What’s happening with the investors:

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If you just take a glance down the weekly return column, it looks a lot like some stuff stayed boringly constant this week (the Rand-Dollar exchange rate, the Naspers shares, the Nedgroup unit trust) – but you’d be deceived. The markets surged and fell back in the last week. So what happened?

Well the truth is, no one really knows what happens. But there are some pretty plausible explanations floating around. Namely:

  1. Well, last week, there was some positive news about foreign investment returning to SA shores.
  2. But then government data was released yesterday, showing that South Africa’s economy had grown by negative 0.6% in the last quarter. This was caused by a 24.7% contraction in the mining industry (all those strikes), and a 4.4% contraction in manufacturing (did you think that the strikes would only affect the mining industry?).

Unfortunately, strikes have ripple effects. The platinum industry has lost R20 billion in revenue, because it’s not producing. And because it’s not producing:

  • it’s not paying wages (so there’s about R9 billion worth of wages to mining workers that is not being paid, meaning a R9 billion hole in lost spending – affecting supermarkets and wholesalers and farmers and so the list goes on);
  • it’s not buying the things that the mine would use in production (like fuel, solvents, machinery replacement, rubber products, etc – so those manufacturing industries are suffering from lost orders).

In addition, because we’re talking about the quarter ended 30 March 2014, there are almost two months of strike action that haven’t hit the GDP growth figures. And with no end in sight, the drag will be signficant come the release of the second quarter growth figures.

So this leads me neatly into the indicators, and where I left off last week:

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So the only real thing to notice is the move in the GDP growth rate. Which, as mentioned, is not really positive. On the other hand, it’s also a relatively quick fix (because if the strikes would end, then activity would pick up) – and in addition, it would look like the economy is booming*.
*Because the GDP would be moving off a lower starting point… Example: let’s say that GDP goes from $50 billion, down to $40 billion, and back up to $50 billion. You start with a contraction of 20% (-$10billion ÷ $50 billion). But then the recovery is a 25% boom ($10 billion ÷ $40 billion). And it looks like things are better than ever before – even though the overall movement in time is 0%.

But it does introduce the other “context” to the political one I mentioned last week (where you look at a country’s performance relative to that of other countries).

The Historical Narrative

In this version, you look at the South African journey. So you’d take an indicator, look at its movement over time, and then come up with a plausible explanation for its movement. The GDP example above works well. Here is another:

  • The unemployment rate is higher now than it was under apartheid.
  • It’s currently sitting at 25%ish.
  • Here’s what unemployment looked like between 1970 and 2002 (according to a Reserve Bank 2003 quarterly bulletin):


And this is one of those areas where there are many plausible explanations – and most people choose to believe in one that ties in with their particular world view.

Some possibilities:

  • The Thoroughly-Racist interpretation: the ANC has completed cocked it.
  • The Anti-Globalisation interpretation: the lifting of sanctions meant that South African industries were trying to compete with their Asian counterparts. Many of those industries couldn’t compete, so they shut down, leaving their former workers unemployed – hence the higher unemployment. Adherents of this view present South Africa’s Textile Industry as a case in point.
  • The Let’s-Look-At-The-Bigger-Picture interpretation: the unemployment rate is calculated as “Number of people unemployed ÷ Number of people able and willing to work”. The increase in unemployment could be a result of more people unemployed – but it could also be the result of more people wanting to work, and not being able to*. This could be caused by a demographic change (like a large youth population become adults and starting to search for work), or a social change (like a women entering the labour force).
    *Some calculations: let’s say that the work force is 10,000 strong, and 1,000 of those are unemployed. That’s an unemployment rate of 10%. Then let’s say that 3,000 women enter the work force, but there are no jobs for them. New unemployment rate = 4,000 unemployed people ÷ 13,000 workers = 31%.

There are other interpretations. But those are the ones that came to mind this morning.

But this is where the data gets exciting (sort of). Because it starts to mix with politics.

Until next week.