Ever since we were told that the ZA economy shrank by 0.6% in the first quarter of this year, there has been a fear that the current, second quarter will also show negative growth. If it does, we will be in a recession.   It will be a few months before we get the official Q2 figure, so at the moment we cannot be sure about this. But what do expert economists think?   For our first ever poll, ZA Confidential spoke at the end of the week to more than a dozen leading economists to get their views. Most of them responded, and I have tried to accurately capture their views. Here is what they think….

Are we already in a recession?

Yes:

Mike Schussler, economists.co.za

Iraj Abedian., Pan-Africa.

Christo Luus, EcoQuant

Chris Hart, Investment Solutions

Ian Cruickshanks, SAIRR

No:

Peter Attard Montalto from Nomura

Sizwe Nxedlana, FNB

Professor Eltie Links

Roger Baxter, Chamber of Mines

Maybe:

Luke Doig, Credit Guarantee

Dawie Roodt, Efficient Group.

Loane Sharp, Adcorp

Prof Raymond Parsons, NW University.

 

Conclusion:

Well. Quite a range of views. Five of our panel of thirteen believe the recession has landed, while four believe we will escape a recession. Meanwhile, the other four are still not sure. There is still hope that the economy will edge forward this quarter, but even so this is not wildly encouraging, with only four of those polled saying there will be no recession. And even if there is some growth in Q2, it is not going to be very impressive, and is unlikely to help us much to deal with the army of unemployed.

 

Tweets of the Day:

Funny Tweets (@Funny_TweetsQ): Diet ideas: Eat whatever you want, and if anyone tries to lecture you about your weight, eat them too.

Steve Stifler (@SteveStfler): Whoever said laughter is the best medicine clearly never tasted scotch

Steve Stifler (@SteveStfler): I’m really glad we don’t have to hunt our own food anymore…. I don’t even know where sandwiches live.

Steve Stifler (@SteveStfler): Whenever you’re having a bad day just remember there are people who have the names of their exes tattooed on them

Ben Weller (@BenWeller): Imagine being as cool as the people at the supermarket who start eating their food before they’ve bought it

 

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Our new Public Enterprises Minister Lynne Brown was centre stage this morning at a news conference at Eskom, which saw a fresh plea from this crucial service provider for us to use less of its service. Ideas on offer were for customers to dress up for outdoors indoors, and also for using hot water bottles, so we consume less fuel for heating in our homes. Meanwhile, Eskom has a multi-million rand funding shortfall, and says it could be some years before the electricity system is producing all the power that is needed. In an effort to further dampen consumption, Eskom bosses are in new talks with their biggest industrial customers to see how further cutbacks in consumption can be achieved. It’s going to be a tough winter…..
The Minister told the media conference at Eskom HQ that electricity remains one of the critical building blocks for economic growth – even if there isn’t enough of it (my words not hers). She noted that Eskom continues to face challenges in the absence of significant new capacity being brought on line.. This means things are going to be very tight in the short to medium term. Due to the levels of tariff hikes which have been granted being lower than Eskom wanted, the utility faces a R225bn funding shortfall. Efforts are underway to close the gap, but not much light was shed on this, so to speak…. Acting Eskom CEO Collin Matjila gave a very long, very detailed and very dull update which pretty much echoed the minister’s gloomy message. He emphasised that the system remains tight and vulnerable this winter. Demand is highest during this period of winter. Industrial and other business customers have come to the party by reducing demand, but even so on 3 emergency occasions in February and March, industrial customers were instructed to further reduce demand. On one of these days, there were wider power cuts so we could all join in the fun. In a statement which would have been funny were it not so serious, the electricity boss then postulated that sometimes people use appliances to heat their homes even when it is not really that cold. Instead of living in a nicely heated home, he wondered why we don’t dress for the weather – to postpone the switching on of our electric heaters? And why not use gas heaters and – this one was probably the best remark of the morning – why not use hot water bottles? The acting CEO confirmed that the probability of load reductions and load shedding remains high – in the event of significant “incidents” on the power system. In other words, we are so close that it won’t take much to trigger more power cuts. And to prepare for this, he advised residential customers to familiarise themselves with load shedding schedules…He even gave the link….. http://loadshedding.eskom.co.za/.
Now I could have misheard the Eskom chairman, because I was sitting near the back of the room for easy escape, but I am pretty sure that not only did he echo this ’we need to save’ message, but I think he also suggested this would be patriotic. Instead of laying down your life for your country, why not turn off your heater, put on a wooly sweater and sit in the dark?
During questions, various official confirmed that Eskom is again talking to its industrial customers to seek ways of further reducing demand. The platinum industry has been playing its part, with consumption halved during the current strike, but that can’t go on forever.
My old chum Tshediso Matona, who is Director General at Public Enterprises, confirmed that a strategy is being devised to work out the focus of new power generation investment – gas is a “no brainer”, There is likely to be a new coal-fired plant, but there still needs to be a decision on nuclear. His body language suggested to me that there is some back-tracking on this nuclear option, but nothing definite emerged. He also noted that Stats SA has been asked to investigate the widely held belief that electricity shortages are holding back economic growth. He questioned how much of the economic malaise is due to shortage of electricity and how much due to world economic conditions, noting that during the day there is sufficient capacity. The shortages kick in in the evening. And he claimed Eskom has never turned down someone who has wanted to be connected.
A new CEO has been selected by ESKOM and the proposal is with government. It can’t come too soon.

