MoneyMarketing May 2017 | Page 2

NEWS & OPINION OPINION 2 Mike Schlussler Continued from page 1 Schussler also points out that the strong team at the National Treasury has now been broken up, with Minister Gordhan, Deputy Minister Mcebisi Jonas and Director General Lungisa Fuzile having departed. “At Treasury we end up with six new people in the top 11 – and if you add the minister and his deputy, eight in the top 13 are new appointments. Th at says to me that we now have a very diff erent Treasury team.” No matter how circumstances change, Schussler says it would be very diffi cult to bring former ministers back. “Th e best we can hope for is that someone who has experience is brought in [as DG] and once that is done, that person will have to gain a footing in the international markets. It would still take us at the least two years to get back to where we were before the ratings downgrades. Even if we do everything right in the next while, we’re going into the 2019 elections in junk status – but this doesn’t necessarily mean a change of government.” Recession Th e head of the ANC’s subcommittee on economic transformation Enoch Godongwana, recently warned that a recession is a likely possibility. “We’re not in a recession right now,” Schussler notes. “Th e fi rst quarter of the year is already behind us and the 2 nd quarter should have started well because commodity prices are still relatively high. Th e recession does, however, become a possibility later because the cost of capital for the banks will increase and they won’t lend money for new projects. Bad luck in the form of something like a drought and we’ll be in a very vulnerable position. EDITOR’S NOTE “Last year, SA experienced two quarters of negative growth, but not in successive quarters, so it wasn’t a technical recession. Th at said the chances of us hitting a recession in 2018 are fairly good. Th e balance sheets of banks have been impacted and they have less money to lend. Th e fi nancial sector is our largest [economic sector] other than government and it’s very important that we acknowledge that the lending capacity of the banks won’t be there. “For a while, there’ll be money for projects, but this becomes a problem six months down the line when these projects are near completion and there won’t be any new projects. Th e construction and manufacturing industries will feel the strain. “If we have a summer drought or commodity prices decline following their better performance, then we’ll be in dire straits and SA will go into recession.” Schussler says the current situation reminds him of the 1980s aft er the Rubicon speech. “We had lower commodity prices then and lending stopped, the growth pattern was terrible, we all became poorer and then there was political change.” While the fi nancial markets have reacted to the recent political changes in SA, the real economy takes a while to act: “We will see the impact on the real economy by the end of next year.” Foreigners currently hold R130 billion of our government debt and debt instruments, says Schussler. “Even if only R100 billion fl ows out, this will infl uence the rand direction. Tighter capital controls are a possibility but not everything will be blocked. I don’t think this will happen immediately though. Th ere are people around with very short memories who think capital controls will help, but you cannot imprison money as if you do, you imprison the people. SA is supposed to be a constitutional democracy and one could argue that it’s unconstitutional to tell individuals where to place their money.” SUBSCRIBE TO 12 months SA subscription– R453.00 (SA postage only, including VAT) Contact Felicity Garbers Email: [email protected] Tel: [phone], Fax: [phone] EDITORIAL EDITOR: Janice Roberts [email protected] LAYOUT & DESIGN: Julia van Schalkwyk SUB EDITOR: Gill Abrahams ADVERTISING ADVERTISING SALES EXECUTIVE: Mildred Manthey Direct: [phone] Cell: [phone] [email protected] DISTRIBUTION & SUBSCRIPTION Felicity Garbers [email protected] PUBLISHING TEAM GENERAL MANAGER: Dev Naidoo PUBLISHING MANAGER: Sandra Ladas [email protected] PRODUCTION MANAGER: Angela Silver [email protected] ART DIRECTOR: David Kyslinger Published on behalf of Media24 by New Media Publishing (Pty) Ltd. MANAGING DIRECTOR : Aileen Lamb CHIEF EXECUTIVE OFFICER : Bridget McCarney EXECUTIVE DIRECTOR : John Psillos NON-EXECUTIVE DIRECTOR : Irna van Zyl PRINTING Printed by Novus Print Solutions © Copyright MoneyMarketing 2017 31 May 2017 B ritish Prime Minister Th eresa May’s calls for a snap general election last month took the markets by surprise, although this move should be welcomed. She may have previously said she was against holding an election before 2020, but she’s entitled to change her mind, especially if it’s in the interests of making the United Kingdom truly united, and to ensure a fi t and proper Brexit. As British Conservative politician William Hague wrote in the Telegraph the day aft er May’s April 18th declaration: “Seldom has a prime minister emerged from 10 Downing Street to make an announcement so utterly and completely justifi ed and correct.” May’s opponents believe that because the government’s majority is rather small, they will be able to force it to change course. Th e Labour party, while not actually opposing Brexit itself, has been planning to vote against the exit terms. Liberal Democrats regard Brexit with contempt. Scottish nationalists, led by Nicola Sturgeon (dubbed by some as the ginger dwarf from the North), are focused on using the Brexit issue as a means to push the case for Scottish independence. Furthermore, unelected members of the House of Lords have vowed to fi ght the Government at every turn. Under these circumstan ces, it is wise that May has called this June 8th election. Th e Conservative Party has a huge lead in the polls and it is highly unlikely that ‘June will be the end of May’ – as some wit recently tweeted. Aft er the Tories emerge victorious (probably a landslide win), May will have the right to claim that she has a clear mandate to deliver Brexit. A possible by-product of the election could be the end of veteran left winger, Jeremy Corbyn, as Labour leader – something that is desperately overdue. For Labour, the election could be a political disaster, with the party polling its lowest vote since 1918. A landslide victory for May would also serve to end the Scottish National Party’s illusion of inevitable Scottish independence. Th e party has already lost some support. Markets always want to see political certainty and strong government – and this is what May’s victory will bring. Janice [email protected] @MMMagza www.moneymarketing.co.za JOHANNESBURG OFFICE: Ground fl oor, Media Park, 69 Kingsway Avenue, Auckland Park, 2092 Postal Address: PO Box 784698, Sandton, Johannesburg, 2146 Tel: [phone] Fax: [phone] HEAD OFFICE: New Media House, 19 Bree Street, Cape Town, 8001 Postal Address: PO Box 440, Green Point, Cape Town, 8051 Tel: [phone] Fax: [phone] [email protected] Unless previously agreed in writing, MoneyMarketing owns all rights to all contributions, whether image or text. SOURCES: Shutterstock, supplied images, editorial staff . While precautions have been taken to ensure the accuracy of its contents and information given to readers, neither the editor, publisher, or its agents can accept responsibility for damages or injury which may arise therefrom. All rights reserved. © MoneyMarketing. 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