English AND Afrikaans at University?

I was fascinated by an Engineering News article about English and Afrikaans being available to engineering students at Stellenbosch University (SU). This is a reminder that many South Africans would prefer not to have English as the dominant taal. However, it is the language of business, and arguably engineers are best equipped to find work if they are fluent in English and have been taught in English. So what do our Experts think?

Expert views

1. Frans Cronje of the SA Institute of Race Relations

This is an old debate. My view is that market demand needs to lead it. If the state were to use pressure to push the university into English then that would be wrong and we would oppose it. We have, for example, been critical of the University of KZN policy of forcing Zulu in first year. Likewise, if the University of Stellenbosch sought to force students into English, we would oppose that. However, where student demand evolves and the university responds to that, then there is no problem. It is probably indicative of natural economic evolution. Afrikaans will, however, be the poorer for it.

2. Mario Pretorius from Telemasters

Language enforcement gave us the Great Trek, the ’76 riots and more to come. NWU at Potch is accommodating local and international students by simultaneous class translation to English. This is the best current solution. Forcing Natal students into Zulu proficiency as a prelude to all Zulu lectures is short- sighted. Tuks (Pretoria University) has a majority of Black students, probably Setswana speaking. Is the idea to exclude non- native speaking lecturers and students from attending and participating? Goodbye international profile? Language proficiency can at best add flavour to a student’s participation. It will be impossible to gain the proficiency required in 6 months; it would be a step backward to stop translations and revert to a ‘Learn or Lose out’. It would be best to focus on access, cost, efficiency and outcome for young and eager minds needing tertiary training for career preparation.

3. Multi-lingual lawyer Emile Myburgh

When I was at Stellenbosch, our lectures were de-facto bilingual already, and that was 1991 – 1996. The lecturers repeated most of what they had said in Afrikaans in English as well. Exam papers were bilingual in any event, and students could answer the exams in either English or Afrikaans.

4. Duane Newman of Cova Advisory

Any initiative which makes a person’s choice of university larger should be supported. An Afrikaans-medium university could be a barrier to many students. Consideration should be given to using this in the schooling system as well. There are many high quality Afrikaans-medium schools which are not an option to many children, due to the language barrier.

Conclusion

There will always be sensitivities about English, Afrikaans and our other languages. As long as students are receiving top quality tuition and study hard, I have no problem with them being offered an array of language options. We are all richer when we have exposure to more than one language.

Tweet of the Day

Dara O Briain (@daraobriain) There’s nothing I adore more on twitter than people who tweet when you’re offline, wait, and then tweet "See! You have no answer to that"

Interest Rates to Remain Unchanged

The Reserve Bank Governor Gill Marcus is concerned about the outlook for the economy, but as expected she announced no change in interest rates, when reporting this afternoon on the latest deliberations of the Bank’s Monetary Policy Committee (MPC). The inflation outlook is being stoked by a number of factors, which include rises in water, municipal rates and taxes, and medical insurance. Internationally, the developed world is hobbling along, while Marcus detected signs of “moderation” in growth in China, India and Brazil. The rand has seen 4.6 % depreciation since the last MPC. Possibly the most significant part of her statement was when she revealed that the Reserve Bank’s GDP growth forecasts are down: to 2.4% this year, from an earlier 2.7%, and for next year down to 3.5% from 3.7%. There is a worrying outlook for mining sector, and concern about strikes and wage settlements above inflation. And we should expect to see further petrol price increases.

Expert views

1. Sizwe Nxedlana of FNB

Gill Marcus painted a very similar view of the economy to our own, with her GDP growth forecast for this year of 2.4%. You have weakening aggregate demand and unsecured lending that needs to be tightened up. Sixty percent of our exports are commodities, and we have much turmoil in the mining sector – so we are likely to export lower volumes at weak commodity prices. It is difficult to see further acceleration in GDP in 2014.

