South Africa&#8217;s Treasury said on Wednesday it supported the report by a government-appointed advisory panel that suggested a national minimum wage of 3,500 rand ($245) per month, throwing its political weight behind the policy initiative. 
&#8220;The report represents &#8230; an important milestone in our government&#8217;s efforts over the years in this regard,&#8221; Finance Minister Pravin Gordhan was quoted as saying in a statement.
Supporters of a minimum wage say it can stimulate growth as workers can spend more while reducing inequality. Critics say it could lead to increased unemployment as employers will be unable to afford higher wage bills.
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South Africa's Treasury supports minimum wage recommendation

South African opposition parties on Sunday urged President Jacob Zuma to report acts of corruption after the scandal-plagued leader said he knows who is stealing public funds.
Since coming to power in 2009, Zuma has survived a string of corruption scandals almost unscathed, but this month the country&#8217;s anti-graft watchdog called for a judicial inquiry into allegations of influence-peddling in the ANC government.
Zuma, in a bid to cement support in his home province of Kwazulu-Natal, on Friday told supporters in Zulu: &#8220;I know they are stealing. I&#8217;m just watching them. I know them,&#8221; local media reported.
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Both the Democratic Alliance (DA) and the Economic Freedom Fighters (EFF), the nation&#8217;s two largest opposition parties, on Sunday called on Zuma to share the information he has with authorities.
&#8220;President Jacob Zuma has a legal duty to report, to the law enforcement authorities, those who he knows to be engaged in criminal behaviour,&#8221; DA-leader Mmusi Maimane said in a statement.
The DA, which tabled a failed no-confidence motion against the president in Parliament last week, filed a criminal complaint against Zuma on Tuesday and will ask the police to also &#8220;investigate those people known by the President to be stealing&#8221;, Maimane said.
Zuma must immediately report those stealing public funds, otherwise the EFF too will lodge a criminal complaint against the president, the EFF said in a statement.﻿

South Africa's opposition parties urge Pres. Zuma to report corruption

The first week of November 2016 will be a part of South African political discourse for some time to come and will mark potential beginnings or certain endings for the ruling African National Congress (ANC) as it considers just how to deal with the folly and the flaws of its leadership, particularly those of President Jacob Zuma.
If there had been some wiggle room before developments on Wednesday, November 2, inside and outside of the Gauteng North High Court, that is no longer the case and the brutal choice now facing the ANC is: does the party survive or does Mr Zuma? Because it cannot be both.
The past few weeks have seen an unprecedented shift inside the ANC and its alliance partners that has sought to separate loyalty to the ANC from loyalty to its current leadership, specifically but not exclusively Mr Zuma.
The release on Wednesday of outgoing Public Protector (PP) Thuli Madonsela’s report into ‘State Capture’ marks a point of no return.
While the party’s National Executive Committee (NEC), as well as the Youth and Woman’s Leagues, remain weighted in Mr Zuma’s favour, that position is becoming increasingly untenable and isolated.
The rising internal opposition to the current leadership is gaining momentum and the weight and opinion of this dissenting movement was immeasurably strengthened by Wednesday’s developments, mainly because what we all just suspected to be possible was manifestly demonstrated to be almost certainly true.
The nuts and bolts of the PP report conclusions may well take most of 2017 to play out, but the ANC cannot wait that long and hide behind due process and most likely several more delaying tactics, because that is merely going to accelerate the disintegration of the ANC and the alliance (insofar an alliance with labour and the Communists can still be said to exist).
Too many struggle heroes, and current and former leaders, are lining up to make a strong distinction between the moral and principled ANC of old and the current incompetent, lost and corrupt leadership and demanding the ANC be saved from itself.
The local authority elections demonstrated that this enlightened leadership and internal critics do not stand alone. The public defence of Mr Zuma by his own spokespersons had become lukewarm and contradictory.
The single most important conclusion to flow from developments this week – including the decision to drop fraud charges against Finance Minister Pravin Gordhan and the legal developments that followed with regard to the PP report of state capture – is that the ANC will almost certainly lose elections in 2019, unless it acts to clean house comprehensively and swiftly, while ending any bid by the Zuma faction to control the succession and install the president’s former wife as ANC leader.
Thuli Madonsela’s outgoing report on her investigation into allegations of state capture and undue political influence by the Gupta family directed Mr Zuma to appoint a judicial commission of inquiry, but set safeguards to ensure he would have no control over that process.
The PP report states that the commission must be headed by a judge selected only by Chief Justice Mogoeng Mogoeng. The report directs:
<ul>
<li>That Mr Zuma appoints the commission of inquiry within 30 days;</li>
<li>That the National Treasury must ensure that the commission is adequately resourced;</li>
<li>That the presiding judge to be given the power to appoint his or her own staff and to investigate all the issues “using the record of this investigation and the report as a starting point”;</li>
<li>That the commission of inquiry should be given powers of evidence collection that are no less than that of the Public Protector; and</li>
<li>That the commission report with findings and recommendations should be presented to the president within 180 days.</li>
</ul>
The PP report, which has been at the centre of numerous court battles and which the Gauteng High Court finally ordered to be released on Wednesday, details numerous situations where Mr Zuma and members of his executive acted in “a questionable manner, often seemingly to the advantage of the Gupta family.”
Those implicated in the report include Mr Zuma, Eskom board chairperson Ben Ngubane, Duduzile Zuma, Ajay Gupta, the Gupta-controlled Tegeta Company, Minister of Public Enterprises Lynne Brown, former minister of finance Des van Rooyen and Minister of Minerals and Resources Mosebenzi Zwane.
The details of the PP report have been extensively reported in the news and need no repeating here but several findings suggest that the National Prosecuting Authority (NPA) will be required to conduct criminal investigations into the activities of those named, including Mr Zuma.
The PP report found it to be of concern “that the Gupta family was aware or may have been aware” of Mr Nene’s removal as the finance minister prior to it happening and that it was “equally worrying” that Mr Nene was removed after Deputy Finance Minister Mcebisi Jonas – who said he was offered the job by the Gupta family at a meeting at their home – told him about the offer.
The failure of the authorities to act on Mr Jonas’s public disclosures about the alleged offer in return for further enriching them with state business could contravene the Prevention and Combatting of Corrupt Activities Act and should have been investigated.
The report says: “If the Gupta family knew about the intended appointment it would appear that information was shared then in violation of section 2.3(e) of the Executive Ethics Code which prohibits members of the executive from the use of information received in confidence in the course of their duties or otherwise than in connection with the discharge of their duties.”
Nor did authorities take any steps to investigate the allegations made by former ANC MP Former MP Vytjie Mentor that she too was offered a Cabinet position by the Gupta family and to persistent allegations regarding an alleged cosy relationship between Eskom CEO Brian Molefe and the Gupta family. This appears to be another violation of the Corrupt Activities Act, as well as a violation of Section 195 of the Constitution on relevant State functionaries. 
What is clear from the PP report is that there were several instances where the relevant authorities (i.e. the Hawks and the NPA) should have investigated serious allegations of corruption and violations of various other laws yet nothing was done, but Mr Gordhan and two SARS officials certainly got their fair (or unfair) share of attention.
What is clear from the report is that Ms Madonsela had no faith in Mr Zuma to oversee any investigations or inquiries into the State capture allegations and has directed the Chief Justice take care of appointing an official. That is a damning indictment.
What is clear is that Mr Zuma and Ministers Van Rooyen and Zwane, who attempted to hide the report from public view, must be investigated for breaking the law.
What is less clear is what the ANC will do now to save itself, with its leadership and reputation in tatters.
Does it choose Mr Zuma and the other tainted leadership, or does it opt to self-destruct? What will the many honest men and women of integrity and passion do to save the movement?﻿