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It may be that one of the roles of a politician is to reassure the peasants. However, this peasant did not feel there was a lot of credibility in yesterday’s assurances to the City Press from our recently anointed finance minister Nhlanhla Nene that the economy is not heading into a recession. Certainly, the two important economic indicators out today tend to suggest that when the data for the current quarter are released, they may well show that it followed Q1 in being a period of negative growth. Firstly, there was the Kagiso Purchasing Managers’ Index (PMI) for May, which fell to 44.3, down from 47.4 the previous month. Then came the monthly numbers from the automotive manufacturers’ association Naamsa, showing that year-on-year sales had fallen by 9.2% – with a shock 40.5% year-on-year decline in vehicle exports. Two horrible bits of economic news, which by no means give any backing to the assurances we have seen from our new finance minister, who appears to have had the chair pulled out from under him, so to speak. I just hope that when the Q2 GDP numbers are released that he is proved right, and I am proved wrong.

I was not happy during a recent visit to the Hilton in Sandton.  I was there for a presentation but also wanted to do some work so went to the Business Centre desk to get the Wi-Fi password.   I was told it was 130. But couldn’t log on.   So I went back to discover that the password was for sale – at R130.  I naturally declined and logged on through my Vodacom dongle.  Am I unreasonable to expect that free Wi-Fi should be available pretty widely these days?   Especially in a hotel, to delegates at an event that is being hosted there?  Here are a few comments from a few of our experts: 

Alan Knott-Craig of PROJECT ISIZWE

Bandwidth is becoming like water & electricity. A basic service. You don’t pay for water at a hotel, so why should you pay for Wi-Fi? One day we’ll look back in amazement that there was such a thing as a Wi-Fi password.

RJ van Spaandonk of the Core Group:

We see in our business that people encounter this situation all the time. This is widespread in South Africa.  It is a frustration.  As a result, the use of 3G devices is much higher in South Africa than in many countries in the world.  Many hotels in Europe offer free Wi-Fi when you are a guest, limited to volume and speed.  If you then want a better experience, and want to download movies and so on, you may be asked to pay a daily fee.

Duncan McLeod from TechCentral:

You’ll recall how in the old days, hotels used to rip people off for using the in-room telephones. It was much more affordable to walk out onto the street and find a pay phone. I guess some hotel groups view Wi-Fi as the modern equivalent of the in-room telephone: something they can use to push up their profit margins.  Unfortunately, it’s a short-sighted strategy. While it’s entirely fair to charge day visitors (non-guests) to the hotel for access, it makes no sense not to provide free access to hotel guests and to people attending conferences. These costs, which are marginal, should be included in the price. It builds brand value for the hotel, making it more likely that people will use its facilities again. People are more likely to re-book at a hotel if they remember its excellent free Internet access. They’re less likely to come back if they’re forced to pay an additional charge for Internet access, especially if that charge is exorbitant.