2. Russell Lamberti from ETM Analytics

The decision and statement by the MPC reflect profound confusion about what lies ahead. The Reserve Bank would probably like to cut – the Governor even indicated that the decision to hold was not unanimous, and that one member wants to cut rates – sensing an economic downturn on the way. But it knows to do so risks a rand firestorm that would create greater inflation pressures, and probably an even deeper recession as a result. The Bank, of course, should hike rates to restore strongly positive real interest rates, but it has an ideological block to such a move and wants to avoid having to hike at (almost) all costs. So the Bank has decided that discretion is the better part of valour, which is a magnanimous way of saying that it’s deeply confused.

3. Nedbank Economic Unit

The MPC’s decision to leave the repo rate unchanged was in line with our and the market’s expectations. The statement was hawkish on inflation, with the MPC concerned about the likely impact of high wage settlements and the weaker rand. However, growth is still subdued and downside risks persist. The MPC faces the challenge of balancing weak growth prospects and rising inflation. We believe that this will persuade the Committee to keep monetary policy neutral over an extended period, with interest rates remaining unchanged well into 2014.

Conclusion

Lots to concern me in today’s announcement by the Governess. She sees so many troubling factors, there is a lot of uncertainty about the future, and the economy is to grow at a slower pace. Don’t rule out an interest rate cut later in the year.

Tweets of the Day:

Michael Jordaan (@MichaelJordaan): As expected no change in repo. With Rand targeting 10 to $ we may even see a surprise hike next time.

Harry Potter’s Dad (@SimonCavadino): Wearing a pink shirt and this teenage kid called me a ‘poof’! I replied that I had once shagged someone with a beard, but that was his mum.

ZA Confidential Speaks to Michael Jordaan.

We caught up with the CEO of FNB Michael Jordaan to chat about his announcement that he is standing down at the end of the year, his future on twitter and his hope to create jobs in the future……

ZAC: Why are you stepping down when still so young, just 45?

MJ: 1 will have been CEO for 10 years, a good innings. Leaders should not hang in too long. I have been commuting from Cape Town for 5 years, and now have time to reflect on my life and plan the second half.

ZAC: FNB was in the spotlight over the recent advertising campaign featuring the wishes and thoughts of young children – and there was anger over some of the critical material posted on U Tube, leading to your chairman apologising to the government. There is a natural suspicion that you may now be taking the fall for that. Any truth in this?

MJ: No, not related at all.

ZAC: You have been an innovative leader at FNB, with cheap iPad offers, apps and other technology. Is this sustainable after you leave?

MJ: Yes. Innovation is in our DNA, the culture will persist, the momentum is strong and there are some exciting launches in the pipeline

ZAC: It is a cliche to say you are going to spend more time with the family. Do they still recognise you? And how disruptive has it been having a job in Jo’burg and a family in the Cape?

MJ: I see my kids two nights a week, and promised my oldest daughter, who is nine, that I will come home "forever" when she turns ten.

ZAC: Where do you want to work after a break? Director-at-large like (former McCarthy head) Brand Pretorius, wine farmer, IT innovator, lecturer and mentor, or a bit of everything?

MJ: I want to do something significant, which is quite a challenge after this big job I am leaving behind. I like to get my hands dirty. I admire entrepreneurs and am fascinated by technology and innovation. I want to create jobs and add value – and also to give back academically.

ZAC: Any further big ambitions ….learning to fly, to fly-fish, marathon running….?

MJ: I want to travel – Silicon Valley, Tel Aviv, Turkey- to read, to think, to cheer on my kids at school games, then start the next big thing.

ZAC: What have been your biggest achievement and your biggest mistake?

MJ: I am proud of the cultural revolution at FNB, the reduced hierarchy, that we have created space so people can empower themselves, and that innovation is so widely practiced. My mistake was in not taking more risk – both earlier in my career and as CEO.

ZAC: Are you going to play any direct or indirect part in politics?

