The news this week was a melting pot of world events. The Fed maintained rates; Trump is in more trouble, facing Robert Mueller and Stormy Daniels; Theresa May continues to have Brexit woes; allegations were made that Iran acted against the nuclear deal; and Cambridge Analytica is facing closure. Locally, Trump did not exempt SA from the steel tariffs; Eskom and KPMG are in the hot seat; and the rand was the worst EM performer.
Global News
- British Prime Minister, Theresa May, has had another trying week. Pro-Brexit Ministers rejected her compromised solution on access to the European Union’s Customs System. She must now find a solution in little less than a week.
- Should President Trump refuse to be interviewed regarding his involvement in the investigation into Russia’s influence over the 2016 presidential campaign, Robert Mueller maintains that he has the legal power to subpoena Trump to appear before a grand jury.
- As expected, the Fed left rates unchanged this week.
- Israeli Prime Minister, Benjamin Netanyahu, announced in a statement that they have evidence that Iran has not upheld its part of the nuclear deal. This has been largely criticised, but may have convinced the only person who matters.
- After its global Facebook scandal, Cambridge Analytica has announced its closure.
Local News
- This week, to South Africa’s surprise, Trump did not exempt SA from his steel and aluminium tariffs. Trump extended a tariff exemption to US allies including the EU, Mexico, Canada, South Korea, Brazil, Argentina, and Australia. SA was not granted these exemptions and will now experience a 25% and 10% tariff on our steel and aluminium exports to the US. This will not significantly impact SA’s total exports, but it will hit employment in the steel sector.
- The rand versus the US dollar reached record 2018 highs this week, breaking through R12.70 ceiling, the highest level since Christmas day 2017. This spike was due to SA not being exempt from the US tariffs as well as US dollar strength. An interesting fact from RMB is that roughly 60% – 70% of rand movements are driven by global factors — the value of the US dollar and commodity prices.
- Barclay’s Africa Group has announced that they will not be retaining KPMG as their auditing firm. This happened after it was found that KPMG had undeclared interests in Nkandla-linked VBS Bank.
- Yesterday Fitch affirmed Eskom’s BB- global scale rating and maintained the negative rating watch on the entity. Fitch’s affirmation takes note of the recent positive developments at Eskom, such as the improvement in liquidity because of both re-established access to funding and reduction in expenses. However, permanent solutions for the company’s business and financial sustainability are needed before the threat of further negative rating actions subsides.
- After initially committing to the latest version of the mining charter Gwede Mantashe has quietly challenged it. David Christianson from the Institute of Race Relations has written an interesting article expanding on Mantashe’s actions, for the article follow this link.
- The petrol and diesel price rose 49c/l and 59c/l and bus strike has continued into this week.