OPINION: South Africa – ANC running out of excuses and options

South Africa&#8217;s is making little progress in turning around the economy as political wrangling delays the implementation of reforms, raising the risk of a credit downgrade to sub-investment grade, S&amp;P Global Ratings said on Thursday.
&#8220;If things deteriorate further it becomes difficult to continue believing that government can implement the things they say want to do, that they can turn around the economic situation,&#8221; said Gardner Rusike, the associate director for S&amp;P global ratings.﻿

South Africa making little progress in economic reform: S&P

PRETORIA (Reuters) &#8211; South African President Jacob Zuma on Wednesday dropped his court bid to delay the release of a report over alleged influence peddling in government as thousands marched in the capital Pretoria against the president. The court ordered the report to be released by 5pm CAT on Wednesday.
The report is currently available here:
<a href="/files/ZA-StateCapture/StateCapture.pdf">/files/ZA-StateCapture/StateCapture.pdf</a>
<a href="/files/ZA-StateCapture/Annex1.pdf">/files/ZA-StateCapture/Annex1.pdf﻿</a>
The rand strengthened more than 1 percent and bonds firmed in response to the news of the withdrawal, which analysts said was an indication the country still had strong institutions.
The release of the report by the Public Protector, a constitutionally mandated anti-graft official, was suspended on Oct. 14 after Zuma&#8217;s application to the High Court. The hearing, which started on Tuesday, was due to continue on Wednesday.
Thousands of people gathered at various points in the city. Some carried &#8220;Zuma must go&#8221; placards outside the court that was to decide on Zuma&#8217;s bid to delay the report on allegations of political influence by his wealthy friends. 
&#8220;My instructions are to withdraw the application and to tender costs,&#8221; Advocate Anthea Platt, without giving reasons. Zuma&#8217;s spokesman did not answer phone calls, email or text messages for comment.
Protesters also demanded that state prosecutor Shaun Abrahams be removed from office. Abrahams had pressed charges of fraud against Finance Minister Pravin Gordhan, but then dropped them on Monday after popular support from both the political and corporate realms for Gordhan.
Supporters of Gordhan and sympathetic financial analysts say all the charges could be a ploy by Zuma and his allies to discredit a finance minister who stood in the way of their securing access to lucrative government contracts. The president has denied that he is in conflict with Gordhan.
Since taking office in 2009, Zuma, 74, has survived several corruption scandals almost unscathed, with the backing of top echelons of the ruling African National Congress (ANC).
But South Africa has had to bear the cost as the economy has stagnated and investors worry about its political stability, business climate and rule of law.
&#8220;This means Zuma must now step down,&#8221; said Azaria Khambani, 33, a security guard taking part in the protests when he heard that Zuma had withdrawn the court challenge.
Jay Jacobs, 40, who also works in the security industry, said: &#8220;We will not leave Pretoria until Zuma goes. He must take the Guptas with him to jail.&#8221;
Brothers Ajay, Atul and Rajesh Gupta, who are close friends of Zuma and run businesses ranging from media to mining, are the subject of the report by the then Public Protector on allegations that they influenced the appointment of ministers.
Zuma has denied granting them undue influence and they have denied seeking it.
 (Writing by James Macharia; Editing by Tom Heneghan)﻿

State Capture report released as South Africa's Zuma withdraws application to delay report

