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The Acorn Brief – April 2021

Volume 19 Issue 3 – April 2021

COMMENT AND OUTLOOK – Is the Tide Turning? It seems that ructions within the ANC between the Ramaphosa aligned reformists and the Zuma aligned Radical Economic Transformation (RET) faction, have finally broken out into the open. This all happened at a recent National Executive Committee (NEC) meeting at which party president Cyril Ramaphosa was finally able to assert control over the NEC and push forward his reformist agenda. All of the motions passed at the NEC meeting went in favour of Ramaphosa’s agenda and were a significant setback for the RET faction. There will no doubt be a pushback from the RET faction and it does not necessarily mean that there will not be challenges from them to Ramphosa’s authority. However, it is the first significant shift in favour of the Ramaphosa led reformist grouping within the ANC NEC. Why this is so important is that it shifts the centre of power away from the ANC headquarters back to government. This may seem odd as the ANC is the governing party but the divisions that have existed since the 2017 Nasrec elective conference, have meant that President Ramaphosa has not been able to meaningfully pursue the turnaround strategy for the country that he knows is so desperately needed. It has all been about internal ANC political dynamics and that has hobbled his agenda to get rid of corruption and to re-establish the functional capacity of the state. The RET faction is not going to go away quietly and is not inconceivable that at some stage there is a breakaway by them from the ANC and an alignment with the Malema led EFF. Without the reformist agenda of President Ramaphosa succeeding, the prospects for a sustainable economic recovery and job creating growth, will be lessened.

After a somewhat chaotic and disorganised start to the COVID- 19 vaccine rollout in SA, it does seem to be gaining traction and there is now hope that a significant proportion of the population will in fact be vaccinated in 2021. The fact that the J&J vaccine is going to be manufactured locally by Aspen is a big boost for the country as well as the African continent as it will make for easier access to the vaccine. The sooner there is widespread vaccination, the sooner the prospects for a full economic recovery will take hold. There are forecasts that economic growth in SA in 2021, could be above 3% which if achieved will be the highest level of growth in many years. However, we must remember that it is off a significantly lower base as a result of the COVID pandemic driven decline in economic activity in 2020. Good progress is being made in the USA and the UK with vaccine roll outs and this has helped to boost confidence about a sustainable economic recovery. In Europe there is also greater confidence about an economic recovery in spite of the

reintroduction of restrictive COVID lockdowns. With confidence about a successful vaccine rollout rising and given the additional fiscal stimulus provided by the US government, most global equity markets continued to rise during March. The Dow Jones and the S&P 500 were both stronger while the Tech heavy Nasdaq had a quieter month. In Europe, the German DAX and French CAC both rose strongly while the UK was up about 3%. Markets in the East did not do so well during March and China and Hong Kong were both down for the month with Japan’s Nikkei being marginally positive. Commodities were mixed for the month with the oil price dropping to USD 62 per barrel, gold falling below USD 1 700 per ounce and iron ore falling as well. Platinum group metals however remained positive for the month.

On the local front the JSE had a marginally positive month but ended the quarter with a decent gain. The Rand strengthened again during March and ended the month comfortably below R15 per USD. The SA Reserve Bank kept interest rates unchanged at the historically low levels that they are at. The inflation rate fell to below 3% which is the bottom end of the bank’s 3-6% inflation target range. The impact of the January alcohol sales ban was reflected in some retailers results, but the country’s trade surplus has improved as commodity exports picked up and imports grew only slightly. The reintroduction of load shedding during March was a disappointment as it continues to stifle the prospect for economic recovery. We did however see the introduction of measures to augment the Eskom power supply by the perhaps questionable introduction of Power Ships to augment the supply of electricity to the SA grid as well as further renewable energy initiatives. The fact that alternative power generation initiatives are being considered is a shift in what was previously a quite inflexible approach to generation of power. There were also further indicators of progress being made in the rebuilding of SARS with 370 new skilled posts being advertised. SARS also ended the fiscal year with a higher level of tax collection than had been projected towards the end of last year. Improved revenue collection and curtailing illicit economic activity that falls outside of the tax net, is an important aspect of the process of stabilising the finances of the country.

The first of the high profile corruption cases are heading to the courts as the mandated term of the Zondo commission approaches it’s end date. Former President Zuma is defying a Constitutional Court order that he should appear before the commission. He has even suggested that we should not be a constitutional dispensation. How did he end up as president?

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