MJ: No, I am useless at politics. Entrepreneurs are the only ones that create value.

ZAC: Does your future lie in SA?

MJ: Yes, and Stellenbosch more specifically.

ZAC: Will you stay active on twitter?

MJ: Of course. I am addicted to twitter.

CPI Inflation at 5.9%. Update

1. Dawie Roodt from the Efficient Group

I am afraid that the recent weakness in the currency is likely to push inflation higher in coming months. Food inflation is also likely to accelerate – and the poor, as usual, will be hardest hit. A weak currency doesn’t seem to be such a good idea after all…

CPI Inflation at 5.9%.

Inflation is within the Reserve Bank’s target range. Just. But the economy is limping badly. So will there be an interest rate cut tomorrow? We asked a few experts/?

Expert views

1. Nedbank’s economic unit

Annual consumer inflation at 5,9 % in April came in higher than market and Nedbank expectations of 5,7 %. On a monthly basis inflation increased by 0,4 %. The upside surprise relative to our forecast stemmed from food prices which increased 0,5 % m-o-m in April. Despite just hovering below the Reserve Bank’s 6 % upper target range, we do not foresee annual inflation breaching 6 % in the May release as the fuel price declined considerably in that month. We still expect inflation though to marginally breach 6 % later in the year. The biggest upside risk still remains the rand which has now reached a four year low against the US dollar. The latest inflation numbers do not alter our interest rate view. We believe that rates will remain at current levels for the rest of this year. The MPC will need to strike a balance between high inflation and still poor economic growth outcomes, with the current policy stance likely to remain in place well into 2014.

2)John Loos from FNB:

This rate comes as a slightly negative surprise, perhaps, with some expectation that lower year-on-year petrol price inflation may have contributed to a slightly lower overall inflation rate. The current 5.9% CPI inflation rate remains negative for disposable income growth in real terms compared to recent years where it was considerably lower. This relatively high inflation rate, coupled with ongoing mediocrity in economic growth, makes it likely that real household disposable income growth will continue its slowing trend in the near term. The current 5.9% CPI inflation rate, which is very near to the 6% upper inflation target limit, coupled to recent Rand weakness which could conceivably exert some upward pressure on imported goods prices should it be sustained, probably doesn’t make a SARB interest rate cut likely at the present time. The FNB view is that interest rates will remain unchanged until the 2nd half of 2013. At that stage, dampened inflationary pressures in a mediocre global and domestic economic environment are expected to make an interest rate reduction more likely. No interest rate reduction would mean no decline in household net interest payments, and thus a neutral impact on disposable income growth. The key “upside risk” to inflation forecasts, however, is high wage demands which threaten to exert upward pressure on inflation. However, this is not a foregone conclusion, as such demand need not translate into actual wage increases, and if they do, labour shedding can still contain unit labour cost increases.

3)Jeff Osborne from the RMI:

Inflation is not being driven by consumer spending – it’s cost driven. The weak rand and the high price of crude oil are stoking inflation. I don’t think the authorities should be influenced by the inflation rate against a further reduction in interest rates. The economy needs stimulation, and a cut in interest rates could help consumers bring down their debt, and could bring greater disposable income for consumers. Lower interest rates would serve to boost levels of trading within the motor industry. Our members are predominately small businesses, and have seen a decline in consumer spending.

Conclusion

Most experts expect no change in interest rates tomorrow. But ZA Confidential wants to see a cut. Watch this space.

Tweet of the Day

Jay Leno (@jayleno) Porn stars say that banks are refusing their business. Weird. You’d think if anyone understood screwing people for money, it’d be the banks.

Mining Sector Faces Wage Conflict.

The mining sector faces a new crisis. Talks have been launched between gold mining companies and the unions, with demands for wage rises of up to 60%. This comes as output is in decline, rival mining unions are fighting a turf war, and costs are being pushed up, not least by parastatal Eskom. So what do those in-the-know think is looming?

