South African economy shrinks, slips into recession

[rinehart0050]

More bad news for the south African economy....

http://www.dw.com/en/south-african-economy-shrinks-slips-into-recession/a-39129871

South African economy shrinks, slips into recession
Africa's third-biggest economy contracted in the first quarter of this year, entering recession for the first time in eight years amid weak manufacturing output and slumping trade.

Official data released by South Africa's statistics agency, Stats SA, on Tuesday showed Africa's largest economy contracting by 0.7 percent between January and March this year, following a 0.3 percent decline in the fourth quarter of 2016.

With two consecutive quarters of declines in output, the country has entered technical recession for the first time since late 2009.

The biggest contributors to the fall in gross domestic product (GDP) were the trade, catering and accommodation industry, which shrank by 5.9 percent and accounted for minus 0.8 percent in the growth rate.

The manufacturing sector decreased by 3.7 percent as unemployment climbed to a record 27.7 percent, the highest jobless rate in 14 years. Only the mining and agriculture sectors posted growth rates of 12.8 percent and 22.2 percent respectively in the period.

the world's two major rating agencies Fitch and Standard & Poor's (S&P) downgraded South Africa's sovereign debt to junk status.

The moves came in the wake of President Jacob Zuma's dramatic ministerial shake-up that saw respected finance minister Pravin Gordhan axed. The poor growth numbers will now pile more pressure on the government to get the economy back on track as it aims to stave off further credit ratings downgrades.

S&P and Fitch said last week risks to a further downgrade would include weak economic growth and political uncertainty ahead of the ruling African National Congress (ANC) conference in December when a successor to President Jacob Zuma as party leader will be chosen.

Zuma can remain as head of state until an election in 2019. But calls for him to resign, including from within the ANC, have grown since the cabinet reshuffle and allegations of influence peddling by some of the president's wealthy friends.

Meanwhile, South Africa's currency has extended its losses against the US dollar to more than one percent as the country's sovereign debt also weakened on Tuesday.

uhe/jd (Reuters, AFP)

 

[TOM]

Just the start...

 

[sierraone]

OK, you guys smarter than me....is this good or bad for foreign hunters?

 

[Hank2211]

OK, you guys smarter than me....is this good or bad for foreign hunters?

Hard to tell.

The rand will probably continue to be under pressure. This could result in lower prices, since most things hunters buy are priced in US$. On the other hand, many might see keeping prices the same in US$ as a way of improving their position in the local currency, which is what their costs are denominated in. It's hard to sustain this position for too long though, and the low rand, along with market forces (over supply), is probably what has resulted in prices for many trophy animals dropping somewhat (in US$ terms) over the last few years. This situation is likely to be more pronounced at the higher end safaris than at the middle, where most of us are.

On the other hand, recessions create hardship, and hardship creates uncertainty, and uncertainty can often create instability. There is little question in my mind that economic hardship is largely behind the rise of Julius Malema, for example. Contented people do not support a message such as his. One possibility is that the pressure on Zuma keeps amping up, and he resists it in ever more creative and perhaps 'undemocratic' ways. Alternatively, the ANC may just wake up and realize that they are called the ANC and not the JZ Party. If that happens, and they cut the President (and those related to him) loose, you might see the pressure relived, at least for a time.

Instability in RSA would not be good for hunters, I'd venture to say. Having said that, Namibia is an oasis of stability, and is right next door, with prices that are often more than competitive with South Africa.

So likely to be puts and takes, as always. Forecasting is a mug's game, so my suggestion is that we just keep our eyes open, and adapt to what the world throws at us. Sort of like what we do when we're hunting!

 

[Areaonereal]

I know I have done my part to financially support their economy for the last three years, but will contribute to the economy of Namibia this year. Enuff said.

 

[KAROO WILD Safaris]

Hard to tell.

The rand will probably continue to be under pressure. This could result in lower prices, since most things hunters buy are priced in US$. On the other hand, many might see keeping prices the same in US$ as a way of improving their position in the local currency, which is what their costs are denominated in. It's hard to sustain this position for too long though, and the low rand, along with market forces (over supply), is probably what has resulted in prices for many trophy animals dropping somewhat (in US$ terms) over the last few years. This situation is likely to be more pronounced at the higher end safaris than at the middle, where most of us are.

On the other hand, recessions create hardship, and hardship creates uncertainty, and uncertainty can often create instability. There is little question in my mind that economic hardship is largely behind the rise of Julius Malema, for example. Contented people do not support a message such as his. One possibility is that the pressure on Zuma keeps amping up, and he resists it in ever more creative and perhaps 'undemocratic' ways. Alternatively, the ANC may just wake up and realize that they are called the ANC and not the JZ Party. If that happens, and they cut the President (and those related to him) loose, you might see the pressure relived, at least for a time.

Instability in RSA would not be good for hunters, I'd venture to say. Having said that, Namibia is an oasis of stability, and is right next door, with prices that are often more than competitive with South Africa.

So likely to be puts and takes, as always. Forecasting is a mug's game, so my suggestion is that we just keep our eyes open, and adapt to what the world throws at us. Sort of like what we do when we're hunting!

Did you write this last year? When last did you check the Rand / Dollar exchange rate?

 

[BWH]

I monitor it daily weekly..... It has hovered between 12-14 to 1USD over the last 6 months. Pretty steady around 13 to 1. However, there is speculation that it will go/grow to 20 to 1 by the year 2020.

 

[TOM]

Zuma, Malema, farm murders, hostilities and crime. Thats a tough hand to overcome.

 

[Hank2211]

Did you write this last year? When last did you check the Rand / Dollar exchange rate?

You're right - it's been quite erratic the last year, but the rand has inched higher. Having said that, it's been quite a ride, so I will look at it more regularly in the future! I believe the rest of the argument holds.

 

[KAROO WILD Safaris]

I monitor it daily weekly..... It has hovered between 12-14 to 1USD over the last 6 months. Pretty steady around 13 to 1. However, there is speculation that it will go/grow to 20 to 1 by the year 2020.

But it was speculated that it would depreciate by 20 to 1 by the end of 2016! It can't be said that a currency is under pressure and outfitters are as well to drop their prices when the rand has appreciated by 20 percent since last year. That's a 20 percent drop in profit. Speculation is exactly that...speculation, the Rand depreciation beyond the natural 4 percent per annum isn't a given.

The Rand will depreciate by 4 percent to the USD every year on average. That's the difference between the inflation of a developing and a developed country and is a natural depreciation rate. All things are held equal at this rate.

 

[siml]

The Rand is R12.80 to the Dollar, strongest it has been in quite awhile. I am surprised it isn't sitting around 15 with all the nonsense in the government.

 

[jacques smith]

Current quote 12.85r to usd

 

[AfricaHunting.com]

 

[Hogpatrol]

I'll throw in my two cents; recessions always cause a shakeout in many industries. Having said that, in my opinion there is a surplus of outfitters in RSA, and most likely other African countries. The strong will survive and prosper, the weak will go bust. Economics 101. If the recession drags on a few more quarters, I would say stay tuned for some killer (no pun intended) deals just to keep cash flow going.
As far as rand to dollar rate going lower, I don't see that as having much effect since oil and other import commodities are priced in U.S. dollars.