...As noted by our Country Risk team, markets are especially sensitive to any challenge to Gordhan s position following Nenegate , in which Zuma went through three finance ministers in a month, after firing respected finance minister Nhlanhla Nene purportedly for political reasons (see Gordhan Arrest Rumours Will Further Dent Market Sentiment , August --). ...As noted by our Country Risk team, markets are especially sensitive to any challenge to Gordhan s position following Nenegate , in which Zuma went through three finance ministers in a month, after firing respected finance minister Nhlanhla Nene purportedly for political reasons (see Gordhan Arrest Rumours Will Further Dent Market Sentiment , August --). Moreover, Gordhan is regarded as a credible and respected driver of fiscal consolidation, which critically involves reforming debt-laden SOEs whose borrowing requirements place major pressure on the budget. ...Since ---- the government has introduced a number of policies intended to address the lingering impact of apartheid segregationist legislation and empower historically dispossessed communities. Some of these laws extend the state s power in investment and land matters significantly, raising investor concern and offsetting the attractive returns the South African market offers construction developers (see New Investment
...South African National Roads Agency; and on September - Denmark s Jyske Bank announced it would no longer be lending to Eskom. Both cited concerns over the governance of the parastatals. We note investors have long been concerned about the ability of SOEs to repay loans, given their financial difficulties pertaining to project cost and time overruns, which extend the time between investment and operation to generate returns. Key examples include Transnet s multiproduct pipeline between Durban and Gauteng almost tripling in cost from the initial estimate of ZAR--bn to ZAR--bn; and Eskom s Medupi coal-fired power plant, originally due online October ---- but now expected to be operational in June ----. Driving the bolder decision to withdraw financial support by some investors has been prompted by additional concerns over governance. This comes as political infighting within the ruling African National Congress (ANC) intensifies, undermining fiscal consolidation efforts as the threat of a credit rating downgrade looms. Clashes between President Zuma and Finance Minister Pravin Gordhan are becoming more prominent, with reports the independence of the Treasury is being undermined dominating headlines.
...--.-- --.-- ---.-- ---.-- ---.-- ---.-- ---.-- ---.-- ---.-- ---.-- Infrastructure industry value real growth, y-o-y -.- -.- -.- -.- -.- -.- -.- -.- -.- -.- f = BMI forecast. Source: BMI We have previously highlighted the prevailing negative sentiment towards the South African economy as a major drag on the potential of the country s construction sector, underscoring our forecast for industry expansion of -.- in real terms between ---- and ----. ...--.-- --.-- ---.-- ---.-- ---.-- ---.-- ---.-- ---.-- ---.-- ---.-- Infrastructure industry value real growth, y-o-y -.- -.- -.- -.- -.- -.- -.- -.- -.- -.- f = BMI forecast. Source: BMI We have previously highlighted the prevailing negative sentiment towards the South African economy as a major drag on the potential of the country s construction sector, underscoring our forecast for industry expansion of -.- in real terms between ---- and ----. We do not expect any improvement to overall business sentiment over the medium term, as investor concerns continue to grow over the government s ability to implement much-needed economic reform. ...