South African Finance Minister Pravin Gordhan declined on Thursday to say whether he was confident of the political support of the ruling ANC, less than a week before he must answer fraud charges in court.
Gordhan said he had tried not to let the case distract him while preparing a mid-term budget presented to parliament on Wednesday.
Gordhan is accused of fraudulently approving, in a previous stint as head of the revenue service, early retirement for a deputy tax commissioner and re-hiring him as a consultant, costing the tax agency 1.1 million rand ($79,000).
He has denied any wrong-doing, saying the case is politically motivated, a sentiment echoed by opposition parties, business leaders and some senior ANC figures. The state prosecutor has rejected allegations of political interference.
Asked during a post-budget breakfast meeting whether he was still confident he had political backing, Gordhan said: &#8220;I&#8217;m not trying to duck, but I&#8217;m not going to answer it.&#8221;
Gordhan, who on Wednesday slashed growth forecasts for the next three years and predicted wider budget deficits than previously expected, said he was not preoccupied with whether he had done enough to stave off credit rating downgrades.
&#8220;Our preoccupation is not rating agencies. Our preoccupation is putting the country on the right footing,&#8221; Gordhan said.
&#8220;If we build confidence to the point where we get investment going &#8230; everybody including ratings agencies will believe that we as a government are doing the right thing,&#8221; he said.﻿

South Africa's FinMin declines to comment on ANC backing

South Africa&#8217;s President Jacob Zuma has filed court papers to determine if an unreleased report into allegations of political interference by wealthy brothers Ajay, Atul and Rajesh Gupta is final, eNCA TV said on Wednesday.
In the affidavit filed on Tuesday and published on the channel&#8217;s website, Zuma also admitted he was &#8220;an implicated person&#8221; in the report by the former Public Protector, a constitutionally mandated anti-graft watchdog.
Zuma has denied granting undue influence to the Guptas and they have denied seeking it.﻿

South Africa's Zuma admits he is "implicated" in graft report

Thomson Reuters Foundation
Little or no access to education and healthcare, poor job prospects and low participation levels in politics make the Central African Republic the worst country in the world to be a young person, an index by a group representing Commonwealth countries showed.
Central African Republic has been plagued by inter-religious violence since 2013 when the mainly Muslim Seleka militia seized power, prompting reprisals from Christian anti-Balaka forces.
Despite a February election touted as a step toward reconciliation, violence is still frequent.
The index released by the Commonwealth Secretariat on Friday ranked 183 nations on employment, education, health and other prospects for people aged between 15 and 29.
Sub-Saharan Africa continued to have the lowest levels of youth development in the world, despite significant progress in the last five years, the index showed.
The 10 countries that score lowest on the index are all from sub-Saharan Africa – the only region where the size of its youth population has not peaked.
According to U.N. estimates, the number of youths globally will rise to 2 billion by 2060 from 1.8 billion in 2015, with most of that growth expected to in sub-Saharan Africa.
&#8220;While increases in civic and political participation – though voting or protests for example – in the region are encouraging, they will only get young people so far without corresponding improvements in access to health and education,&#8221; said Abhik Sen, one of the report&#8217;s authors.
&#8220;Deep inequalities in levels of youth development persist among countries worldwide,&#8221; he told the Thomson Reuters Foundation in a phone interview.
In North American and European countries, for example, nearly 100 percent of young people can read and write, compared with less than 40 percent in Niger and South Sudan.
Germany topped the index for youth development, followed by Denmark, Australia, Switzerland and Britain.
The report found that youth unemployment was a growing concern with young people at least twice as likely as adults to be jobless worldwide.
Matthew Hobson, a World Bank expert on social protection, said in the report that &#8220;global growth and poverty reduction over the next 20 years will be driven by today&#8217;s young people, yet many of them struggle to find productive employment.&#8221;
Sudanese billionaire philanthropist Mo Ibrahim said within three generations, 41 percent of the world&#8217;s youth will be Africans.
&#8220;That is a wonderful resource for our continent if it is skilled and employed,&#8221; he said in the report.﻿

