Cities at risk as new arrivals lack housing finance

Published Jul 18, 2013


Only 15 percent of households in South Africa have access to mortgage finance. About 60 percent qualify for government-provided housing, leaving a group of about 25 percent who qualify for neither.

The figures were presented by the Minister for Planning in the Presidency, Trevor Manuel, in his keynote address to the 2013 Metropolis annual meeting in Johannesburg yesterday.

And he made an important point: “Among people who find themselves in this gap are the bulk of public servants, and the overwhelming majority of workers who are organised into trade unions.

“Because this category of families includes so many people who have an organised voice, there is an increased risk of social upheaval.”

Cities in South Africa are growing in leaps and bounds with many new arrivals gravitating to informal settlements and slums.

He acknowledged the dangers inherent in the situation.

“We need to equip our people with skills and education to take advantage of opportunities offered by the economies of the cities.”

This is a remedy offered repeatedly for most of the country’s economic and social ills. But mending the country’s largely dysfunctional education system is a distant goal. Resistance from teacher unions and an ineffectual minister of basic education, who survived the recent cabinet shuffle, are hurdles along the way.

Rand currency

The Japanese-headquartered Nomura financial services group has presented some insights into where the rand currency is likely to be headed in its “Country Views: South Africa” third-quarter report on the currency’s risk outlook.

Emerging markets economist Peter Attard Montalto noted that as the third quarter was approaching the outlook had been similar to the last risk outlook at the end of March, when the local currency hit R9.50 to the dollar.

“However, there are some important developments to contextualise – they include the US Federal Reserve, China, mining agreements, electricity and wider wage shifts.” As South Africa entered a world of “tapering” of the Fed’s quantitative easing programme, there would be increased market differentiation on idiosyncratics and with it a risk repricing of South African assets, he wrote.

He translated this as meaning that the rand/dollar exchange rate would get more or less stuck at R10 “albeit in a volatile band, particularly to the upside” for the rest of the year before “in the long run converging with our notion of fair value down to around R9.75”. Noting that the dollar had traded around R10 since the end of May, “it is easy to forget that it is at very weak levels – this time last year it was at R8.23 and the year before at R6.67”.

Montalto thought that the market was now pricing in a large amount of risk surrounding the outlook.

This might be “implicit” rather than “explicit” risk, he believed. This he described as “a broad and fuzzy negativity” surrounding South Africa.

The prediction was that the currency was likely to move to R10.50 a dollar or so under more extreme and particularly labour-led events or R10.25 with less risk events. It would probably move down again as the market digested “the data”. The currency could possibly move into another band of weakness if there was Eskom load shedding or a Reserve Bank “mistake”, but an external shock from China or over the Fed tapering was more likely. That is good news, isn’t it?

Edited by Peter DeIonno. With contributions from Donwald Pressly and Ethel Hazelhurst.

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