million jobs evaporated with very little fiscal or monetary stimulus realistically possible. Political deadlock and an upcoming presidential election are about to start kicking into high gear. Mr Obama’s “Yes we can” is looking more along the lines of “But we didn’t”. To be fair to Mr Obama (along with Mr Cameron in the United Kingdom), he picked up the biggest hospital pass of all time (if there was ever a time NOT to win an election, that was it). An added issue facing America is the timing of the Al Quaeda revenge counterstrike – also a “when, not if” and its scope (or the many smaller counter-strikes).
Whew, in spite of all the issues in SA, based on the above, it looks like a very good time to living at the tip of Africa.
Information is power and there is no meaningful impact that South Africa or South Africans can have on any of the aforementioned. All we can do is be aware of the issues so that one is not caught short (by way of example: counterparties with European/ American exposure going down in flames).