- South Africa GDP Growth Slows to 0.2%
South Africa’s economic growth slowed in the third quarter as factory production and trade contracted, complicating the government’s task of boosting output to avoid a possible credit-rating downgrade to junk next year.
Gross domestic product expanded an annualized 0.2 percent in the three months through September compared with upwardly revised growth of 3.5 percent in the preceding quarter, the statistics office said in a report released on Tuesday in Cape Town. The median of 19 economist surveyed forecast 0.6 percent growth compared with unrevised expansion of 3.3 percent in the second quarter. The economy expanded 0.7 percent from a year earlier.
S&P Global Ratings last week affirmed the nation’s BBB- assessment, the lowest investment-grade level, while warning that political turmoil has distracted from reforms to boost growth. The economy will probably expand at the slowest pace this year since a 2009 recession. Slow growth will make it more difficult for Finance Minister Pravin Gordhan to meet his pledge to narrow the budget deficit to 2.5 percent of GDP by 2020, from a projected 3.4 percent this year, and to limit government debt, according to Nicky Weimar, an economist at Nedbank Ltd.
“The only conclusion you can draw from a 0.2 percent growth rate is that there is no momentum and it seems to suggest there is very little underlying confidence,” Weimar said by phone. Ratings companies want to see “that we start to implement the sort of policies that will get us to a faster growth rate,” she said.
Factory output, which makes up about 13 percent of GDP, contracted by an annualized 3.2 percent from the previous quarter and trade shrank by an annualized 2.1 percent, the statistics office said. Mining production rose 5.1 percent and the finance industry expanded by 1.2 percent.
Gordhan, 67, has been leading efforts to avoid a cut to junk while wrangling with President Jacob Zuma over control of the Treasury and state-owned companies. That and delays in passing new mining and anti-money laundering laws and a failed attempt by senior African National Congress officials last week to oust Zuma have fueled perceptions of political turmoil and policy uncertainty.
Low commodity prices, the worst drought in more than a century and weak export demand have weighed on output and the economy will probably expand 0.4 percent this year and 1.2 percent in 2017, according to the central bank. That won’t create the jobs required to reduce the nation’s 27 percent unemployment rate, Governor Lesetja Kganyago said on Nov. 30.
“It’s certainly not enough growth to assist with the social issues like unemployment or income growth and this will keep ratings agencies nervous about the country’s rating,” Kevin Lings, chief economist at Stanlib Asset Management Ltd. in Johannesburg, said by phone. “It’s clear that South Africa is facing a crisis in economic activity.”
The rand gained 0.6 percent to 13.6511 per dollar by 10:37 a.m. in Johannesburg on Tuesday. Yields on rand-denominated government bonds due December 2026 fell three basis points to 8.95 percent.
Scarcity of Day-Old-Chicks Cripple Poultry Farmers in Akwa Ibom
Despite billions of Naira spent on Akwa Prime Hatchery and Poultry Limited by the Executive Governor of Akwa Ibom State, Udom Emmanuel, poultry farmers in the state said they had to order day-old-chicks from outside the state as the 200,000 capacity poultry farm developed specifically to make day-old-chicks and other poultry products available at affordable prices is almost empty at the moment.
The farmers expressed frustration over many challenges they face in the course of bringing day-old-chicks from outside the state. Usually, Ibadan, Enugu and sometimes as far as Kaduna, while the hatchery built and inaugurated in 2016 remains idle.
Mr Ekot Akpan, one of the poultry farmers who spoke with the pressmen said the state had not had it this bad.
Akpan said: “For the 12 years that I have been in poultry farming, this is the first time that poultry farmers have been so harshly affected by both economic and non-economic factors. And, quite unfortunately, nobody is available to offer any explanation.
“Farmers have been left at the whims and caprice of owners of the means of production.
“There seems to be no government regulation of the poultry industry. How, do you explain a situation where you wake up suddenly and the price of a day old chick is selling for N600, a bag of feed goes as high as N6,000.