Jeff Osborne from Gumtree Auto ZA:

R130 is ridiculous when you consider the actual cost of the data. The Hilton is no doubt paying commercial rates and when you look at the published consumer options (far more expensive than commercial rates), you can see the sheer scale of the overcharge. For R99 you can purchase (no contract) 2GB from Afrihost or even 7GB for R145. Mugg & Bean offer free Wi-Fi for 30 minutes, as do Seattle Coffee, Fego, Woolworths and many others. However, hotels do have a different challenge to content with – that being the abuse of the offer. Hotel guests stay longer than restaurant patrons, and as such it is more open to abuse due to the prolonged period that the customer has access to the Wi-Fi. Hotels can reasonably be expected to limit the daily usage per user – BUT is it not fair to match restaurant offerings and have the first 50mb or first 30 minutes free? In this case, R130 could be fair if it is a once-off charge for the duration of your stay at the hotel. But for a day visitor, there should be an alternative offer that is more in line with restaurants and so on… 

Conclusion:  Wi-Fi should be widely and easily available.  If you are worried about people exploiting this, then put a cap on daily use.  But to charge an excessive amount for this service, which costs very little to provide, is mean and short-sighted.   Note to anyone inviting me to a presentation or other event in the near future:  please ensure there is good, free Wi-Fi availability.  If that loses the Hilton some business, then I will shed no tears.   

Tweets of the Day:

Steve Stifler (@SteveStfler):  I want to live in a world where the Food Network delivers.

Politics & Law (@PoliticsL): The only mystery in life is why the kamikaze pilots wore helmets. Al McGuire

Politics & Law (@PoliticsL): I told my wife that a husband is like a fine wine; he gets better with age. The next day, she locked me in the cellar. Anonymous

Saurin (@thesaurin): Yeah, I know Yeah, I know Yeah, I know Yeah, I know Yeah, I know Yeah, I know Yeah, I know – twitter user flipping through a newspaper

 

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An elegant and enjoyable Cape white is unveiled by food and wine guru Michael Olivier to the tasting team. It is the Jordan unoaked Chardonnay 2013.
John Fraser is joined in the Johannesburg studio by Corlien Morris from Wine Concepts and by branding legend Jeremy Sampson.

I was horrified.  A lunch with friends on a nice sunny day in Pretoria was ruined for me by the mark-ups on the wine.   One reliable red from Stellenbosch, the Warwick First Lady, was selling for around R220 a bottle, and R80 for a glass.  No indication how much air would accompany the wine in the glass. Now this wine can be purchased retail for around R60-R70 a bottle, depending on the retail outlet and their promotions at the time, and I am sure a restaurant would be offered a cheaper wholesale price.  I am afraid that the mark-up is just far too high – a mark-up in the order of four-fold?  That is unacceptable, and I will not be returning to that restaurant.  But am I just being mean and cork-Scroogish?  Should we happily pay so much for restaurant wines?  And what about us bringing our own bottle, and paying a corkage fee?   Here are a few comments from a few of our experts:

Food and Wine Guru Michael Olivier:

As a former restaurateur whose wine mark-up was 70%, I think 4-times is a bit rough.  There are fridges, glasses, openers and staff which need to be paid for, of course.  If guests brought their own wine and it was either an overseas wine or a particularly old vintage I did not charge corkage.  But if people bring their own wine ,the restaurateurs lose out on income.  So yes – charge corkage, perhaps equivalent to the profit on your lowest-priced bottle.   I had a guest bring a cake once, asking for it to be served for dessert!    I did not charge cake-age.

