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