“And, in a state that government claims to be pursuing agriculture as one of his cardinal programmes.
“For instance, in 2016, the state government said it has constructed an hatchery, and the intention according the government was to ensure availability of day old chicks at affordable price to farmers, but, quite, unfortunately, that effort has not yielded any tangible result.
“Farmers are still getting their day old chicks from Ibadan, Kaduna, and Enugu. So, the question now is where is the hatchery?
“One would have expected that farmers would be buying old chicks at humane prices, but, from all indications they acclaimed hatchery is a ruse. So, which one is the Akwa Prime Hatchery producing,” he said.
CBN Predicts 2 Percent Growth for Nigeria in 2021
Despite the economic recession and numerous uncertainties encompassing Nigeria in recent months, the Central Bank of Nigeria (CBN) has said the nation will grow by 2 percent in 2021.
Speaking at the 2020 bankers’ dinner organised by the Chartered Institute of Bankers of Nigeria (CIBN), Godwin Emefiele, the Governor, CBN, said implemented government intervention programmes will aid the nation’s recovery by next year.
Emefiele further stated that the intervention efforts represent around 3.5 percent of Nigeria’s current Gross Domestic Product (GDP).
He said, “Our actions in 2021 would be guided by the considerations that emerged from the Monetary Policy Committee meeting of November 23 & 24, 2020, which sought to address the major headwinds exerting downward pressure on output growth and upward pressure on domestic prices.”
On fast declining foreign reserves, the Governor said the institution has adopted a demand management framework designed to boost the production of items that can be produced locally and aid conservation of external reserves.
“Due to the unprecedented nature of the shock, we continued to favour a gradual liberalisation of the foreign exchange market in order to smoothen exchange rate volatility and mitigate the impact which rapid changes in the exchange rate could have on key macro-economic variables,” Emefiele stated.
The CBN projection came few weeks after the National Bureau of Statistics (NBS)’s report showed Africa’s largest economy contracted by 3.62 percent in the third quarter following a 6.10 percent decline posted in the second quarter. Nigeria officially slid into the worse economic recession in almost 30 years and the second economic recession under the current administration.
While, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, has projected that Nigeria would rebound from the recession in this final quarter or the very first quarter of 2021, falling revenue generation, rising capital flight amid weak demand due to the negative impact of coronavirus on earnings, household incomes and lack of jobs remain a concern.
COVID-19 Vaccine: Crude Oil Extends Gain to $48 Per Barrel on Wednesday
Oil prices rose further on Wednesday as hope for an effective COVID-19 vaccine and the news that the United States of America’s President-elect, Joe Biden has begun transition to the White House bolstered crude oil demand.
Brent crude oil, a Nigerian type of oil, gained 1.63 percent or 78 cents to $48.64 per barrel at 11:50 am Nigerian time on Wednesday.
The United States West Texas Intermediate (WTI) crude oil rose by 1.36 percent or 61 cents to $45.52 per barrel.
OPEC Basket surged the most in terms of gain, adding 3.16 percent or $1.37 to $44.75 per barrel.
This was after AstraZeneca, Moderna and Pfizer-BioNTech announced the positive results of their trials.
Moderna and Pfizer had claimed over 90 percent effective rate in trials while AstraZeneca said its COVID-19 vaccine was 70 percent effective in trials but could hit 90 percent going forward.
“The possibility of having a vaccine next year increases the odds that we’re going to see demand return in the new year,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.
Also, the decision of President-elect Joe Biden to bring Janet Yellen, the former Chair of Federal Reserve, back as a Treasury Secretary of the United States is fueling demand and strong confidence across global financial markets.
“President-elect Biden’s cabinet choices, particularly Janet Yellen’s Treasury Secretary position, are adding to upside momentum across a broad space of asset classes,” said Jim Ritterbusch of Ritterbusch and Associates.
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