Worst country in the world for young people revealed

The general tone of responses to the heavy-handed and clearly intimidatory delivery of a criminal summons to Finance Minister Pravin Gordhan has either been outright condemnation of a political witch-hunt, or some sentiment that at least Mr Gordhan would now have the opportunity to clear his name in a court. But Mr Gordhan ever appearing in a real trial is not part of the plan.
Several institutions and political structures, including the presidency and the ruling African National Congress (ANC), have made the point that no-one was above the law and that Mr Gordhan would now have his day in court, but all have avoided the seven hundred elephants in the room – the 700 fraud, corruption and sundry charges still hanging over the head of President Jacob Zuma.
Ironically, the National Prosecuting Authority (NPA) – the very organisation that inexplicitly dropped all charges against Mr Zuma several years ago and is fighting attempts to have them reinstated – was among those ignoring the herd of elephants while pontificating that no-one was above the law.
Its credibility already in tatters, the NPA has become a political blunt instrument in the hands of factions rather than a legitimate independent authority, and that is one of the real tragedies of this saga.
As for the suggestion that now Mr Gordhan and his co-accused – the former South African Revenue Services (SARS) commissioner Oupa Magashula and the former deputy SARS commissioner Ivan Pillay – would have the opportunity to clear their names in a court of law, that is not part of the plan.
The prospects of this farce ever getting to trial is remote and not part of the strategy to force Mr Gordhan out of office, either by removing or suspending him, or to make his life so miserable and fearful that he decides to call it quits. There will be no trial – this saga ends one way or another long before the first court appearances on November 2 actually morphs into a full-blown hearing.
There is considerable legal opinion that these fraud charges and the “rouge unit” charges that are still pending are so thin they could not hold up a tea-bag, let alone hold up in court.
Responses to Tuesday’s announcement by NPA boss Shaun Abrahams, who managed to keep a straight face throughout even as he ignored the seven hundred elephants in the cramped room, was largely predictable and followed traditional lines.
Those ignoring the rampaging elephants demanding to be heard included the ANC who said that Mr Gordhan must fully co-operate with the NPA in order to bring the matter to finality as soon as possible, “This investigation and related, untested and mischievous ‘conspiracy theories’ has had a detrimental effect on the South African economy and we trust that today’s announcement will move us a step closer to uncovering the truth from facts and bring this matter to finality,” the ANC said.
The presidency agreed, as apparently did Mr Zuma himself, though the statement issued from Cape Town while Mr Zuma was in Kenya did not make it clear whether it was a presidency statement or a statement from the president. There is a difference.
While media reports claimed that Mr Zuma was standing by Mr Gordhan, the actual statement is less clear and confuses words attributed to the president with the views of the presidency speaking on his behalf.
“Our society is anchored on the rule of law as well as fair and just judicial processes,” Mr Zuma is quoted as saying. “In this regard, Minister Gordhan is innocent until and unless proven otherwise by a court of law. This is a fundamental pillar of our constitutional democracy and the rule of law. The president has reaffirmed his support for the minister and added that the decision by the NPA came at the most sensitive time for the country when Minister Gordhan was successfully leading initiatives towards economic revival, bringing together business, government and labour in efforts to reignite growth so that jobs can be saved and created,” the presidency said. It is unclear which bits are the actual words of the president and which are being spoken on his behalf, but in any event, this is lukewarm at best and no hint that Mr Zuma is going to withdraw his legal opposition to the challenge to reinstate charges against him.
The Black Business Council (BBC) was quoted by media as stating there was “no political interference” during the investigation leading up to the summons issued to Mr Gordhan. The BBC said it viewed these developments in a “serious light”. “We respect the rule of law and furthermore expect the Chapter 9 institutions that regulate and ensure that nobody is above the law,” the organisation stated, also ignoring the obvious parallels to Mr Zuma’s outstanding and unresolved legal issues.
Others were less impressed
The National Treasury said that “[i]t is most unfortunate that the Hawks have, once again, chosen to initiate legal proceedings at a moment that appears calculated to maximise the damage inflicted on the economic well-being of South Africans and essential processes of government”.
The Council for the Advancement for the South African Constitution (Casac) said that the summons would have “serious negative repercussions”. The organisation, chaired by Sipho Pityana, said the developments raised questions about the integrity of key institutions of democratic governance. The organisation believes that political interests are at the centre of this, especially given the timing of the announcement. “The circumstances around the investigation of these matters, the timing of questioning and the leaks to the media, all call into question the good faith and independence of the investigative authority, the Hawks, as well as that of the NPA,” said executive secretary, Lawson Naidoo.
Business Leadership South Africa (BLSA) was deeply concerned about both the timing and the decision to charge Mr Gordhan and two former senior SARS employees with fraud. “Our country is experiencing a period of profound upheaval. With another rating agency review ongoing, the Medium Term Budget Policy Statement (MTBPS) weeks away, serious social protest and violence occurring at our universities, and a number of contentious disputes between state institutions playing out in public, this decision could not have come at a worse time.”
Business Unity South Africa (Busa) said the NPA decision was “most unfortunate”. Busa President Jabu Mabuza said “while nobody is above the law, we remain deeply concerned about what appears to be the emergence of a pattern which sees serious allegations made against Minister Gordhan made very close to important dates and developments.” 
There is majority political opinion that the fraud charges directed against Mr Gordhan and his former colleagues at SARS have no legal merit and are part of a deliberate overtly political plan to force the finance minister out of office as he is perceived to stand in the way of the dominant patronage/ tenderpreneur factions in the ruling party and government.
On the other hand, there is minority opinion that there was no political interference in this saga that has been ongoing for several months now. A disturbing aspect in the political dimension is that the consequences of this action have been ignored, not merely underestimated or miscalculated, but deliberately ignored.
There is substantial legal opinion that the charges have no prospect of success and appear to be unfounded and based on little, if any, real evidence. The organisations and political factions that backed the NPA and suggested (correctly) that no-one was above the law ignored the massed ranks of elephants in the room related to the outstanding and unresolved legal issues around Mr Zuma. Apart from the very real damage these development could inflict on South Africa’s economy and finances, the NPA and the Hawks now face a pivotal credibility and legitimacy tests likely to undermine a crucial Chapter Nine institution and weaken our democracy.
Finally, there is no prospect that this saga is ever going to end in a full-blown hearing – that is not on the agenda – it either forces Mr Gordhan out of office or it does not, but either way, there will be no trial and no day in court for Mr Gordhan and his co-accused. There is no legal basis for such a development and it is a political bridge too far. ﻿

South Africa – Gordhan and the seven hundred elephants in the room

The Africa head of ratings agency Standard &amp; Poor&#8217;s said on Thursday the current situation in South Africa was &#8220;not business as usual,&#8221; citing &#8220;political turmoil and tension&#8221; as worrying signs ahead of a ratings decision on Dec. 2.
Addressing the Thomson Reuters Africa summit in Cape Town, Konrad Reuss also said S&amp;P would be closely looking at South Africa&#8217;s economic growth trajectory and fiscal targets.
Reuss was speaking two days after the national prosecuting authority said it planned to charge Finance Minister Pravin Gordhan for fraud, a ploy widely seen as an attempt by President Jacob Zuma to take control of the Treasury by removing the respected technocrat.
&#8220;This is not about political noise. We have political turmoil, political tension that can undermine structural reforms,&#8221; Reuss said.
He also said that any attempts to undermine South African state institutions would be negative for the rating.
S&amp;P rates South Africa at BBB-, the lowest investment grade rating one notch above junk, and it maintained that rating in June while keeping its outlook negative, citing slow economic growth and political concerns.
 
