Wednesday, 14 October 2015

Economic crisis? What crisis?

This week South Africa's African National Congress starts preparing for next year's municipal elections after their policy conference and predictions of more economic troubles. Political troubles could worsen in Guinea as the opposition refuse to accept the results of the first round of presidential elections while Egyptians seem little interested in what the main parties have to offer in parliamentary elections due this month. Ghana and Zambia, two of the countries worst hit by commodity price falls, face more difficult economic adjustments in the months ahead and doubts still linger about the sincerity of President Joseph Kabila's plans to leave office in Congo-Kinshasa next year.

SOUTH AFRICA: Economic crisis? What crisis?
Delegates to the ANC's policy forum last weekend were more exercised by the crisis in their own organisation than the economic storm clouds gathering. True, the fall in ANC members to around 750,000 today compared to 1.2 million in 2010 makes grim reading for the leaders of the governing party. Grimmer still because no one had a good explanation for this falling support.

Certainly, it will make the elections in the country's key metropolitan areas – such as Johannesburg, Tshwane/Pretoria and Port Elizabeth – a more important test for the party with rising support for the Economic Freedom Fighters on the left and the Democratic Alliance on the right.

Although the policy forum talked about the need for state backing for agriculture, more power stations and the steel industry, the debates on the economy at the forum lacked much sense of urgency. But outside the party bubble, the International Monetary Fund was forecasting that economic growth would fall to 1.3% next year, the lowest since the recession of 2009.

Part of the reason for that is due to the China slowdown. Falling demand from China for South Africa's platinum, iron ore and gold – metals that make up about half the country's exports – is threatening jobs and state revenues. Such financial pressures, combined with the government's plan to boost spending ahead of next year's elections, will complicate Finance Minister Nhlanhla Nene's target of cutting the budget deficit to 2.5% of GDP next year from its current level of 3.9%.

Another bit of bad news for the ANC was delivered by French economist Thomas Piketty whose pioneering research on global inequality cast more doubt on the success of the government's black economic empowerment programme. Despite the programme's aims, said Piketty at the Nelson Mandela memorial lecture at the beginning of the year, South Africa remains one of the most unequal countries in the world with less than 10% of the population owning about 65% of the wealth.  Of the wealthiest 5% of the population, some 80% are white, added Piketty.

GUINEA: Condé's contest turns sour
Agreements on the electoral rules and hundreds of election observers notwithstanding, Guinea's second multi-party elections on 11 October have triggered widespread protest and an opposition walk out. In the country's complex coalition politics, no single party was likely to win outright in the first round but the results announced this week are key to how the parties line up for the second round of voting next month.

As the early results indicated a resounding lead for President Alpha Condé, opposition parties responded with accusations of blatant rigging and interference with the collation of votes. Celou Diallo, veteran politician and Condé's closest rival, is refusing to accept the results announced so far.

EGYPT: Parliamentary polls go back to the future
The much delayed legislative elections, now due in two rounds on 17-19 October and 22-23 November, could see the return to power of many politicians from the National Democratic Party of deposed leader Hosni Mubarak. Hundreds of former NDP members, the party was dissolved after the 2011 uprising, are standing in the contests to elect the 568 members of the new parliament.

With their wealth and business connections, many of these former NDP members are expected to do well and are likely to endorse the strengthening of the executive powers of the presidency under the General-turned-President Abdel Fattah el Sisi.

How much legitimacy the new parliament will have, as criticism grows of the El-Sisi government's arbitrary methods, is another matter. Local commentators say the turnout is unlikely to exceed 30% of the registered voters.

GHANA: Another high-price loan
Finance Minister Seth Terkper has got his billion dollar bond but at a price. Ghana had to offer 10.75% interest on the the US$1 bn. bond to bring in the investors; a year ago it floated a billion dollar bond at 8.25%.

The higher rate that Ghana had to pay signals an end to the heydays of African sovereign bond issuance, at least until commodity prices start to rise again. The good news for Terkper is that as market analysts reported that Ghana's bond was 'comfortably over-subscribed', it shows a continuing international interest in Ghana despite an 'annus horribilis' of power cuts and floods.

CONGO-KINSHASA: Kabila's election wobbles
Lambert Mende, chief government spokesman, is insistent: President Joseph Kabila has no intention of seeking a third term in power and will leave office on schedule next year. Clear enough? Not quite because the Kinshasa rumour mill is full of stories about plans to extend the presidential mandate for 'reasons of security' or even the need to complete 'vital infrastructure' projects.

And the departure of Father Apollinaire Malu Malu, head of the electoral commission, has nothing to quieten the speculation. Meanwhile the opposition parties are making their own plans. It sees that the former Governor of Katanga, Moise Katumbi, has great support from those opposition parties planning to unite around a single candidate in next year's elections. And those parties seem to view Kabila's plan to leave power next year with great scepticism.

ZAMBIA: Bashing budgets without the IMF
Its economy hit by tumbling copper prices and spiralling debts, Zambia has been hit by the China slowdown syndrome. After a stint of using copper and cobalt exports to pay for several ambitious road, rail and power projects, Zambia is facing a reckoning. Its kwacha is now rated the worst performing currency, having lost 47% of its value against the dollar this year.

Undaunted, Finance Minister Alexander Chikwanda, 76, says he will cut the budget deficit to his target of 3.8% of GDP without the help of money or policies from the International Monetary Fund. His confidence is based on his prediction of a 20% boost in tax revenues, despite the closure of several mines.

Bankers are heartily sceptical with some forecasting the deficit will be as high as 8.7% next year. Although Chikwanda talks sternly about the need for 'greater fiscal discipline' he will face huge pressure from his political colleagues who are facing a difficult national election next year.

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