Tuesday, August 18, 2009

South African Economic Crisis News Update: State Offers Loan Relief to Black Farmers; Recession Continues

State offers loan relief to black farmers

August 18, 2009
By Donwald Pressly
South African Business Report

South Africa's agriculture, forestry and fisheries department is pledging to take over operational loans on farms of emerging black farmers who are "under distress" which amount to about 10 percent of the 283 farmers facing financial troubles as identified by the land bank.

The double pronged move is also intended to salvage the land bank from certain collapse.

These farmers as a whole owe R232 million to the land bank, which falls under the treasury department. The department's spokesman Steve Galani confirmed that the operational loans amounted to about R23 million to cover the costs of operational loans of about 30 farmers.

The new agriculture minister Minister Tina Joemat-Petersson who reported at the results presentation of the land bank that the new rural development and land reform department would take over the land loans - about 90 percent of that which is owed. This was over R200 million.

The bailing out of the bank was welcomed by agriculture business chamber chief executive John Purchase and AgriSA president Johannes Moller who noted that the bailouts would reduce pressure on the land bank.

Purchase who also welcomed the announcement by the minister that government would look at merging and coordinating the work of the various development finance institutions.

Purchase noted at present that the various institutions were involved in targeting the same farmers in need and many of them shopped around resulting in duplication. The coordination of their work would remove unnecessary duplication.

Moller said the bailout could in fact rescue the land bank from going under but it was unclear where the two ministers would get the budgets from to take over the land and operational loans of the distressed farmers.

He said Joemat-Peterssen had noted during a recent meeting with AgriSA that she was considering the reestablishment of the agricultural credit agency which previous existed. This meant that farmers could loan money - at a lower rate - to pay back more expensive loans, including from the land bank.

Ben Marais, president of the Transvaal Agricultural Union which represents conservative white commercial farmers, said he was uncertain of the benefits of palming the bulk of the loan obligations onto the rural development and land reform department.

That department's mandate was to redistribute land and what had been happening was that commercial farms had been taken out of production. He was concerned that this would not change simply through this rearrangement of funding.

Joemat-Peterssen said it was of critical importance that government would not "just be throwing money into the problem and walking away." Government would not allow the distortion of normal flow of business processes to rescue individuals who were not willing to put their shoulders "behind the wheel".

SA economy stuck in recession

PRETORIA, SOUTH AFRICA Aug 18 2009 11:39

South Africa's economy remains stuck in a recession, according to gross domestic product (GDP) data released by Statistics South Africa on Tuesday.

The economy contracted once again in the second quarter of the year, according to the Pretoria-based agency.

The seasonally adjusted real GDP at market prices for the second quarter of 2009 decreased by an annualised rate of 3% compared to the first quarter of 2009.

Economist Mike Schussler said: "It is pretty much what the market expected. It shows that the slowdown has started to slow down at least. We are still in a recession, but the signs are there that we will see a turnaround before the end of the year.

"The third quarter might still be negative, but we could see things change by the end of the year."

The main contributors to the decrease in economic activity for the second quarter of 2009 were the manufacturing industry (-1,6 percentage points); the wholesale and retail trade, hotel and restaurant industry (-0,6 of a percentage point); the finance, real estate and business services and the agriculture, forestry and fishing industries (each contributing 0,5 of a percentage point).

Positive contributions by other industries included the construction industry (0,5 of a percentage point); the general government services and the mining and quarrying industry (each contributing 0,3 of a percentage point) and personal services (0,1 of a percentage point).

Carmen Altenkirch, senior economist at Nedbank, said: "Unsurprisingly, the worst-affected sectors included manufacturing, which continue to be adversely affected by both weak domestic and export demand, as well as retail and wholesale trade. Consumers remain reluctant to spend due to job losses and insecurity, still-high debt burdens and a general lack of confidence.

"Growth in government spending was supported by the government's fiscal stimulus package. The construction sector also continued to benefit from the government's infrastructure spending," she said.

"We still expect to see a further contraction in the third quarter, albeit at a much more modest pace, growth should return in the fourth quarter.

"Since the peak of the cycle, GDP has fallen by roughly 3%." -- Sapa

Source: Mail & Guardian Online
Web Address: http://www.mg.co.za/article/2009-08-18-sa-economy-stuck-in-recession

SA recession: The worst may be over

By Gordon Bell

Pretoria - South Africa's economy shrank for a third consecutive quarter in the three months to June, but an easing in the rate of decline suggested the worst of the country's first recession in 17 years may be over.

Statistics South Africa said seasonally-adjusted gross domestic product (GDP) contracted by an annualised 3.0 percent in the second quarter, in line with expectations, compared with a 6.4 percent fall in the first quarter.

Government bonds weakened on the GDP numbers.

Africa's biggest economy initially appeared to be weathering the global downturn, supported by a stable banking sector and healthy state finances, but followed other economies into decline last year.

The central bank has cut interest by 500 basis points since December in an effort to boost the economy.

"People had more disposable income after interest rates went down, but either it is that people are reluctant to spend or are servicing the debt they already have," said Kedibone Mokone, acting manager of national accounts at Stats S.A.