(Reporting by Ed Stoddard and Ed Cropley; Editing by James Macharia and Hugh Lawson)﻿
<div></div>

S&P: South Africa "is not business as usual"

Political infighting, weak economic growth and mounting debt at state-owned companies all pose a risk to South Africa&#8217;s credit rating, Moody&#8217;s said on Thursday.
Moody&#8217;s, which rates Africa&#8217;s most industrialised economy two notches above sub-investment grade, said its negative outlook reflected &#8220;wide and rising political divisions that generate policy uncertainty and impede structural reforms&#8221;.
President Jacob Zuma and Finance Minister Pravin Gordhan are locked in a power struggle over spending at state-owned companies and plans for a multi-billion dollar nuclear power programme, political and financial analysts say.
Zuma denied this week that there was a &#8220;war&#8221; between the Presidency and Treasury.
&#8220;Policy paralysis and infighting is another risk, which is
becoming evident with, for example, increased uncertainty about continuity of leadership at the National Treasury,&#8221; Moody&#8217;s said in its quarterly credit opinion.
Moody&#8217;s affirmed its Baa2 rating on South Africa in May. Fitch and S&amp;P Global Ratings have South Africa one step above subinvestment, or &#8220;junk&#8221;, with negative outlooks. All three are expected to make their next ratings decisions in December. [L5N184033]
Moody&#8217;s on Wednesday said it may cut the ratings of five South African state-owned firms over funding risks.﻿

South Africa's political infighting adding to downgrade risk: Moody's

Democratic Republic of Congo will form an interim government that includes opposition members, as part of a deal to set up new elections and break a political impasse, Justice Minister Alexis Thambwe Mwamba said.
The announcement came after backers of President Joseph Kabila and some opposition members agreed on Wednesday on the timing of those elections, a question that has caused more than a year of debate and led to violent protests and arrests.
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However, most major opposition parties are boycotting the talks. They see them as part of Kabila&#8217;s plan to justify staying in power beyond the end of his mandate in December, when he is due to step down under the constitution.
&#8220;The government will be redone. We will put in place a government that we will co-manage between the presidential majority, the opposition and civil society,&#8221; said Mwamba, who is representing Kabila&#8217;s political supporters in the talks.
It was unclear which opposition members would become part of the new government.
Opposition leaders this week walked out of talks on the timing of the presidential election. The vote had been set for November, but the authorities now say it cannot be held before next July.
The opposition had insisted the presidential election should be held next. The government said local elections should come first, which would probably delay the presidential vote further.
The government and a group of opposition parties agreed on Wednesday the presidential vote would be combined with legislative and provincial elections, although no specific dates were set. Local elections will come later.
&#8220;This opens the way to a calendar that will mention the exact date of the handover of power between the old president of the republic &#8230; and the newly elected president,&#8221; said Vital Kamerhe, one of the leading negotiators for the opposition.
Despite the apparent advance in the negotiations, efforts to broker a peaceful exit from power for Kabila, who has led Africa&#8217;s leading copper producer since the assassination of his father in 2001, remain fragile.
Congo has never experienced a non-violent transition of power since independence from Belgium in 1960.
Diplomats and observers fear the crisis could trigger a repeat of civil wars that killed millions of people between 1996 and 2003.

Congo to form interim government that includes opposition members

Guinea Bissau political rivals have agreed to a road map that includes the formation of a new government, according to a statement from regional mediators seeking to end a year-long political crisis in the West African country.
President Jose Mario Vaz dismissed prime minister Domingos Simoes Pereira in August 2015 and the country&#8217;s political institutions have been paralysed by infighting since then.
Observers hoped the appointment of Baciro Dja as prime minister in May would ease the deadlock but he has failed to win the support of a key faction within the ruling PAIGC party.
The United Nations has warned that the crisis might benefit drug traffickers and attract &#8220;extremist terrorist groups&#8221; seeking to gain a foothold in the region.
The former Portuguese colony is notoriously unstable and has seen nine coups or attempted coups since 1980. The turbulence has helped it become a major transit point for cocaine trafficked from South America to Europe.
A team of mediators from regional bloc ECOWAS, led by neighbouring Guinea&#8217;s President Alpha Conde and Sierra Leone&#8217;s Ernest Bai Koroma, spent Saturday in talks with stakeholders in the capital Bissau.
&#8220;The (parties consulted) have all shown their support for the plan proposed by mediators,&#8221; said Guinea&#8217;s government late on Saturday, after meetings with the president, prime minister, PAIGC as well as the main opposition party PRS.
&#8220;The signals being sent are reassuring that the crisis in Guinea Bissau is beginning to ease,&#8221; the statement said.
The six-point plan includes a preliminary agreement to form a consensus government, an agreement to reform the constitution and the defence sector, it said.
It gave no timeframe for the new government.
Previous internal and external efforts to resolve the political deadlock have failed.
The crisis has prevented parliament from agreeing budgets and has blocked international aid on which the poor, cashew-exporting country of 1.7 million depends.
The country faces a budget shortfall after the IMF said it would withhold future payments unless the government backtracks on loan bailouts for two private banks.﻿

Guinea Bissau to end crisis, signs deal

South Africa&#8217;s business confidence rose in the third quarter, ending seven straight quarterly declines, a survey showed on Wednesday, but could fall again over the uncertainty facing the finance minister.
Police are investigating Finance Minister Pravin Gordhan over the activities of a surveillance unit set up when he headed the tax department, a probe that has also rocked South African markets and raised concerns over a possible credit downgrade.
The Rand Merchant Bank (RMB) survey said further ructions around Gordhan could keep business executives on tenterhooks.
The RMB index, which is compiled by the Bureau for Economic Research, climbed to 42 points in the third quarter from 32 in the three months to June, helped by a stronger currency and lower fuel prices and inflation.
&#8220;A continuation of the current domestic political uncertainty, or renewed adverse international political or economic developments could easily see business confidence falter again,&#8221; it said in a statement.﻿

