This week Finance Minister Tito Mboweni gave his Medium-Term Budget Policy Statement (MTBPS) and painted a gloomy picture. Debt has ballooned, and the country is no better off, unemployment is at record highs, and Eskom is without a credible plan.
- Democrats took the next step in the impeachment process of President Trump. The US House of Representatives voted 232-196 approving a set of rules for the next, more public, stage in the inquiry into Trump’s attempt to have Ukraine investigate a US political rival.
- The European Union approved the UK’s request for a three-month Brexit extension. Additionally, Prime Minister Johnson got what he wished for, Britain will be heading to the polls around the 12 December. Currently, Johnson is in the lead by 15%, but it is the first couple of days of campaigning.
- Chinese officials have indicated that a long-term trade deal with President Trump seems unlikely. They remain concerned about President Trump’s impulsive nature and the risk that he may back out of even a limited deal. Both Chinese and US trade officials have said that they would like to sign the first phase of a trade deal in the coming weeks.
- The Federal Reserve cut interest rates by a quarter of a per cent for the third time this year while saying that there may not be any further reductions on the way.
- Global equity markets had a strong October, with the MSCI World gaining 2.9% and S&P500 rising by 2.0%.
- Public Enterprises Minister, Pravin Gordhan, introduced his plan to fix Eskom. The hope being that this roadmap would put the debt-stricken power utility on a sustainable long-term path. The plan will thankfully end Eskom’s monopoly on electricity. Unfortunately, it failed to reassure investors of Eskom’s financial sustainability.
- Unemployment is at its worst levels in over a decade, currently sitting at 29.1%, youth unemployment is a national crisis. This serves to reflect the poor state of the country’s economy.
- Moody’s is scheduled to publish its latest assessment of South Africa’s sovereign credit rating late this evening. Follow this link for an opinion piece by David Buckham on the matter. Fitch Ratings Inc released a statement on Thursday saying that a clear path toward stabilising debt is still missing.
- Follow this link for the analysis written by Alison Barker from Analytics (our partners and participants in our investment committee) regarding the possible outcomes of today’s Moody’s announcement.
- Finance Minister Tito Mboweni presented his Medium-Term Budget Policy Statement (MTBPS) this week. In the speech, he said that Moody’s rating is “not looking good”. The less-than-inspiring MTBPS forecast an acceleration in debt as a percentage of GDP to beyond 71% in 2022/23. Mboweni said that South Africa’s debt is “increasing at an unsustainable pace”.
- Meanwhile, expenditure continues to mount, with the largest proportion of the country’s wealth being spent on the public payroll, which has grown by around 40% in real terms over the last ten years.
- Economists and analysts were unimpressed by Mboweni’s MTBPS. Follow this link for an article condensing economists’ feedback on the budget statement. What was most disappointing is the lack of definitive plans to arrest the fiscal slide.
- Read the full transcription of Mboweni’s 2019 MTBPS, by following this link.
- The rand weakened sharply on the back of the MTBPS, falling from R14.60/$ to R15.15/$ in the subsequent 24 hours. Despite this, it ended October 0.6% stronger than September. The ALSI, like offshore markets, also had a strong month as it gained 2.9%.