Stung by the global downturn, manufacturing was once again a drag on the economy, while the trade sectors also struggled despite the interest rate cuts.

Manufacturing, which comprises just under 15 percent of GDP, fell by 10.9 percent and the wholesale and retail trade sector declined by 4.5 percent. Agriculture dived a surprising 17.1 percent, its biggest fall in six years.

On an unadjusted basis, the economy shrank 2.8 percent compared with the second quarter of 2008. It contracted 2.0 percent in the first six months versus the same period last year, pointing to the first decline for a full year since 1992.

The central bank unexpectedly cut its repo rate by 50 basis points to 7.0 percent last week, raising speculation that second quarter growth would disappoint.

World Cup

Analysts said the GDP data suggested the local economy was still struggling despite the easing in monetary policy.

"The domestic economy... continues to show signs of stress, with finance and wholesale and retail trade contracting," said Razia Khan, head of Africa research at Standard Chartered.

"The apparent front-loading of spending by the authorities may be paying off -- construction growth is back in double digits -- but are the benefits feeding into the rest of the economy soon enough? The GDP data suggests not."

Construction continues to be the best-performing sector, bolstered by a government infrastructure spending programme and preparations for next year's soccer World Cup.

Mining grew by 5.5 percent in the second quarter, but was coming off a record 32.8 percent fall in the previous quarter.

The data backs up suggestions from Central Bank Governor Tito Mboweni and Finance Minister Pravin Gordhan that any recovery in South Africa's economy will lag others, after several developed countries recorded second-quarter growth.

Analysts said the Reserve Bank may be surprised the data did not come in worse than it did and would watch for signs of recovery in the third quarter to inform their next rates move.

Most analysts say the rate-cutting cycle may have ended.

Government bonds weakened. Yields had fallen sharply following last week's rate cut on chances of more policy easing.

The yield on the 2015 bond was up 7.5 basis points at 8.225 percent at 1200 GMT, from before the data was released.

(Additional reporting by Phumza Macanda, editing by Lin Noueihed)
Published on the web by Business Report on August 18, 2009.

South African economy falls again

The South African economy contracted for the third quarter in succession between April and June, the latest official figures have shown.

It shrank at an annualised rate of 3% during the second quarter of 2009, a less severe decline than the 6.4% contraction from January to March.

Manufacturing was the worst performing sector, seeing output slide 11%.

The central bank cut interest rates last week to help the economy and the government has a stimulus plan.

'Reluctant consumers'

The South African Reserve Bank trimmed its main lending rate from 7.5% to 7% on 14 August, its sixth cut since December of last year, when rates were at 12%.

Meanwhile, President Jacob Zuma's administration is spending 787bn rand ($98bn; £59bn) over then next three years on infrastructure projects.

With South Africa continuing to experience its first recession in 17 years, retail sales fell 4.5% between April and July.

"People had more disposable income after interest rates went down, but either it is that people are reluctant to spend or are servicing the debt they already have," said Kedibone Mokone, acting manager of national accounts at government agency Statistics South Africa.

Analyst Razia Khan, head of Africa research at Standard Chartered, said the South African economy was continuing "to show signs of stress".

Story from BBC NEWS:
Published: 2009/08/18 11:40:08 GMT

Metrorail strike costing millions - Chamber

August 18, 2009

Johannesburg - The Metrorail strike has cost businesses in Cape Town millions of rands, the Cape Chamber of Commerce said on Tuesday.

"The costs must run to many millions of rands," said Chamber president Jeremy Wiley.

Cape Town businesses have reported an increase in employee absenteeism, late arrivals to work and requests to go home early to avoid traffic congestion caused by the strike.

"When you add these three factors together it becomes clear that the strike is undermining productivity and the cost to business will be enormous," said Wiley.

He said the loss in productivity threatened business's ability to pay wage increases demanded by labour during other industrial action.

"We call on Metrorail and the unions to resolve the matter without delay," said Wiley.

The nationwide strike by Metrorail train drivers continued into its second day on Tuesday as unionists insisted the labour action had a "huge impact" on services.

"The service they [Metrorail] are running is a public holiday or a Sunday service. It is having huge impact because most of their train drivers are on strike," said United Transport and Allied Trade Union (Utatu) spokesman Pieter Greyling.

The Passenger Rail Agency of SA (Prasa) said the strike had mainly affected Cape Town which operated at 31 percent on Monday. Gauteng South had operated at 93 percent, Gauteng North at 89 percent and Durban at 70 percent.

Prasa said on Monday that Metrorail's overall train service performance for the morning stood at 80 percent of its regular service.

But Greyling dismissed this.

"That is pure propaganda," said Greyling.

Utatu represents between 2500 and 2800 Metrorail workers, including train drivers and most of the administrative staff such as ticket sellers.

The main sticking point in wage negotiations with Metrorail was a proposed new limitation on the number of overtime hours workers could claim, said Greyling.

"This will mean that our people could end up earning between R4000 and R6000 less per month. These people have been working this overtime for years now, and now the company wants to start limiting it."

Utatu's fellow union, the SA Transport and Allied Workers' Union, is not taking part in the strike. - Sapa

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