South Africa's business confidence improves, political uncertainty remains

Big data allows us to quantify political risk and we must do so, in order to avoid pointless attempted coups and excessive political repression. It may also be useful for investors.
﻿There’s some really interesting data on Africa in this report – including the 96% annual chance that Nigeria retains the democracy label it won after the important 2015 elections (and that “failed state” risk is very low indeed), and the 97% chance that SA remains a democracy despite fears of many that it may end up following Zimbabwe’s path to greater poverty and less democracy.  Both look more solid countries than many think.  Political risks are three times higher in other African countries than Nigeria – as we highlight below, from Ivory Coast to Mozambique.  Meanwhile annual democratisation risk is much higher than we expected in Egypt (13% a year) and Morocco (9%).
The best dancer at a wedding I attended last month was an open-minded member of China’s Communist Party who I tested this report out on. He thinks it’s wrong. China’s communist party will be in power for another 100 years he reckoned, as we have yet to see the third generation of family rule – and Chinese dynasties don’t only last two generations.  Data tells me that China is changing because of rising income levels, and that he is making the same mistake as those Turkish military officers who in July said that military coups have generally succeeded in Turkey, so will succeed in 2016.  They are trapped by their understanding of history, and their lack of understanding of the power of the middle class.  
In yesterday’s media, we saw three stories about democracy and autocracy, from the pro-democracy groups winning seats in Hong Kong’s elections, to Gideon Rachman’s piece asking a set of fascinating questions about politics and geo-politics to the news from Russia, ahead of the parliamentary elections on Sunday 18th September. Russia has stopped the Levada Centre, the only independent pollster (who we met at our 20th annual conference in June) from producing polls – as it is now a foreign agent.  
Our new report has something to say on all these issues, and many others.  
1)      We reiterate our 2011 argument that all countries become democracies as they get rich, except those countries that export a lot of oil per capita (see fig 2 in the report – because Russia does not) and the city state of Singapore.  Rachman thinks the “end of history” thesis only lasted 20 years.  I think he’s wrong. Look at fig 3 – which shows all the countries in the world that are not democracies. Above $14k of per capita GDP, only large oil exporters, Belarus and Singapore, and above $21k, only large oil exporters and Singapore, are not democracies.  Where then is the successful challenge to the “end of history thesis” that all countries eventually become rich and democratic? This table also answers Rachman’s question about why poor China in 1989 stayed autocratic while wealthier central Europe democratised.
2)      We show that no countries ever lose a positive Polity IV rating once they have a high per capita GDP.  The Turkish coup attempt could not succeed – or to be 100% accurate, we have never (yet) seen a country lose democracy at Turkey’s income level which is over $15k. 
The percentage chance of a country losing a positive Polity IV score (full democracy, democracy or open anocracy) and getting a negative score (autocracy, closed anocracy) at certain per capita GDP thresholds (2011 PPP dollars).
 <img loading="lazy" decoding="async" src="/media/19206387/renman_graph1_7sept.png" width="481" height="289" alt="Ren Man _Graph 1_7Sept"/>﻿
Source: Polity IV, Penn table, Renaissance Capital  
 3)   We examine the countries that have seen a deterioration in their democratic rating –Turkey, Russia and Malaysiawere all more democratic a decade ago than they are today.  We highlight that as all rich countries are democracies or oil exporting autocracies, and none occupy the middle ground (Singapore is an exception), this tells us that
a) Russia, Turkey and Malaysiawill remain “open anocracies” but stagnate economicallyand remain middle income or
b) They become “democracies” – a surprisingly high 10% chance each year (but thedata sample is too small for us to be confident about this) or
c) They do grow fast, while remaining “open anocracies” – which has never happenedbefore.     
 4)  We highlight how the oil price crashed in 1985 and triggered a wave of democratisation among countries that exported only a little oil per capita (from the USSR to Mexico).  We may see a new wave of democratisation since the oil price crash of 2014-15, and suggest democratisation may occur in 2018-20 inRussia, Iran and Venezuela.  See figure 16. 
 5) Political regimes are actually very stable.  There is an 86-100% chance each year that the current regime will remain in place next year.  The greatest risk of significant change is in the poorer countries.  See fig 25 for EM, fig 26 for Frontier and fig 27 for Beyond Frontier – to see the chances of political change in the coming year.  African countries fromIvory Coast, Mozambique, Tanzania and Zimbabwehave a 1 in 7 chance of a big change – with more risk of a shift towards autocracy than democracy.  Nigeria and Kenya are far more stable, with a 96% and 95% chance respectively of remaining a “democracy”.
6) Democratisation is coming toChina, Vietnam, Morocco, Egypt and Jordan.  China is already at the income level where there is a 4.5% chance each year of a shift towards democracy.  This risk will grow to 8% in the 2020s, when per capita GDP is higher.  Vietnam is likely to lag China.  Morocco already carries a 9% chance annually of a further shift towards democracy, while Jordan and Egypt have a surprisingly high 13% chance of such a shift in any given year.  Democratisation at high income levels tends to be relatively peaceful.
 7)  The Pinochet argument– that autocracy is better at low levels of GDP per capita – is undermined by our data analysis. See figure 19 and fig 20.  Some autocracies do grow faster than democracies, but a number from Cuba to Tajikistan do not. 
<img loading="lazy" decoding="async" src="/media/19206394/renman_graph2_7sept_600x408.jpg" width="600" height="408" alt="Ren Man _Graph 2_7Sept"/>﻿
 
