SI BRW E1 080112 p01€¦ · sunday, january 8 2012 business report south africa’s national...

www.businessreport.co.za SUNDAY, JANUARY 8 2012

BUSINESSREPORTSOUTH AFRICA’S NATIONAL FINANCIAL DAILY

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Conferenceswill fine-tuneANC policyDonwald Pressly

THE YEAR ahead for the ANCwill be a momentous one, start-ing with the centenary state-ment in Bloemfontein/Man-gaung today where PresidentJacob Zuma will recapture thehistorical highlights while por-traying a vision for the future.

The year, however, is likelyto be a little bit of a tug-of-waras the ANC battles with its sus-pended Youth League (ANCYL)leader Julius Malema. He islikely to pop up all over theshow testing the limits of theparty’s resolve to sideline him.

Much of the political the-atre will be a repeat of theyears when Zuma himself, dis-missed as deputy president ofthe country by then presidentThabo Mbeki, popped up to sitnext to his nemesis atconferences of the movement –including the 2006 nationalgeneral council.

Watch the benches of theleadership as Malema makeshis public entrance at the pub-lic events on this year’s calen-dar, including today’s state-ment, the policy conferenceand the elective conference atthe end of the year.

It could be a messy ride. It istoo early to tell whether Zumawill be re-elected as ANC pres-ident or whether he will facean opponent at the elective con-ference, likely to be at the Uni-versity of the Free State inBloemfontein in December.

At the moment it looks as ifZuma will be unopposed asthere is no obvious candidatewho would carry a bigger con-stituency than he still does.

Ironically, a Zuma win willprobably mean that policy posi-tions under attack, such as aprudent approach to themanagement of the fiscus, willbe cemented.

Malema’s and the ANCYL’ssupport for nationalisation ofmineral resources and collec-tivisation of land will probablybe watered down drastically.

The chances are that theteam appointed by the ANC na-tional executive committee tostudy nationalisation optionswill come up with plans forgreater state involvement inthe mining sector, but the statehas already set up a state min-ing company, adding to anexisting one which is involved

in diamond mining.The policy and elective con-

ferences will fine-tune govern-ment thinking on economicmatters. Economic Develop-ment Minister Ebrahim Patel’sNew Growth Path, and the na-tional planning commission’slong-term national develop-ment plan, differ in the sensethat Patel’s plan sees a greaterrole for the state in the econ-omy and the creation of jobs.

The commission – whose po-litical boss is Planning Minis-ter Trevor Manuel – sees a part-nership role for the state andbusiness in creating jobs anddriving growth.

Resolution of the Walmart-Massmart matter will providesignals as to whether or notSouth Africa is viewed asfriendly to foreign directinvestment.

It is expected that, sometime in January, Judge DennisDavis, the Competition AppealCourt judge, will announce adecision on Walmart’s pur-chase of a controlling stake inMassmart. In November hegave a guarantee “that it will beout by the end of January”,Bloomberg reported.

Last May, the competitiontribunal authorised Walmart,based in Arkansas, to buy a51 percent holding – forR16.5 billion – in Massmart, afood and general goodswholesaler. Trade unions,including Cosatu-alignedunions, argue that jobs will belost as Walmart is known tosource the cheapest products,usually from abroad.

The Competition Tribunalgave its approval for the sale,subject to a moratorium on re-trenchments for two years.

In October the ministers ofAgriculture, Forestry andFisheries, Tina Joemat-Petters-son; Economic Development,Ebrahim Patel; and Trade andIndustry, Rob Davies, arguedthat the acquisition of

Massmart “can have a poten-tially devastating effect on localjobs and the transaction shouldbe sent back to the CompetitionTribunal for a proper consider-ation and more effective condi-tions to be imposed”.

The Minister of EconomicDevelopment specifically ar-gued that he was bound by thelaw and the constitution to in-tervene in the appeal by the SACommercial, Catering and Al-lied Workers’ Union, to ensurerealisation of the objectives ofthe Competition Act. Daviessaid there was no evidence toMassmart’s claim that the dealwould create 15 000 jobs in thenext three years. Instead, he ar-gued Walmart’s growth waslikely to come at the expense oflarge numbers of jobs inmanufacturing.