Out-to-Lunch Columnist David Bullard:

The interesting thing about moving down here to the winelands is the price of good wine in a restaurant. For example, I usually pay around R85 for an estate Sauvignon Blanc, and maybe as much as R100 for a very quaffable estate red. That’s all thanks to healthy competition and a clientele that baulks at paying more. I shudder every time I have to pay for a wine in a restaurant in Jo’burg.  To me it’s rather like the argument over the price of motor vehicles. The price is what the market will bear and, while I would no longer pay a 400% mark up on a wine (because I now know better) I am sure many people with expense accounts will.  A fair corkage charge is R50-75, depending on the restaurant. That is a more than generous fee for the hire of glasses. If I take a rare wine to a restaurant (one they do not stock) I expect to pay no corkage – in exchange for a tasting glass for the sommelier. That has always worked if I check it out while making the booking. Since my ratio of booze spend to food spend is well known to be around 60:40, most restaurants that know me are quite happy to oblige. If they don’t, I simply don’t return there or recommend it. Like everything in life, it’s a matter of give and take – and while a restaurateur is quite entitled to make a profit from what I drink, I think I am quite entitled to object when I get the feeling I am being…..  (The end of this sentence has been removed due to its graphic content.  Ed.)

Mario Pretorius from Telemasters:

The mark-up on wine of 400% follows the general restaurant rule that the food cost should be around 25% of the price of the dish.  Is this a fair mark-up? The difference is that food is altered from its raw state by expert chefs to something you probably couldn’t repeat at home; hence the culinary experience that resonates so well. To enhance the ambience, some libation is welcome, but at most some cooling and the use of a corkscrew is added.  It is a galling misuse of good faith at the 4x level, and few restaurateurs offer good value in the drinks section.  The good news is that the bile spitting will bring out the miser in most of us and we will drive home more sober. Alternatively, one should choose the most economical wine, up from cheap but not expensive. It has been exhaustively reported that few experts can distinguish good wines from ghastly, expensive, and supposedly superior, ones.   The alternative is obvious: BYOB. Since corkage is usually a fixed amount, the best strategy is to bring the most expensive or best bottle in your cellar and grin at your victory. Just don’t overdo it; jail time as a drunken driver will be phyrric.

Branding Guru Jeremy Sampson:

I think a mark-up x4 is verging on the obscene. And a glass at more than the (retail) price of a bottle is just stupid. After all, what value is being added?  There are times when I am happy to take my own bottle and pay corkage.  In brand terms we all need to be able to trust who we are dealing with.  Once we discover that we are being taken advantage of we should vote with our feet and then use the most potent form of marketing – word of mouth – to ensure they are driven out of business

 Duane Newman from Cova Advisory:  

Pricing of wine in a restaurant is an interesting challenge to deal with. I have found expensive wine has much higher mark ups – 3 to 4 times the local liquor store. It is defendable, as the restaurants whhich carry the expensive wines normally have an extensive selection – and the restaurant has to pay up-front and carry the stock. I also believe it is a price point issue. Some people buy wines in a restaurant based on price, believing the more expensive the wine, the better quality they are getting.  This is not always true, of course.  It therefore comes down to knowledge of what you are buying. The more you know, the better equipped you will be to select value for money.  Personally, I buy wines based on what my wife and I like, and based on the occasion.  We really enjoy Meerlust Rubicon or Merlot which can go for R700 in a high-end restaurant, but I can buy the same wine for R200 or below at a shop. But I would be willing to pay that for the special occasion.

Conclusion:

Dining out should be a pleasure.   Dining out and being ripped off for wine is not.  Charge too much for your wine and I will charge for the door.  And I will not be back. 

Tweets of the Day:

Mindblowing Pictures (@GooglePics):  If a midget smokes weed, does he get high or medium?

Mark Twain (@MarkTwainQuote):  The only way to keep your health is to eat what you don’t want, drink what you don’t like, and do what you’d rather not.

NotKennyRogers (@NotKennyRogers):  Even a bad hamburger is better than good hummus.

Eli Braden (@EliBraden):  The worst part of having triplets is being pregnant for 27 months

Mark Twain (@TheMarkTwain): Man – a creature made at the end of the week’s work when God was tired.