 8) However, we do find that there is some correlation between ease of doing business, corruption, legal scores and political system – the extremes of democracy and autocracy tend to favour better results than those with very mixed systems.  See figures 21-23.
 9)The demographic argument– that lots of young people are destabilising for any political regime – is supported by our data.  However, we found that too many young people (more than 30% of the population are 15-29), as well as too few (25% or less), suggests no change.  It is 25-30% which is the key level that encourages change. China and Russia might be at less risk of political change if they get old before they get rich.  See figures 29 and 30. 
 We have not looked at all the market implications of political change. This was a report which in 37 pages aims to show what will happen.  We need to produce another report to look at the market implications of this.  One challenge will be the fact that we have more political history than financial history for many emerging and frontier markets.
 But one conclusion we would highlight is that EM and Frontier markets are more politically stable than we might think – and the risks some of us remember from the 1990s when Russia’s military was shelling its parliament and Turkish tanks provoked the fall of a government – are now risks that are concentrated in beyond frontier markets like Zimbabwe, rather than larger markets.  ﻿
 
TED talk: <a href="http://www.ted.com/talks/charles_robertson_africa_s_next_boom.html?source=email#.UmdluZ8ok3k.email">http://www.ted.com/talks/charles_robertson_africa_s_next_boom.html?source=email#.UmdluZ8ok3k.email﻿</a>

Report: The revolutionary nature of growth (2016)

Politics came to the fore in August, in both a positive and a negative way. On the positive side, the 2016 local government election was largely free and peaceful and voters showed that they were prepared to hold politicians accountable, especially in the metro areas. All parties involved also accepted the outcome of the polls. While local governments do not usually influence macroeconomic policy, it is notable that those parties with a radical economic agenda failed to make big inroads, showing that the risk of a major shift to populist policies seems limited.
On the negative side, fears that Finance Minister Pravin Gordhan would be arrested and removed from his post, and concerns over the direction of governance and economic policy in general, resulted in a sell-off of the rand and interest rate-sensitive assets. It also highlighted significant divisions within Cabinet, which does not bode well for implementing the reforms identified by ratings agencies as necessary to lift the economic growth rate and sustain our investment grade rating.
Data showed improvement, but recent numbers mixed
Renewed political uncertainty threatens to further dent confidence in the economy just as data seemed to be pointing to a slight upturn. StatsSA is expected to announce a fairly strong second quarter economic growth number this week, following the first quarter’s decline. However, data for the third quarter so far is mixed.       
The most recent Barclays purchasing managers’ index (PMI) focusing on manufacturing data is concerning. The PMI unexpectedly slumped from 52.5 index points in July to 46.3 in August (with 50 index points separating growth from contraction). This was surprising, given that the PMI remained above the neutral level for the previous five months, highlighting the vulnerability of the sector. A decline in new sales orders and business activity was the main reason for the much weaker PMI. However, businesses remain optimistic that conditions will improve over the next six months.
Credit growth slowed in July. Total loans and advances grew by 6.7% year-on-year in July, down from 7.2% in June. Although corporate borrowing is down from the previous month, it continues to be the big driver with 12.3% annual growth. Household borrowing has also slowed down dramatically with interest hikes of 200 basis points since January 2014. After adjusting to the removal of African Bank’s “bad bank” from the numbers, household credit growth was only 3.7% year-on-year, down from earlier in the year and well below inflation and income growth rates.
Mortgage lending grew by 5.7% year-on-year in July, but this was mainly driven by commercial mortgages. Banks&#8217; home loan books only grew by 3%, pointing to further sluggishness in the domestic residential property market. Instalment credit, which is mainly used to finance vehicle purchases, grew by only 1% between July 2015 and July 2016.
According to industry body Naamsa, the number of new vehicles sold fell further in August. However, StatsSA data shows a significant increase in the value of used car sales this year, with consumers clearly shifting away from new to used cars. One reason is that new car prices are increasing sharply as a significant number of new vehicles and components are imported.
On the positive side, South Africa posted a R5 billion trade surplus in July, and the surplus for the year-to-date of R17 billion is still a remarkable improvement on the R24 billion deficit posted over the same period in 2015. The improvement stems from a 10% growth in exports, driven mainly by precious metals and vehicles (about half of locally manufactured vehicles are exported, compensating for the decline in domestic demand).
Imports grew only 3%, with the lower oil price contributing to a R22 billion saving on our oil import bill for the first seven months of 2016 compared to the first seven months of last year. At current levels, the rand is certainly weak enough to continue supporting export growth.
Rand under pressure
The rand’s response to renewed political uncertainty has been severe, but had a strong rally that was helped along by the positive reaction to the elections. It has also been worsened by increased uncertainty over the timing and extent of US interest rate increases following comments from key Federal Reserve officials over the past two weeks. However, Friday’s payroll numbers indicating the US economy added 151 000 jobs, less than expected, complicates the case for a US rate hike later this year.
Unlike December’s “Nenegate” episode, which occurred in the midst of a global sell-off of emerging market assets, the current standoff between Minister Gordhan and the Hawks is fortunately taking place against a more favourable global backdrop for emerging markets. Year-to-date, emerging market equities are also leading developed market equities in US dollars with a return of 15% against 5.5%.
With the weaker rand and the prospect of a ratings downgrade, it is no surprise that local interest rate-sensitive assets have been knocked hard. The 10-year South African government bond yield rose from 8.6% to 9% during the month of August, but was still well below 9.7% where it started the year. The All Bond Index lost 1.7% in August, cutting year-to-date returns to 11.7%. Over one year, the ALBI delivered a disappointing 4.5%, lagging cash and inflation.
Listed property followed bonds sharply lower, with a loss of 4.8% in August. Year-to-date, the asset class has returned a respectable 7.6% but the twelve-month number has rolled down to 3.5%. The JSE Financials Index lost 3.3% in August, wiping out most of the year-to-date gains. Over one year, the sector lost 4%. However, rand hedge industrials rallied in August and lifted the JSE All Share Index to positive territory for the month.
Living with political uncertainty – focus on valuations
Political uncertainty flared up over the past two weeks, causing anxiety for both investors and ordinary citizens.  However, the most important political development over the past month in terms of its longer-term implication for the country was the local government elections and not the Hawks’ treatment of Minister Gordhan. The latter is obviously unsettling, but it is important to focus on valuations. For example, the local bond market is clearly pricing in the uncertainty.
Credit default swaps on government bonds suggest that the market is already treating South Africa as a sub-investment grade economy. Real yields are elevated relative to where inflation is expected to be over time, while short-term interest rates are in peak territory. This suggests remaining overweight to local fixed income.
The rand volatility over the past year in particular is a reminder of the importance of diversification, since markets seldom move in one direction and can be unpredictable over the shorter term. When the rand weakens, offshore investments and rand-hedge shares tend to benefit. Interest rate-sensitive assets such as bonds, listed property and bank shares do well when the rand strengthens.
Nobody knows where exactly the exchange rate will be in the future, but the massive 16% annualised depreciation against the dollar over the past five years suggests that the worst is probably behind us.  A fearful concentrated portfolio of rand-hedges could therefore be a risk &#8211; we’ve seen how quickly the rand can rally when conditions were in its favour this year.
It also remains true that over longer investment horizons, short-term volatility fades away. The key for investors remains to have an appropriately diversified portfolio built around long-term goals and the time available to meet those goals. Our Strategy Funds provide such diversification on an ongoing basis, with a combination of local and global asset classes and a spread of fund managers. Once in place, the most important thing for investors (but often the most difficult) is to avoid making investment decisions based on emotional responses.
Chart 1: Rand-dollar exchange rate and South Africa’s 10-year government bond yield
 <img loading="lazy" decoding="async" src="/media/19206045/old_mutual_chart_1_6sept16.png" width="567" height="322" alt="Old Mutual Chart 1_6sept 16"/>﻿
Source: Datastream
 
