A 10 percent fall in China’s fixed investment would knock half a percentage point off South Africa’s gross domestic product (GDP), according to the International Monetary Fund.
Absa Capital economist Peter Worthington identifies this as one of the downside risks to domestic growth, because the second-largest economy is losing momentum. A few days ago, the World Bank cut its growth forecast for China to 7.5 percent this year, from the April forecast of 8.3 percent.
Jeremy Stevens, a Standard Bank researcher, predicts China’s growth will slide from 7.7 percent last year to 7.5 percent this year and then to a 24-year low of 7 percent in 2014. He puts the cyclical bottom in the second quarter of next year when growth in economic activity slides to 6.6 percent year on year.
China has been South Africa’s biggest customer in recent years, buying mostly commodities. Now not only is growth slowing, but the nature of China’s economy is starting to shift from fixed investment to domestic consumption. This represents a double whammy for the local economy because the local manufacturing industry is not able to compete with more efficient operators elsewhere for China’s burgeoning consumer market.
Trade with Europe, traditionally South Africa’s largest trading partner, until Asia replaced it in this role, has yet to recover from its six quarters of recession.
In the interim, South Africa will become increasingly reliant on its neighbours. According to Standard Bank economist Shireen Darmalingam, the trade surplus with the rest of Africa has grown steadily, from just R6.3 billion in 1994 to R41bn last year. And SA Revenue Service data show exports to Africa rose 21 percent to nearly R69bn in the first half of this year, while imports soared 29 percent to R46.8bn. Progress on trade relations with the region is clearly critical – something policymakers should keep in mind when they impose trade barriers.
The whole thing has got way out of hand and it’s time to call a halt to it all. We in the media industry are happy when there’s lots of information around; which is why we get nervous when things like “secrecy bills” begin to encroach on us.
Well, at least the guys on the political desk get nervous; after just a few years of integrated reporting some of us here on the business desk are beginning to wish for a bit more secrecy from our companies.
With every new tome spewed out by some or other earnest investor relations department, it becomes that much more difficult not to suspect that all of this “good corporate governance” is actually an attempt to overwhelm us all into a state of utter indifference. We’ve all watched those US legal soaps in which the opposing legal team asks for sight of a few documents and is promptly snowed under by an avalanche of papers containing largely pointless information. This is what we’ve come to with integrated reporting South African-style.
It is not only that it is hugely time-consuming, the manner in which information is allocated to one of several documents is misleading. And the whole exercise is made even more enervating and dangerous because now you’re largely reliant on web-based documents rather than printed ones.
Where should you look for the details of the executive remuneration? You might think it would be contained with the remuneration report. Well, you’d be wrong.
It is actually included with the annual financial statements, not with the “summary” annual financial statements but the full “unsummarised” version. If you are lucky, the company will use an intelligent and easy to use system of referencing from one document to another. But generally you won’t be lucky and so you will navigate it on your own. It is time to realise “less is more” in the world of integrated reporting.
Edited by Peter DeIonno. With contributions from Ethel Hazelhurst and Ann Crotty.