Slump threatens to shrink state capital expenditure
September 9, 2009
If you look back to March last year when Bear Stearns collapsed and triggered a global financial crisis, the message from the government was that South Africa would not sink into recession. This view was held because of the strength of South Africa's financial institutions, which remain strong today.
But as credit dried up globally, as consumers lost their homes and confidence, as commodity prices slumped, and with South Africans already heavily indebted, the recession washed up on our shores.
As the numbers show, after three consecutive quarters of negative growth, the country is in recession. When reality started to sink in, towards the end of last year, the government refined its message to: "Okay, we will be affected by the global recession, but it won't be so bad because infrastructure spending by the government will help prop up the economy."
Now it seems that capital expenditure may not deliver as much support as expected. Nedbank's latest capital expenditure project listing, which was released this week, shows that fixed investment plans in South Africa fell further during the first half of this year, with only 29 new projects announced, down by 64 percent compared with the same period last year.
All major sectors pruned expansion plans. Nedbank said public corporations announced no new projects, but significant expansion by these state-owned enterprises remained under way.
The government previously announced plans to spend R787 billion over three years on infrastructure, but warned in March that spending might be scaled back, or be spread over more than three years. Eskom has already said that R30bn of its R343bn capital expenditure over the next five years would be put on hold.
Given that the government has changed its tune on the recession and the extent of its impact on South Africa, it would not be surprising if the much-anticipated state capital expenditure has to be whittled down considerably, especially as the state's revenue is under pressure.
Recessionary reshuffle
The tentacles of the global economic slowdown are spreading into the world's real economy, with the result that competitiveness rankings have shifted in the World Economic Forum's latest global competitiveness report.
To start with, the US has lost its pole position, held for several years, to Switzerland - primarily as a result of weaknesses in public and private institutions and ongoing macroeconomic imbalances. The US now comes in at number two.
The soundness of US banks was much weaker, with assessment of bank solvency plummeting from 40th position last year to 106th. The report notes this is on a par with countries such as Albania and Mali.
If there is a good news story, it belongs to Brazil, which leapt eight places in the report. Other nations notching up a slight improvement in competitiveness in the midst of global recession were India, China, Australia and Canada.
But the recession has been particularly harmful for Russia. Not even its standing as the eighth-largest domestic market in the world (providing a buffer in the economic crisis due to reduced dependency on exports) could save Russia from a 12-place drop as a result of a notable deterioration in financial market efficiency. Indeed, experts predict a longer-term negative effect on competitiveness as a result of the crisis. Russia's oil and gas exports partly explain the external shocks it has been subjected to. Its comparatively undeveloped financial markets are also a negative.
Other nations losing competitive edge as a result of the recession include Iceland, which lost six places, and Spain, which lost four. The Icelandic story is not surprising following the bankruptcy of the nation's banks and ballooning public debt. In Spain, the fall tracks a rising unemployment rate of 19 percent - the highest in the euro zone - and a weakening of macroeconomic stability in the face of a debt burden.
DA bark worse than bite
Making the transition from the opposition benches to the government has a way of toning down the rhetoric of politicians.
Bonginkosi Madikizela, the nephew of the more famous Winnie Madikizela-Mandela, is the first African DA provincial minister. He is a member of Western Cape Premier Helen Zille's cabinet.
The new housing MEC says he has proposals on how to solve the problem of tenants of state housing not paying their rent but he doesn't want to reveal them just yet.
He will be holding discussions with the various interested parties - including Zille, Human Settlements Minister Tokyo Sexwale and the housing development agency, a national body that is about to become responsible for the N2 Gateway housing project in Cape Town.
His national counterpart in the DA, housing spokesman Butch Steyn, is a lot more strident. Steyn says defaulters should simply be "evicted", noting that those occupying the N2 Gateway went through a rigorous screening process to discern whether they could afford the rentals.
Originally the housing was supposed to go to informal settlement dwellers earning a household income of R3 500 a month or less. Payment levels there plummeted from 19 percent a year ago to about 6 percent now, slightly up from 4 percent in July.
Gavin Davis, Madikizela's chief of staff, was asked about the consequences for non-payment. He reported that rent defaulters received letters from the state attorney indicating how much they owed and when the money must be paid.
He said the department's rental strategy was currently under review and was due for finalisation in December.
"It will address issues such as debt and contract management," reported Davis.
It seems that the voice of strident action associated with the DA in opposition is becoming somewhat more muted - and a trifle more bureaucratic - in the government.
Edited by Peter DeIonno. With contributions from Samantha Enslin-Payne, Ingi Salgado and Donwald Pressly
|
|