Chart 2: South Africa’s imports and exports (R million, seasonally-adjusted and smoothed)
 <img loading="lazy" decoding="async" src="/media/19206052/old_mutual_chart_2_6sept16.png" width="480" height="288" alt="Old Mutual Chart 2_6sept 16"/>﻿
Source: SARS﻿

S.A. Investment Note: Politics to the fore

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JOHANNESBURG, Sept 2 (Reuters) &#8211; South Africa&#8217;s presidency said on Friday that a minister not a cabinet team had asked for a judicial inquiry into why banks cut ties with a company belonging to the Gupta family, conflicting messages from a government which appears increasingly divided.
On Thursday, Mineral Resources Minister Mosebenzi Zwane had said the inter-ministerial team, set up by the cabinet in April and led by him, had cabinet backing for its proposal to set up such an inquiry to consider legal action against the banks.
That could trigger further turmoil after markets were rocked by a police investigation of Finance Minister Pravin Gordhan.
South Africa&#8217;s Treasury is also in public rows with state-owned companies over their dealings with firms linked to the Guptas, who have been accused of holding undue sway over the President Jacob Zuma.
The statement from Zwane&#8217;s team said the banks that had closed Gupta-owned Oakbay Investments&#8217; accounts were influenced by &#8220;innuendo and potentially reckless media statements&#8221;.
The prominent business family is accused by the opposition of being behind Zuma&#8217;s abrupt sacking of former finance minister Nhlanhla Nene in December, a move that rattled investor confidence and triggered calls for Zuma&#8217;s resignation.
The Guptas have denied using their friendship with Zuma to influence his decisions, including on cabinet appointments, or to advance their business interests.
The president has acknowledged the Guptas are his friends but denies any improper behaviour based on that.
REGRET OVER CONFUSION
On Friday evening, presidency spokesman Bongani Ngqulunga said in a statement that the proposals by Zwane, which had drawn criticism from political commentators, were not the views of the inter-ministerial team, nor the cabinet.
Ngqulunga said the presidency regretted the confusion caused by Zwane&#8217;s statement, which &#8220;was issued in his personal capacity and not on behalf of the task team or Cabinet&#8221;.
As part of its recommendations, Zwane said his team also urged Zuma to set up a state bank and called for new banking licences to be issued to end the &#8220;oligopoly&#8221; in the industry.
He also said that although Gordhan was one of the cabinet team&#8217;s members, he did not take part in its meetings.
Asset manager Futuregrowth said earlier this week it had decided to stop lending money to six state-owned companies because of the swirling political uncertainty.
Gordhan said on Friday that Futuregrowth&#8217;s decision was a &#8220;very concerning development&#8221;.
Speaking to the SABC news broadcaster in China, where he has accompanied Zuma for a G20 meeting, Gordhan said &#8220;we in the Treasury have been warning both political figures and people who run some of our institutions to be careful &#8230; and make sure your governance is right&#8221;.
&#8220;Don&#8217;t think that the world is not watching us in some of the things that are happening in some of these SOEs (state-run enterprises). Those people are not obliged to lend us money.&#8221;
Gordhan is embroiled in a separate investigation into whether he used a tax service unit to spy on other politicians &#8211; something he denies &#8211; and that has also put markets on edge about the fate of Africa&#8217;s most industrialised economy.
Several banks and companies had cut ties with Oakbay, including South Africa&#8217;s top four: Standard Bank, Nedbank, Barclays Africa&#8217;s Absa and First National Bank (FNB), part of FirstRand.
In April, Oakbay approached government departments including the presidency to express &#8220;deep disappointment&#8221; over the account closures, saying this made it &#8220;virtually impossible&#8221; to do business in South Africa.
A family spokesman for the Indian-born businessmen, who moved to South Africa in the early 1990s, said any inquiry would not change plans announced on Saturday for the Guptas to exit their South African businesses this year.
Although the Guptas&#8217; relationship with Zuma has been a source of controversy for years, it burst into the open in March when senior political figures went public to say the family had exerted undue sway, including offering cabinet positions. (Additional reporting by Ed Stoddard; Editing by Louise Ireland)
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