Expert views

1. Frans Cronje of the SA Institute of Race Relations

If market forces determined wage levels in mining in SA they would be significantly lower than they currently are. Controversially this would be a better state of affairs in many respects to the one that currently applies in that sector where wage levels are pricing workers out of jobs and mines out of production. Of course many will take issue with this analysis but they would then have to accept that the consequences of the policies they support must necessarily contribute to a declining industry and therefore less overall social and economic advancement and upliftment. In addition it is important to keep in mind that post-Marikana, low cost labour became politically incorrect. Hence even where certain classes of investors would be able to employ semi-skilled South African they will shy away from this fearing the inevitable backlash from parts of government and civil society. The unhappy conclusion is that the future of the mining industry as driver of employment does not look good. Mechanisation will increasingly be the way to go as miners seek to lessen their exposure to the political heat that attaches to employers of large numbers of semi-skilled workers across South Africa. There is an upside to this trend that in turning to mechanisation, and particularly robotic drilling, gold miners to reach even deeper underground and access new seams that may prolong the life of certain mines. However the investment in this technology will require certainty over mining rights and policy which is unfortunately lacking.

2)Independent Analyst and Economist Ian Cruickshanks:

I notice that Unions never make requests – they make demands The mining industry is really important to the economy. Mining makes up 10% of South Africa’s GDP. In addition, there are all the services around mining. If this wage round leads into a protracted strike, it will have a significant impact on the economy. The 60% demand is unaffordable, as some mines are close to break-even, or operating at a loss. So a big increase in wages would mean further mine closures and more unemployment. The situation has never been more desperate than it is now.

Conclusion

Trouble is ahead. The fan is spinning. The only question is the quantity of shit flying in its direction.

Tweet of the Day

Clayson Monyela (@ClaysonMonyela): With SA as a key partner, DRC has announced Oct 2015 as construction date of the 1st phase of the largest hydroelectric plant in the world.

Vodacom Results for the Year to March.

The Vodacom results seemed impressive to me. At a time when there is such fierce competition in the mobile communications industry, CEO Shameel Joosub delivered an assured run-down of the business. It was interesting that neither he nor his CFO dressed up in suits. Indeed the CFO looked like a lecturer at a minor university who hadn’t been near a barber for many a month, but he was comfortingly sharp and informed when answering questions. The numbers were not bad, with revenue up 4.5 percent, heps up 23 percent and the dividend up 10.6%. We were told of an increasingly challenging environment, with the consumer under pressure, particularly at the lower end. There is still a big growth in data, especially on smartphones. And data in SA and elsewhere seems likely to be the main growth driver. The management team seem to believe there are good opportunities from international expansion, and are actively looking to enter new markets.

Expert views

1. Malcolm Mac Donald of Tersos

Margins on data are continuing to expand, while prices fall, and volume grows. This is astonishing. With data currently 30% of revenue, and 75 % of the network LTE ready, apparently the bottleneck to growth is access to spectrum. Vodafone procurement gives Vodacom the benefit of scale and they continue to reduce costs on network provision. There are most likely customers still trapped by their 24 month contracts who would have pursued cheaper contracts with other providers, but new pricing initiatives will most likely attract enough new customers to offset this. So, all in all, a compelling and excellent set of results from Vodacom.

2)Mohammed Nalla of Nedbank:

The market seems to be disappointed with Vodacom’s results, with the stock down 3.75% by mid-afternoon, vs. MTN’s -2%. As expected, domestic growth appears lacklustre while international growth continues to be the primary focal point. From a revenue mix perspective, the focus remains on growing data revenues as voice continues to remain pressured. Nothing surprising here. The potential for growth using bolt-on acquisitions on the continent is one that investors will look at with care, cognisant that Vodacom should not overpay for assets. On the positive side, the increase in the dividend is promising and will certainly please investors who hold Vodacom as a dividend play. This is arguably one of the most promising rationales for holding telecom stocks, as the industry moves into a more mature phase requiring less capital expenditure and looks at cash-generative returns to shareholders.