Nein. (@NeinQuarterly):  Turkey walks into a bar. Orders a democracy. Bartender: Sorry, Greece got the last one.

 

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Well, it was worse than expected.  ZA GDP fell by 0.6% in the first quarter of the year.   What this means is that the economy is not growing; it is shrinking.  And at a time when inflation is disturbingly high.   As is unemployment.    Ouch.  Not good news for President Zuma’s new cabinet, nor indeed for any of us.    ZA Confidential secured some speedy reaction from some of our experts….

Mike Schussler from economists.co.za

Depending on how the platinum sector strike goes on, we could already be in a recession – which is 2 quarters of negative growth. Ultimately, the strike and the length of the strike in the platinum sector, and number of holidays in Q2, could cause the recession  I think manufacturing will look a lot worse in the second quarter. This is self-inflicted and it is not at all good for a new Cabinet to come in now.  We really need to sit down and talk in ZA.

Chris Hart of Investment Solutions:

This is the first GDP decline since 2009.  I think it is fair to say ZA is an a recession.   And its credit rating must be at risk.  It must, from a political point of view, be an absolute priority to get the economy going again.   Effectively, it will need a change in policy direction to generate the investor confidence needed to generate the growth. 

Ian Cruickshanks:

GDP decreased by 0.6% – at the bottom end of expectations.  This confirms that ZA is experiencing a shrinking economy.  If we get another negative quarter like this, we will be in recession.   Mining is a major factor – the sector decreased by almost a quarter- and manufacturing decreased by 4.4%, which is a big negative factor as well. Only the finance and trade sectors are carrying the economy now. Our international credit rating is at risk, threatening a reversal of recent foreign portfolios inflows. We are likely to see foreign traders punish the rand.

Nedbank’s Economic Unit:

As expected, the economy contracted in the first quarter of 2014, with real GDP shrinking by a seasonally adjusted annualized 0.6 % q-o-q, sharply down from growth of 3.8 % in the final quarter of 2013 and worse than market expectations of a quarterly decline of 0.1 %.  Predictably, the weakness mainly came from a sharp plunge in mining production, which was dragged down by the now 18-week long strike at most major platinum mines. But the economy’s fragility was on display in most other sectors, too. Manufacturing output dropped sharply, while the pace of activity in most of the services industries also slowed to the low single digits. The only rays of light came from construction and agriculture, where output rose by an annual rates of 4.9 % and 2.5 % respectively over the quarter.   The outlook for the rest of the year remains clouded by the ongoing strike in the platinum mining industry and the potential spill-over effects of lost wages on confidence and household spending. With the platinum strike claiming both April and May, production is highly unlikely to rebound strongly in the second quarter, while lost wages of over R8bn in the platinum mining industry alone and slower growth in income elsewhere – coupled with rising inflation, high unemployment, elevated debt burdens and higher interest rates – will continue to weigh on domestic spending. Once the strike is resolved, the economy should start to recover, helped by stronger global demand, a weaker rand and increased infrastructure spending by the public sector. Overall, we now expect GDP to grow by a moderate 2 % in 2014 as a whole.  

Investec’s Annabel Bishop:

The real economy shrank in size in the first quarter of this year as work stoppages (both strikes and electricity conntraints) damaged production.  South Africa saw its real economy contract in the quarter following a contraction in the mining sector of 24.7% on a qqsaa (quarter on quarter, seasonally adjusted, annualised) basis. The manufacturing sector also contracted, by 4.4% qqsaa as work stoppages caused by strike action and electricity constraints caused the worst GDP outcome since the 2008/2009 recession.  On a year on year basis the economy saw weak growth of 1.6%, which does not portend well for 2014, particularly as the constraints in the electricity supply have not been resolved and the strike action in the platinum sector is ongoing. The Reserve Bank’s leading indicator for March fell by 2.4% y/y, which implies weakened activity in the second to third quarters compared to the first, although it is only one month’s reading and cannot be fully relied on as a predictor.   Nevertheless, over the past few years South Africa’s economic growth has been deteriorating substantially, and GDP growth is at risk of approaching the 1.0% y/y mark this year after recording 1.9% y/y in 2013, 2.5% y/y in 2012 and 3.6% y/y in 2011. Strike action and reduced supply of electricity has slowed production, while real household consumption expenditure growth has deteriorated on weakened financial health, waning demand, and flagging manufacturing production.  Despite the worrying downward trend in economic growth, and strength of the rand, the SARB has clearly communicated its intention to hike interest rates further in the current cycle, with January’s 50bp hike contributing to the first quarter’s economic weakness. The wholesale, retail, motor trade, accommodation and catering sector recorded weak growth of 2.2% y/y, and is at risk of slowing further should additional interest rate hikes occur this year.  We previously forecast a 50bp interest rate hike in July, but this hike should now be delayed to the fourth quarter of this year instead. The optimal outcome would be no further rise in interest rates in 2014 as inflation is likely to be within target in 2015, and the Reserve Bank cannot influence the 2014 CPI outcome given the time lags involved between changes in interest rates and the impact on inflation. Furthermore, the path of global monetary policy normalisation is sedate and no interest rate hike is required in South Africa in 2014 (or likely 2015) from this source. Regulatory reform, specifically a reduction in red tape and reduced state intervention in, and ownership of, the economy is needed to triple the size of the private business sector. Only through improving the ease of doing business in South Africa, including adding the vital component of flexibility to the labour market, will SA be able to triple the size of the private business sector and sustainably raise economic growth to the 5% mark.

 

Comment:

Unemployment and inflation are uncomfortable high, and now we learn the economy is shrinking.     Anyone know the way to Perth?

Some Tweets: 

Steve Stifler (@SteveStfler):  Why are there instructions on my toothpaste? That’s like putting instructions on toilet paper.

 

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Oversized smartphones, which the geeks call phablets, are set to overtake tablets.
This is according to Deloitte’s TMT predictions, a global technology trend analysis which was released in Johannesburg today.
“Phablets – an oversized smartphone that’s part cellphone, part tablet, will outsell tablets by $25 billion, and the total global sales of smartphones, tablets, PCs, TV sets and gaming consoles will exceed $750 billion in 2014 and then plateau as consumer usage will continue to converge,” Deloitte announced.
Phablet sales will reach a quarter of smartphones sold. These devices work better with some Asian languages, and also are better than smartphones for gaming.
It also predicted there will be a lucrative market in wearable technology devices, such as glasses, watches and fitness bands.
Smartphone growth will be strongest among the over 55s. We may need more apps for older people…
Meanwhile, by the end of 2014, up to 50 million homes around the world will have two or more pay-TV subscriptions.

A few other observations:
There are a lot of open on-line education courses, but there is a very high drop-out rate. – Many visits to doctors for basic diagnosis will be on-line in future. – Gaming is competing with TV for “relaxing moments”
– Sports broadcasting rights will jump in cost by 14%. A challenge for the broadcasters is how to pass on these increases…
– Performance rights, the payment for the right to play music to the public, will exceed $1bn.
– In sub-Saharan Africa, cordless video on demand is a growing trend. Such as Box Office from DSTV.

Conclusion: A useful bit of research, but one wonders why I needed, as a delegate to a technology conference, to ask for details of the free wi-fi log-in?

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There had been a lot of speculation about big changes in President Zuma’s new Cabinet, which was unveiled this evening.   While there was significant change elsewhere, I am not convinced that there was much change in the key economics areas.   There was a big shift with Pravin Gordhan being moved from the Treasury to tackle challenges in Local Government, but he is succeeded by his deputy Nhlanhla Nene, so there is also big continuity.  The two left-leaning ministers who are of big importance to business – Rob Davies at the dti and Ebrahim Patel at Economic Development – are remaining in-situ.  A new ministry for Small Business Development may or may not be a good thing, depending on how it is established and whether it makes a real positive contribution to small business under Minister Lindiwe Zulu.  Similarly, a lot is riding on the shoulders of new Public Enterprises Minister Lynn Brown, and on those who will be steering the mining, Labour, Telecommunications and Water Ministries.   Having Cyril Ramaphosa as Deputy President may be good for business, as he has run businesses, and has done spectacularly well out of it.  But he will have a lot else to do as Zuma’s right hand man.  An immediate hope is that he does more to settle labour tensions in the mining industry from the Presidency than he ever did from the boardroom.   Let’s get a short comment from two top experts on links between industry and government