Had Walmart been com-pelled to provide more informa-tion on the growth of imports,the true extent of job losses inSouth Africa would have be-come evident, he argued.

Joemat-Pettersson said theimplications of a displacementof local suppliers by Massmartwere well understood by theagriculture sector “in terms oflost income and likely losses ofjobs”. It appeared that in someindustries this had alreadytaken place since the merger.

She cited the example ofolive farmers who had beenadvised that they should notexpect orders from Makro – aMassmart subsidiary – forlocally produced olive oil asthey intended to importcheaper products.

No case tests South Africa’strade policy – and friendlinessto foreign direct investment –better than the Walmart/Mass-mart deal. Its outcome will in-dicate how friendly the countryis to business or whether a pro-tectionist stance is likely to befollowed in future.

As Europe, one of thecountry’s biggest tradingpartners, battles to resolve itsdebt and currency problems,pressure will grow on the gov-ernment to move to a protec-tionist stance.

Curiously it will be thecourts – arguably more thanthe elective and policy confer-ences of the ANC – which willplay a guiding role in the eco-nomic direction which SouthAfrica will follow.

There is no evidenceto Massmart’s claimthat the deal wouldcreate 15 000 jobs inthe next three years.

Lagarde praises SA’s efforts tocreate jobs, says euro will staySungula Nkabinde

CHRISTINE Lagarde, the manag-ing director of the InternationalMonetary Fund (IMF), said 2012would be a difficult year forSouth Africa, especially in thelight of persistent unemploy-ment and the potential impact ofthe euro debt crisis.

Euro zone leaders have beenstruggling to solve the region’ssovereign debt crisis that beganwith Greece in 2009 and hasspread to Italy, threatening topush Europe into recession andpull the euro apart.

Lagarde, in South Africa aspart of her first tour of thecontinent since taking the IMFpost, said that the fund wouldbe likely to revise downwardsits 4 percent growth forecast

for the world economy in 2012. Even so, she dismissed specu-

lation that 2012 would see theend of the euro.

“Will 2012 be the end of theeuro currency? I seriously don’tthink so. It’s a young currency;it’s a solid one as well,” shesaid after a breakfast meetingon Friday with Finance MinisterPravin Gordhan.

“You have within the zone,not in relation to the currency,

serious pressure and issuesconcerning the sovereign debt,concerning the strength of thebanking system, which arebeing addressed. But the cur-rency itself is not one thatwould vanish or disappear in2012. Not at all,” said Lagarde.

Lagarde lauded the SouthAfrican government’s focus onunemployment and labour-intensive job creation saying itwas the correct policy, addingthat attempts to deal withyouth unemployment, in partic-ular, were not isolated to SouthAfrica but a global issue.

Gordhan said more actionwas needed globally to addresscurrency volatility resultingfrom the euro zone crisis.

“Clearly the current weak-ness in the currency is beneficial

for exporters, but it has the flip-side effect of inflationary pres-sures that the Reserve Bank hasto deal with,” he said.

Martyn Davies, chief execu-tive of the emerging marketspecialist firm, Frontier Advi-sory, said it was about timethat institutions like the IMFstarted forging meaningfulrelationships with the emergingmarket world. “I think this visitreflects the shift in the geo-political and geo-economicshifts in power to emergingmarket economies.”

Lagarde was due to meetReserve Bank Governor GillMarcus later on Friday andPresident Jacob Zuma yesterdayon the sidelines of the ANC’scentenary celebrations inMangaung.

Walmartvows tohelp SAsave withlow costsNompumelelo Magwaza

WALMART, which is in thethroes of finalising its takeoverof Massmart, fired anothersalvo on the price-cutting front,just in time for the back-to-school rush.

The world’s biggest retailerand Massmart on Friday an-nounced that its latest ex-tended price-cutting promotionwill begin today, covering awide mix of merchandise, in-cluding school clothing andprinters. The retailers said theprevious two promotions hadalready saved consumers morethan R100 million.

Today’s special offer, whichruns until March, illustratesWalmart’s shrewd merchandis-ing strategy, coming at a timewhen most consumers are un-der financial strain followingwild spending over the recentfestive season.

According to Massmartchief executive Grant Pattison,this once again reflects thehigh priority that Massmart-Walmart places on the SouthAfrican consumer, starting byextending competitive pricingin order to generate savings forordinary South Africans.