Conclusion

Vodacom has a large customer base, a supportive and knowledgeable major shareholder and is looking good. Telkom should never have sold its stake.

Tweet of the Day

@MarkTwainTwtr: There is no sadder sight than a young pessimist.

Additional Comment on South Africa Trading More with Africa

1) Peggy Drodskie of SACCI

This survey seems to confirm that with the economic woes being experienced in the countries with which South Africa has in the past had strong business ties, order books are not as robust as before. South African manufacturers are therefore finding alternative markets in Africa. This coupled with the fact that the growth rate in many African countries is relatively high provides a market for South African products. In addition, the tripartite free trade agreement between the three major trading blocs in sub-Saharan Africa (SADC, COMESA and EAC)has attracted significant foreign aid for infrastructure development. In addition African states are opening their doors and encouraging trade and investment. Thus it makes sense for South African manufacturers to turn to Africa .

SA is Trading More With Africa.

Engineering News is reporting on a Manufacturing Circle survey which suggests a jump in South African exports to the rest of Africa, with 50% of those questioned saying they now export more to Africa than to Europe. This is yet another indication that the pattern of our trade is changing, with a swing away from traditional markets and a move to our neighbours in Africa and our BRICS partners. Here is a link to the article: http://www.engineeringnews.co.za/article/sa-manufacturers-have-turned-export-attention-to-africa—survey-2013-05-16

Expert views

1. Duane Newman from Cova Advisory:

With all the positive growth projections on Africa compared to the rest of the world, these results do not surprise me. I would expect the biggest opportunities and growth areas to be in consumer spending and infrastructure projects in Africa. By 2020 it is expected that the consumer alone will have a spending power of $1.4 trillion in Africa, with over 50% of the African people living in cities. This will definitely create many more opportunities for South African businesses focusing on the consumer. The proposed free trade area for Africa is a challenging one to move forward, as many of the African countries are still heavily reliant on customs duties as a source of government revenue. One only has to look at the R42billion (approx. 5% of total tax collected by South Africa) paid to our Southern African Customs Union neighbours in 2012/13 – where the majority of their revenue comes from an allocation from the customs duties collected under the agreement. Without this funding these countries (especially Lesotho and Swaziland) would literally collapse. I hope that the South African exporters are taking advantage of the numerous government grants on offer to expand their manufacturing base, but also to do research and to get a better understanding of the opportunities in Africa.

2. Craig Pfeiffer from ABSA Investments:

China and Europe are traditionally our large key export markets but one can read into the survey that perhaps a significant chunk of the exports to China is in the form of raw materials rather than manufactured or beneficiated goods. Exports to Europe are lower as their demand for our manufactured goods has been substantially reduced by their own domestic recessionary conditions. With the African continent growing at over 5% there is a market on our doorstep for our manufactured goods and the proximity of the market appears to facilitate exports from the country. The Walmart acquisition of Massmart has highlighted the importance of Africa as a growth area and we have already seen the pioneering work of Shoprite into Africa and the current scramble to expand into the region by the latecomers. This survey highlights the opportunities that do exist on the continent and the opportunities that are being exploited by the more nimble-footed manufacturers.

3. Chris Gilmour from ABSA Investments:

None of this is surprising. South African manufacturers, with a few notable exceptions like SABMiller, tend not to be very globally competitive on price. Thus the rest of Africa, where the price of just about everything is very expensive, is an obvious destination for our manufactured goods. The weak rand improves that attraction even further. And while Chinese manufactured goods have been very cheap for many years now, that is changing, albeit very slowly, as wage rates in many parts of China rise sharply. When one takes account of shipping costs, the comparative advantage that Chinese goods have enjoyed over many other countries in terms of price is beginning to be eroded. Although SA manufactured goods may not be cheap, they are least relatively well made and reliable, so the market for these goods in Africa should grow. An obvious example here is the SA motor industry. At long last we are starting to see motor exports into the rest of the continent.

