How far the success of South African champions Mamelodi Sundowns in attracting FC Barcelona for a friendly last month (which the fortunate scribe was invited to watch) can be regarded as a metaphor for the investment attractions of the country is probably a leisurely Castle Lager discussion. However, some resonance of the country’s actual economic situation could be found in Sundown player Esrom Nyandoro’s comment about what it is like to mark Ronaldhino: kicking (and the scribe paraphrases) the great Brazilian is straightforward. But, unsportingly, he kicks back just as hard.

It is difficult not to be impressed by the economic dynamism of Johannesburg and the appropriately named province it sits in, Gauteng (place of gold). Yet for the hyper worrier investor (guilty) there are usually things to worry about. An abundance, for example, of no-brand name ads carrying the message 'Need vehicle finance?' did not soothe. Nor for that matter, do the banners proclaiming 'Hummer is coming'.

Speculating from these and the tremendous traffic generated by the vast numbers of cars under three years old crawling between Pretoria and Jo’burg during rush-hour(s), many consumers appear to have used the prior relatively easy credit times to park a Mitsubishi Pajero in their new high security residential housing developments alongside the slightly older first-choice (pending Hummer) BMW.

Not that South Africans are alone amongst the world’s citizenry in exhibiting self-indebting luxury good expenditure behaviour when money falls from the sky; but it does look a trickier political balance to maintain in a place where 100 metres across the highway from spanking new industrial zones the sight of families living in the bush under tarps or in corrugated iron huts during winter can be contemplated. Indeed, the actual ANC leadership contest (result due in December) echos this very tension. As does, arguably, the level of violent crime.

For the industrialised part of this two-speed economy, the prime rate sits at 13% and appears, on the latest poor inflation data (6.4% ex-mortgage costs and above the 6% target ceiling of the central bank), set to go higher in August. Household debt to disposable income is circa 73%. And the latest economic indicators for Gauteng (place of gold, remember) indicate a generalised slowdown. Eish (as the locals say), liquidity may be about to kick back.

It is true that these South African mortgage and inflation rates are historically very reasonable. But the scribe suggests that a few things happened globally to debt markets and China in the last decade which might have been more determinant to this condition than the wonderful domestic changes since one-man-one-vote elections in 1994. Unfortunately, the combination of the two may yet turn out to be akin to a Girls Gone Wild Spring Break Special with the consequent post-party come downs.

Which brings the assessor of investability face to face with the obvious point that finances are amongst the least interesting things to consider in a country where politics, economics and society is still utterly dominated, one way or another, by the residue left by the appalling creature institutionalized in 1948 by Doctor of Divinity, Nazi supporter and all-round nice-guy DF Malan.

There are fine potential equity and property investments in South Africa, but they reside in an extraordinary context; and if you have ever wondered what the ‘emerging’ part of the ‘emerging economy’ label really refers to, visit Jozi and balance carefully the risk spoken by dry data alongside the broader qualitative one witnessed by the eyes.

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3 comments

  1. Charles Butler // 7/02/2007 08:58:00 PM

    Welcome back! I'm not sure it's relevant, but if you assume that 'Pajero' is a Spanish word (as it sure appears) and translate it rigorously to English - you get 'Wanker'.

    Did Messi play? Ronaldinho's brilliant, but that kid inhabits another zone entirely.

    C

  2. RJH Adams // 7/03/2007 10:33:00 AM

    C,

    Thanks. Good thing Mitsubishi don't use the Hummer marketing catchphrase in Spain with the Pajero model then: the same car is sold as a Montero in Spain (or so I read).

    Messi did not play (and the anti-Argentine Brazilians might dispute your ranking vs Ronaldhino)- don't know why. But other big names featured: Thuram, Eto, Puyol, Deco etc.

    R

  3. Charles Butler // 7/03/2007 11:28:00 AM

    Yes, it is NOW the Montero. But it took them a couple of years to catch on. All the new ones 7-8 years ago were onanists.

    C

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