“The Walmart perspective isthat the customer is numberone and the intensity withwhich they drive this focus isquite remarkable and perme-ates their approach to every-thing,” said Pattison.

“An early Walmart successhas been their ability torelentlessly challenge our buy-ers to become even more fo-cused and energised to deliverand, more importantly, meas-ure opportunities that theyhave identified to save cus-tomers money,” he added.

Walmart’s takeover of Mass-mart is currently bogged downat the Competition AppealCourt after unions and the gov-ernment objected to it on thegrounds that it would lead tojob losses, a claim that bothMassmart and Walmart denied.A ruling on the appeal is ex-pected by the end of January.

Finance Minister Pravin Gordhan, left, walks to a press conference with the managing director of the International Monetary Fund, Christine Lagarde. Thepress conference was held in Pretoria on Friday. Lagarde was in the country for a two-day visit during which she was to meet with Gordhan, Reserve Bankgovernor Gill Marcus and President Jacob Zuma. PHOTO: SIMPHIWE MBOKAZI

❚❚ Nationalisation again under investigation

Agricultural and commodity prices expected to stay high despite economyAyanda Mdluli

THE AGRICULTURAL sectorharbours some good and badnews for the new year as pricesfor commodities, such as grainand chicken, are expected to re-main high, thanks to the in-creased volatility in food prices.

Grain and meat prices in-creased considerably last yearand saw food inflation riseabove the level forecast. GrainSA said inflation was at32.7 percent year on year. Grainproducts had risen by as muchas 13.4 percent, while maizehad risen by up to 60 percentsince March last year.

White maize is now fetchingaround R2 680 a ton and yellow

maize just over R2 600 a ton. In2012, South Africa will go frombeing an exporter to an im-porter of grain.

Absa Business Bank’s agri-cultural outlook said world agri-cultural and commodity priceswould remain elevated, despite adepressed global economy.

Ernst Janovsky, agribusinesshead at Absa Business Bank,said most issues that plaguedthe sector last year were likely toremain prevalent this year, asnot much had been done to im-prove infrastructure and trans-port costs, that would play a bigrole in keeping prices in check.

But oil price increases andexchange rates were uncontrol-lable factors, he said. “To some

extent we will experience thesame problems as last year.”

Janovsky downplayed thesignificance of a grain shortage,and maintained there was stillenough grain in the silos. Goodrains late last year corroboratedhis views. The only downsidewould be that consumers wouldhave to pay more as farmersheld on to their stocks, waitingfor the next price increase.

For 2011, a shortfall of atleast 200 000 tons of grain waspredicted. In its forecast for2012, Grain SA said there wouldbe a shortage of 143 000 tons ofwhite maize, largely used forhuman consumption, and60 000 tons of yellow maize,used for animal feed. The likely

shortfall was blamed ondrought and over-exporting.

Agriculture also faced chal-lenges that had to be managed,such as market risk, which in-cluded price, storage and pro-duction risk, Janovsky said.

He cautioned that SouthAfrican farmers faced a 60 per-cent-plus price exposure to theoutside world. This scenariowould oblige farmers tobecome players in the globalmarket, which resulted in littlecontrol over pricing levels.

There were also factorswhich influenced prices overwhich they had no control, suchas international productiontrends and farming subsidies,and import and export tariffs.

But rand strength is likely toprovide a cushion by putting alid on inflationary pressuresstemming from imports.

This would create “some lee-way for further interest-ratecuts. Interest rates will remainrelatively high, if compared toinflation, in a bid to draw capi-tal to South Africa. The ex-change rate should tend tosoften, especially against theeuro, while holding firmagainst the dollar”.

Investment opportunitiesexist in agriculture, as interestrates are historically low andmachinery can be importedcheaply. But the sector’s out-look will be dictated by whathappens to food prices.

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Source: Absa

Domestic maize production and trendsThousands of tons : rand/ton 1980-2015

18 0002 500

500

1 000

1 500

2 000

3 000

80

Consumption Production Ending stock SA white maize SA yellow maize15100500959085

6 000

9 000

12 000

16 000

2012will not see the endof the euro, saysIMF boss Lagarde

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