 Duane Newman from Cova Advisory:  

There is definitely stability in the economic cluster. Rob Davies is staying on at Trade & Industry which means consistency at Director General level as well. The new Finance Minister Nene is good news as he has been Deputy Minister for 6 years so he should know the job quite well already. That Pravin Gordhan has moved away from Finance should not be as bad news as he should fix local government – which is where service delivery impacts many South Africans. The restructure of creating a Communication Ministry with Brand SA included should improve the branding of South Africa internationally.  I think that Cyril Ramaphosa as Deputy President means that government should be more business friendly.  A new Small Business ministry seems stillborn. Its role needs to be clearly defined as small businesses struggle to engage with government. Small businesses just don’t have the resources and time to spend time in meetings with government. I hope the Chambers of Commerce role is now elevated.  I am still not convinced on the role of Economic Development ministry. I believe this still needs to be reviewed.

Professor Raymond Parsons From NW University:

‘The new Cabinet creates a mix of positive and negative perceptions. To begin with, unfortunately the widespread anticipation of a ‘lean and mean’ Cabinet did not materialize and the inevitable need to repay political debts and keep an ideological balance seems to have heavily dominated the appointments. It is very much President Zuma’s own team, given the political dynamics, even though the underlying message remains one of capacity-building and the need to ‘deliver’. Confirmation of Cyril Ramaphosa as Deputy President is a considerable asset to the Cabinet and the country, given his experience of organised labour, business and politics, as well as his participation in the drafting of the National Development Plan (NDP). He is potentially in a strong position to exert the necessary political clout to help push things along.

The accession of Deputy Minister Nene to the portfolio Finance Ministry was not unexpected. He comes with the necessary experience of the National Treasury stretching over several years, but has big shoes to fill at at a critical moment in SA’s business cycle. I am agnostic about whether the creation of a Small Business Ministry will be a success, given the mixed experience of similiar structures elsewhere, but we should chew it and see. There is no doubt about the real challenges facing small business and the need to urgently implement the necessary solutions to enhance their role in growth and job creation. Apart from the time it will take to settle in the new Ministry, it may also become another casualty of the ‘turf war’ and conflict over economic policy that has been apparent between the National Treasury, the DTI and Economic Development.

The move by Gordhan to Cooperative Governance brings an efficient Minister with a good track record to bear on the serious delivery problems at local government level, and should be welcomed. One suspects, however, that among investors and businesspeople the jury will remain out for the time being pending real outcomes around the implementation of the commitment by President Zuma to ‘radical economic transformation within the framework of the NDP”. Business wants to be treated more as a genuine partner in future development, rather than as an ‘alien force’. If the key targets of the NDP are written into the performance contracts of Ministers and outcomes are rigorously monitored, then in those instances where continuity in the appointments has been favored over change may work out. We still need to see whether the new cabinet as a whole can project the necessary policy coherence which creates the certainty and predictability required by investor confidence to boost economic growth.

Comment:

A bit of change, but not enough to convince me that this is a new government team that is good for business.  Let’s give Zuma credit for having got rid of a few underperformers, though not all.  Many have just popped up elsewhere.

Some Tweets on the New Cabinet:

griffin (@watkykjy):  Joemat-Pietersen new minister of energy. O jirre. Winter is coming. Forever.

SaffaZimbo (@SaffaZimbo):  Most successful ministry in #ZumaCabinet will be small business. There are going to be a lot of smaller businesses in SA in 5 years.

