5 things you need to know in SA business today and reactions to yesterday's dismal economic numbers
1. We are all waking up in a house on fire this morning after a Black Tuesday of shocking economic numbers and a dispute over whether the ANC is considering printing money to get the country of its slump.
SA’s economy shrank by a massive 3.2% in the first quarter of this year from the last quarter – the worst performance in a decade.
Weak levels of investment and more than 270 hours of loadshedding wreaked havoc across the economy, while a gold mining strike and a weak grape harvest added to the pain.
Mining (-10.8%), manufacturing (-8.8%) and agriculture (-13.2%) took the worst hits.
Interest rates will almost certainly be cut next month to bolster the economy.
The rand weakened sharply following the GDP release, but then things got really interesting…
2. ANC secretary general Ace Magashule announced yesterday afternoon that the National Executive Committee resolved at the latest Lekgotla that the Reserve Bank’s mandate should be expanded – and that it is considering quantitative easing.
The prospect of South Africa basically printing money to get itself out of an economic mess sent the rand into a tailspin. In a best-case scenario, that would cause inflationary pressure – in a worst-case scenario, well, Zimbabwe.
Last night, finance minister Tito Mboweni rubbished his own party’s stance:
Government sets the mandate for the SARB. There is no quantitative easing thing here. The primary mandate of the SA Reserve Bank is to “protect the value of the currency in the interest of balanced economic growth and development”.— Tito Mboweni (@tito_mboweni) June 4, 2019
And the chair of the ANC’s economic transformation committee, Enoch Godongwana, also issued a statement to say that Magashule's comments that the party considering constituting a task-team to explore quantitative easing at the bank were "inaccurate". There was also no decision by the ANC to expand the mandate of the SARB. There was no decision by the ANC to expand the mandate of the central bank.
The rand is trading at R14.66 this morning, from R14.46 the same time yesterday.
3. The SA Revenue Service announced on Tuesday that it has lifted the tax return threshold from R350 000 to R500 000. This means that people who earn less than R500 000 per year, and meet certain other criteria, will not need need to file tax returns, commissioner Edward Kieswetter said at a media briefing in Pretoria.
4. Auditing firm Deloitte has replaced all senior auditors, including an audit partner, on the audit of sugar giant Tongaat Hullet.
Last week, Tongaat confirmed that its 2018 financial results cannot be trusted, and estimated that assets were overstated by as much as R4.5 billion. Deloitte has been Tongaat’s auditors for more than 15 years. Deloitte was also Steinhoff’s auditors for years, before that company went into meltdown at the end of 2017. On Tuesday afternoon, Deloitte said it has launched an investigation into the audits the firm completed at Tongaat.
5. Absa will only have a new CEO by next year, Business Day reported this morning. The bank is looking at a "very small" pool of individuals for a potential CEO.
Reactions to the dismal economic growth numbers
Output figures for South Africa's 2019Q1 GDP have employment-intensive and export-facing sectors contracting sharply and the government sector the fastest growing sector. Will the penny ever drop?— Adrian Saville (@AdrianSaville) June 4, 2019
The drivers of growth and competitiveness are investment spending and exports. South Africa's 2019Q1 GDP figures show these as the two biggest decliners! Deeply worrying. To say CR has his work cut out is a gross understatement.— Adrian Saville (@AdrianSaville) June 4, 2019
Should #SouthAfrica really be surprised by these dismal #GDP numbers? No. It's the result of a decade-long cumulative effect of policy confusion & confidence-sapping outcomes put on #economic steroids by Stage 4 loadshedding. #economy #politics #Africa https://t.co/clfQtN0z3K— Daniel Silke (@DanielSilke) June 4, 2019
South Africa GDP plunged by 3.2% in the first quarter of 2019, way worse than expected. The intense focus on politics over the past number months meant the economy lost focus as everyone adopted a wait and see approach. Expect further downward revisions to SA GDP growth in 2019— kevin lings (@lingskevin) June 4, 2019
...4/ I don’t think growth remains this weak— Razia Khan (@raziakkhan) June 4, 2019
I think the likelihood of the negative output gap closing at an undesirably low rate of growth has still got to be a concern
Receive a single WhatsApp every morning with all our latest news: click here.
Also from Business Insider South Africa:
- The National Credit Regulator tried to ‘protect fraudsters’ from Sars and the big banks – but the appeals court isn't keen
- Another SA company has admitted its financials are wrong - what you need to know about the crisis at Tongaat Hulett
- These South African CEOs are now out. Investors think these bosses could be next
- 21 CEOs in 10 years: A guide to all the executive drama at SAA and Eskom
- South Africans can now get banned from Uber for being rude to drivers – here’s what we know so far
- 72% of the ‘Louis Vuitton’ bags, belts and sunglasses on Gumtree are fake – here’s how the experts can tell