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South Africa Nears Depression As Brics Malaise Deepens

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Hey-ho. This was fairly predictable to anyone except an economist or a central banker.

South Africa is sliding towards a slow economic crisis as the global commodity boom fades and striking workers dig in their heels, becoming the third of the Brics quintet after Russia and Brazil at risk of full-blown recession this year.

Output contracted by 0.6pc in the first quarter, the worst since the Lehman crisis. “The GDP figures reveal a sad state of affairs and highlight the grave need for South Africa to get its industrial house in order,” said Jeffrey Schultz, from BNP Paribas.

Large parts of the gold and platinum industry have come to a near standstill as 70,000 workers remain on strike for the 18th week, with no solution in sight. South Africa’s Chamber of Commerce warned that the whole structure of labour relations is breaking down, risking economic havoc. “South Africa urgently requires open debate on ending and preventing debilitating strikes,” it said.

The rand slid 1pc to 10.47 against the US dollar. Yields on 10-year South African bonds rose eight basis points to 8.17pc. Borrowing costs are returning to levels seen during last year’s “taper tantrum” as the US Federal Reserve turned hawkish.

The strikes caused a 24pc collapse in mining output, the worst in almost half a century. This distorted the GDP figures but the slowdown is spreading, and the economic malaise runs deeper. Shilan Shah, from Capital Economics, said the country faces a serious structural crisis that threatens to drag on for years. “They have already exhausted the scope for catch-up development. We think the growth rate has fallen from 5pc-6pc to a new norm of 1.5pc-2pc, and this is going to be a long-term problem,” he said.

Such sluggish growth is not enough to make a dent on unemployment running at 25pc, or more than 50pc for youth. Like other Brics, South Africa neglected basic reforms during the glory days of the resource boom, when a wash of global liquidity masked the rigid cost structure and chronic over-manning.

Mr Shah said many of the great mines of the Witwattersrand are in danger of losing money. The average break-even cost of gold production has risen to $1,600 an ounce, far above the current price of $1,275 (£758).

South Africa has tied its fate to China, now its biggest trade partner, leaving it exposed as the Chinese authorities try to wean the economy off investment in heavy industry and as the central bank deflates the housing boom. China absorbs 67pc of South Africa’s iron ore exports, and a growing share of its thermal coal.


Edited by zugzwang

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Nothing to do with the ANC being corrupt, useless, racist communists then?



Quote from article:

Spending on presidents' private homes
  • PW Botha: $16,100
  • FW de Klerk: $22,000
  • Nelson Mandela: $2.9m on two residences
  • Thabo Mbeki: $1.1m
  • Jacob Zuma: $23m on rural Nkandla residence

All figures in 2013 financial terms

Source: Public protector report

and look where our tax has been going... (2012 link)


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Nothing to do with the ANC being corrupt, useless, racist communists then?


But...but....Nelson Mandela was like Jesus...you can't say that, it's obviously the fault of the white people.

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So the SA economy grew at at annual rate of 3.8% in 2013Q4 and contracted at an annual rate of 0.6% in 2014Q1?

That's a depression? What the hell are we in? Freight and Trading Weekly:

The seasonally adjusted Gross Domestic Product (GDP) at market prices slumped at an annualised rate of 0.6% for the first quarter of 2014, Statistician General Pali Lehohla announced on Tuesday morning.

This decrease in growth -- the worst since the second quarter of 2009 when the world’s economy dipped as a result of the global recession -- comes after the GDP grew by an annualised rate of 3.8% in the fourth quarter of 2013.

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