Conclusion

Watch this space. As long as African countries can work together, and can minimise instability, corruption and nepotism, the potential is massive.

Tweet of the Day

Sarah Britten @Anatinus I wonder if the Gupta guests noticed the real Africa on the side of the road as they were chauffeured back from Sun City.

Are Power Cuts Looming?

It’s getting cold at night in South Africa, and power utility Eskom has a monumental task in keeping the power flowing. There is a tiny margin between peak demand and peak supply, and so ZA Confidential asked three of our leading commentators for their views on whether or not we will soon be enduring power cuts. Unfortunately, it seems it’s not a matter of if, but when, the lights will go out.

Expert views

1. Mike Schussler from Economists.co.za:

Having had my own power out for four days, I must say that yes there will be power cuts – and the question is “how big and how many”, rather than “if”. I believe it will happen but not as bad as, say, in 2008 – and it should not take much of GDP away. But it will be a major hassle factor for households with more expenditure going to batteries, generators etc. I suspect though that, along with labour issues, this will be one of the two big internal brakes on the SA economy.

2. Dawie Roodt from the Efficient Group:

I am afraid I think we will have blackouts this winter. The reserve margin at Eskom is simply too small and a small hiccup will result in a power cut. Furthermore, I also think that the current projects are unlikely to come on stream on time -which means that blackouts are likely to be with us for at least two years more.

3. Chris Gilmour from ABSA Investments:

Let me begin by stating that I believe that Eskom CEO Brian Dames and CEO Paul O’Flaherty (if he stays) will do their utmost to ensure that the lights do stay on this winter and that we, the citizens of SA, are not subjected to rolling blackouts. But this winter, for the first time ever, we face a real and perhaps intractable problem. The combination of an extremely low (virtually zero) reserve margin, a maintenance schedule on our ageing power stations extending well into the winter season and the likelihood of a very cold winter could easily result in a situation where Eskom is forced to ration electricity via rolling blackouts (or in politically correct Eskomspeak…”load shedding”). It’s not something that Eskom will want to happen but unfortunately, due to a confluence of events largely beyond their control, the situation is dire. I hasten to point out that it is not as dire as it was in January 2008, when unscheduled and widespread rolling blackouts were the order of the day. Back in those days, what little coal that was left in the power stations was mainly a black slurry of coal dust and fine rock particles. Stocks had been driven down to an average of a few days due to a combination of cost-cutting and incompetence. But today at least we have plenty of coal – this season’s possible crisis will be caused not by Eskom’s incompetence but by bigger factors, such as not making the decision to build (new power stations) Medupi and Kusile until well into last decade – and by persistent quality problems and industrial action at both of these new stations. Medupi should have had its first generator up and running in May last year. Had that happened, the power station would now be adding around 1.6 Gw into the national grid and we wouldn’t be staring down the barrel of the power outage gun. But unfortunately, Medupi’s first generator will only begin producing in December this year, far too late to make any difference to this winter’s situation. Provided Medupi does indeed come on stream in Dec 2013, that should relieve the situation to an extent next winter but in reality, we will need to have at least half of the generators working and producing a combined 2.4Gw before we can even think about relaxing a little. Kusile’s first generator should start contributing to the grid from about 2015 and by then the immediate threat of power cuts should be lessened to virtually zero probability. I’m not a betting man but in the absence of a very mild winter and/or divine intervention, my money would be on there being at least some rolling blackouts this winter.

Conclusion

It is time to stock up on candles, get spare batteries for the torch, and load the flashlight app into your smart phone. I just hope we will all be happy having to watch our evening TV shows in the dark (bad joke I stole from Glen Campbell).

Tweet of the Day

Bette Midler (@BetteMidler) Martha Stewart is on Match.com. And if anyone knows how to match, it’s Martha.