M. Ntshobololo (@Mthetheleli15):  Cowboy Beki Cele is back on Zuma’s cabinet,ironically he was fired not long ago for not being fit for office.

Pieter du Toit (@PieterDuToit):  New propaganda minister, Faith Muthambi, was member of parliament’s Nkandla committee; she denied delaying tactics.

Lerato Mbele (@BBCLerato):  Tina Joemat-Peterson given a key portfolio like Energy Ministry, after a scathing report by Public Protector. Am I missing something here?

The Brain (@za_Thinker):  Bad ministers never really get fired. Just redeployed to stuff up another portfolio. #CabinetAnnouncement

Comedy Central AF (@ComedyCentralAF):  Disappointed that Khulubuse wasn’t made Minister of Fast Foods 😦 #newcabinet #TheFig)

Nickolaus Bauer (@NICKolausBAUER):  #ZumaCabinet We didn’t get a ministry of information. But we got a new communications ministry that will control SABC, ICASA & GCIS #Ominous

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I spent several hours this week at the first SA Manufacturing Indaba, a worthwhile event and one I expect to see repeated.   Much was said that was worthwhile, but one idea has stuck in my mind.   One of the panelists recalled meeting a visiting Belgian trade delegation, which included that country’s Minister of Red Tape, whose job was to visit other government departments to get rid of unnecessary forms and to trim down those which were too full of useless questions.   Of course, in South Africa it is the opposite, with most ministers and bureaucrats regarding red tape as their main reason for existing.   But might this be something to emulate here, as the President prepares his new Cabinet?  Here are the views of a couple of our experts….. 

George Glynos from ETM:

Undoubtedly yes. The question will however always revolve around what is seen as red tape and whether this can genuinely be done efficiently.  The danger with central planners is that they implement regulation to solve a particular problem.  The danger in trying to address this is not that they don’t remove some red tape, but that they potentially replace it with another version.  Ultimately, if it does follow more free market ideals then by and large I would support this, but my comment may be ideological.

Mike Schussler from economists.co.za

Yes, please.  We need a ministry for business that can oversee other ministries to tell them to get rid of red tape, hurdles and restrictions such as labour law and trading laws – and see that we get the co-ordination we need to help SA firms (particularly smaller ones) export, and that we get business a voice inside cabinet. If the unions have the Department of Labour and Economic Policy can business not have a department headed by a knowledgeable business man (with friends and contacts mainly in business) in a Department of Business? This department would make everyone sit up and take notice of the term: profit. Profits create wealth, and wealth creates jobs. We have departments for the poor in Social Development so we need a department for business that does not write rules but lowers many regulations. It also will help any business that has completed its work or requirements to get paid within 30 days. It would also tell SANRAL that 7 days or pre-paid is not SA business practice – and that as they pay their suppliers this way, they will also only get paid in 30 days.  It would police government departments to see if they are helping or hindering business and set out findings in a report every year. It would also have Ombudsman for tax, banking and insurance under it. It would provide opinions and experts on small business to a small claims court that falls under Department of Justice, but for which it provides experts at reasonable fees to small and medium sized business. This is so that those people who do not pay in 30 days get to know courts better. This would make people respect the right to work as well. In a strike situation where a union claims not to know why non-striking homes are burning, this department would investigate along with the police. If a union or its members are involved, the said union will be raided and bank accounts closed and leaders made to pay back losses to the economy. If people are killed, then, and the union is found guilty this ministry would make sure that union loses its licence and its leaders are banned for life from organizing employees.  Yes to a business ministry that adds rules for others and takes away red tape and rules for business.

Conclusion:

I have a horror of form-filling, but have done some writing work recently for large organisations, whose form-filling requirements were ridiculous.   The only good thing is that having jumped through all these red tape hurdles I have at last been paid!  But a proper pruning of red tape in both the public and private sector would be really welcome – and would hopefully improve productivity as well.   

Tweet of the Day:

Nein. (@NeinQuarterly):  Somewhere a painting of a pipe is sitting quietly at its desk. Smoking an artist.

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