1. While things are starting to look grim in Europe, the situation in South Africa also gets somewhat cloudy. Remax in South Africa predicts that 17% of the South Africans could loose their house this year. In the US the mortgage crisis currently affects 2 million households. With an average of 3,6 Americans per household, this makes 7,2 million Americans and on a population of 200 million represents (only) 3,6% of all Americans affected.

    And for the next two quarters, South African should brace itself for even harder months ahead. The consumer price index excluding rates on mortgage bonds was hovering at 7,9% year on year in November instead of between 3 and 6% as targeted by the SA Reserve Bank. At the end of this month the Reserve Bank will determine whether to impose another interest rate hike. It has already raised the interest rate four times in the past two yearts because inflation is not coming down. If raised, the interbanking prime rate would go beyond 15% !

    However, for a variety of reasons I see light in the South African tunnel. Consumer debt is slowing since the introduction of the National Credit Act and the economic output is projected to keep growing at figures between 4 and 5% and the bulk of emplyment would remain relatively secure. With regards to growth and job security (South) Africa is much more resistant to the impact of this crisis in the long run than Europe is. The key question in both continents is how middle class will keep it's buying power in the coming decennium.

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  2. Since February 2006, the South African Rand is in freefal. This year, the currency has been constantly drifting downwards. I was in South Africa early December and I was stunned how cheap life in South Africa has become when you calculate back to Euros. A Big Mac Meal in Cape Town costs SAR 16,75 or 1,67 EU. Last year I would pay 2,5 EU for that same Big Mac Meal in Cape Town. According to this Big Mac index the Rand is seriously under valuated. And this is exactly the strange thing, the interest rate in South Africa is high, but still much lower than what it has been in the past; the growth rate is on track (4,8% GPD growth this year) and things are looking good for the ecoomy in 2008 (5,2% estimate for 2008). But still the rand falls.
    While the Brazilian Real keeps scoring records; the slide of the South African Rand is continuing on a daily basis. Economists are clueless. They think the reason is a mix of more emotional factors: the Zuma factor, the politicians and their position with regards to AIDS, the situation in Zimbabwe. But none of these can justify the movement of the currency. The slide now has a momentum of its own. This is the time to enter the South African market or take a stake in a South African exporting business. The South African central bank is trying to dam panic and avoid inflation impacts by raising the interest rates -another reason to enter with money into South Africa-

    My advice: wait until the SAR drops to 0,093 against the EU -very soon, a matter of weeks- and wire some money into South Africa and let it yield a healthy 11% on a Money Markets account until the currency takes up again by the end of 2008. Or better even: take a stake in a South African exporting business which is independent from importing machinery or raw materials.

    South African Rand

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  3. This weekend, the ruling South African party, the ANC, will decide the leadership of the party. By monday we know who the ANC will put forward in the presidential elections of 2009. Current ANC president Mr. Thabo Mbeki is not eligible for re-elections, since he is currently in his second term; but as ANC president he could keep on controlling the powers and handpick himself his successor in 2009. Technically, the new president of South Africa will only be voted in 2009. But since the ANC controls more than 70% of the votes, the decision will be made this weekend. Current president Mr. Mbeki is the most prestigious political leader on the African continent. He has done well in managing the South African economy, which has achieved an unprecedented growth the past 8 years. Yet, despite this success, the benefits of this growth have not reached the poor. Poverty remains an increasing major problem of South Africa. Currently Mr. Jacob Zuma, 65 is the frontrunner for this weekends elections. He was fired by current president Mr. Mbeki as deputy president of the country last year over corruption allegations and positions himself as a champion of the poor. He is also a Zulu, the largest black tribe. The last two presidents Mr Mandela and Mr Mbeki were both Xhosas.

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