As my first blog after the LIFE series, I need to be careful of my mood. It could influence the way I present myself.
On 2 May, ABSA published its Home Ownership Sentiment and it has made interesting reading amongst other documents that flow across my desk. It has found itself sandwiched between four important announcements: the outcome of the election, the GDP growth number for Q1:2019, the SARB MPC decision, and the composition of Cabinet. May I say that another really interesting and unfolding story is the resignations of unsuccessful MP’s from President Ramaphosa’s government? Perhaps a comment on that later.
“Gevang met a slap riem”, the saying goes. ABSA, and frankly every economist I have read, was caught out by the -3.2% GDP growth in the first quarter economy. Some expected negative growth, but at the beginning of 2019 we were preoccupied deciding whether the year’s GDP growth would be more than or less than 1%. The news “klapped” us, using another lekker Afrikaans idiom. All of a sudden, we have revised, from the IMF to Moody’s and the others, down to below 1% for the year. No Ramaphoria this time round, but I must be honest, I felt sorry for him. Imagine fighting a grueling election campaign where your front and your back are exposed, to hear this news. Goodness me, it must have been tough! But, on the other hand, a huge wake-up call that, frankly, the ANC and its constituents have not even yet heard. Bottom line, ABSA had no inkling as at 2 May either when they projected 1.3% growth.
Secondly and briefly [see blog: Election 2019] for the sake of context, the Election results were really mixed. The ANC at its lowest majority, the DA bleeding but retaining the Cape, the EFF positive, and new kids like ATM [I do not know whether to say “appropriate” or “unfortunate” when it comes to this abbreviation for the African Transformation Movement] and Good [“cute”, I thought] in parliament. And now the broad swipe at the DA as “Auntie” Patricia takes over Public Works….. Fact is by all accounts, that CR gave the ANC this 58% break but it was not enough to silence his critics and we’ve seen the truth of that almost every day in the Press.
Thirdly, the SARB decision. Remaining the same was a good one but more enlightening was the dovish sentiment around inflation and rates. Inflation rises on strong demand and there isn’t any; frankly, I get the sense that only Financial Services are flying. Growth in the Manufacturing, Mining and Agricultural sectors was down -5%, -8% and -13% respectively. That’s a crisis in any other country and so it is here – the only good news is that it softens inflation. What emanates from that is the SARB saying that with inflationary pressures being weak, they may be able to reduce interest rates in order to stimulate economic growth. Sad that a crisis leads to rate reductions but we’ll take it, won’t we? By the way, this possibility is against the backdrop of all the major banks calling rates to remain the same for the balance of the year.
And finally, the composition of the Cabinet. In Election 2019, I wrote:
I think he will produce a Cabinet who are worthy to represent us. I also happen to think that Cyril Ramaphosa is the best person in the country for the job and, heaven knows, he better be and he better be selected. Anyone less would be a national body blow of titanic proportions. I think he will reduce the Cabinet but he will not be able to ignore everybody who we may consider tainted by some misdemeanor; he just won’t have that luxury right now but having said that, he needs to try. We will know in the next few days.
We know now. He has been selected and I’m relieved after the sensationalism of May’s coverage. However, he was not able to drastically reduce Cabinet and shave much-needed cost reductions. Nor was he able to leave some people out despite coverage to the contrary. Mr. President knows he needs to watch his back as many seem to not have it. That said, what do you think all these resignations are about? Apart from Jeff Radebe who is going to enjoy a “more normal life”, the rest all feel like they are resigning in a fit of pique. The useless ones and the not so useless ones have decided to throw in the towel. I guess it’s quite hard to mix with the riff-raff MP’s when you’ve been a Minister; but, on the other hand, they may feel that they have had their genius and competence overlooked by their panoptic [read: seeing the whole at one view, a word I recently read in a mega-cynical article on the Cabinet size and choices] President. Whatever their reasons, individual or corporate, I trust there is nothing sinister lurking in their choices. Fact is the Cabinet is too big to save costs but reduced enough to demonstrate the need. In the final analysis, the vote of these members could prove more important to CR than what they cost and in any case, what they accomplish for their salary and perks is more important than what they draw from your and my tax revenues – nothing costs more than incompetence and corruption.
So, to return to the Ownership Sentiment paper, everything is down quarter-on-quarter. The sense of buyers being willing to buy because prices are cheaper is offset – in Hermanus at least – by the fact that people are not buying. A live example: A beautifully renovated house 800m from us was on the market for R6.9m. Reduced to R6.5m, they have had a “cheeky” offer of R5.6m cash which is under cost. In 6 weeks 23 couples have viewed the house with only this offer presented. Everybody else liked and left the house. One year ago, this house would have been snapped up in two months at little discount to the asking price. What is real is that politics and economics intersect to create Confidence. At the moment, that intersect is just too low for the commitment that confidence brings.
But there is one silver lining to this cloud and that is the banks’ willingness to lend. I am really impressed at the conversion ratio, whether by “first bank” or “secondary bank”, of homeloan applications and by the rates on offer. There is no doubt that things could be worse. The banks are bringing their part in this property market. We appreciate that sincerely.
2019 was never going to be easy. Elections were the big gorilla but now he is sitting in the corner resting. I guess that leaves us in the room. Are we going to join him, sulking, complaining, wondering and wandering? The temptation is to find the reason why “it’s hard”. But please, don’t! Get up, look up and press on – if you don’t, someone else will and you will become the double-loser. That must not happen! This too will pass……..