October 2014 – ZA Economist

A blow for Mark Shuttleworth – but not for freedom

Mark Shuttleworth has struck the Reserve Bank a heavy R350m or so blow. Most significantly and laudably he is to put R100m of his damages into a fund to help South Africans pursue their constitutional rights. In this way he may well help to protect SA property against seizure by the government without proper compensation. Whether exchange control itself would survive a constitutional court action remains as moot as ever.

The Shuttleworth Appeal succeeded on the basis that the 10% levy collected by the Reserve Bank did not pass the constitutional test of “A Money Bill – as defined by sections 75 and 77 of the Constitution of South Africa” and not because the court decided that exchange control was either illegal or unhelpful. Nor, it appears, was the court asked to so decide. Continue reading A blow for Mark Shuttleworth – but not for freedom

What can be done to reform the tax system in a useful way? We explore some of the possibilities

The newly appointed Minister of Finance, Nhlanhla Nene, will step into the limelight next week to provide an update on the state of government finances and reveal the Treasury plans for the direction of national government expenditure and revenues over the next three years.

Of particular interest will be to learn how government revenues are holding up in the face of slower economic growth, and what this may mean for the funding requirements of government. Most important: whether or not higher tax rates will be called for, a move that will damage the growth prospects for the economy.
Continue reading What can be done to reform the tax system in a useful way? We explore some of the possibilities

An extraordinary day in the markets

For a while now – since 19 September to be precise – the markets have stopped worrying about what US growth might do to interest rates (threatening equity valuations) and began to worry about growth itself.

News of deflation in Europe had fed these fears and helped force bond yields everywhere (including RSA yields) lower. Yesterday morning a weak US retail number, announced before the market opened in New York, was more than enough to encourage a dramatic sell off of leading equities and an equally dramatic rush to the apparent safety of bonds. We show the intraday moves in the bond markets below.

Continue reading An extraordinary day in the markets

The SA economy: Finding a driving force

How fares the SA economy? Unexpectedly better thanks to the vehicle market – but it remains hostage to interest rates

The strength of new vehicle sales in September has come as a welcome surprise given the prevailing and understandable pessimism about the state of the economy and particularly about the fragility of household income and spending intentions.

Unit vehicle sales to South African customers – including sales of light and heavy commercial vehicles – have recovered strongly enough over the past three months to reverse the suggestion of a downturn in the new vehicle cycle. If current trends are sustained, by no means a given, sales this time next year could be at an annual rate of 720 000 units and not far from the record sales achieved in 2006. Continue reading The SA economy: Finding a driving force

Equity markets and interest rates: September suffering

September was a tough month for equities, even though interest rates had declined by month end.

September proved to be a difficult month for equities and it was especially difficult for emerging market (EM) equities, including the JSE that once more behaved like the average EM equity market. The S&P 500 lost less than 2% of its US dollar value in the month while the EM bench mark lost almost 8% of its value and the JSE All Share Index, measured in US dollars, had fallen by more than 8% by the end of the month. Continue reading Equity markets and interest rates: September suffering