Finance Minister Gordhan held his awaited 2017 Budget Review this week. In his address, Gordhan provided some colour about the current economic environment in South Africa and his expectations. For the first time since 2010, investment in fixed capital decreased by 3.9% during the first nine months of 2016. The bulk of the decline was felt in private business investment, while public corporations also invested less as they postponed capital expenditure plans. Gordhan expects investment growth to recover moderately from 1.5% in 2017 to 2.8% in 2019. However, according to the Finance Minister, the level of domestic savings remains insufficient to fund capital expenditures. The lack of domestic savings is consistent with a tenacious current account deficit. Headline inflation is forecasted to remain above 6% in 2017 and to decline to 5.7% in 2018, at the top end of the official target range. In its 2017 Budget Review, National Treasury projected a GDP growth of 1.3% in 2017, 2% in 2018 and 2.2% in 2019. This assumes favourable trends coming from better commodity prices and exchange rate which bodes well for capital flows, inflation and business and consumer confidence as said Gordhan. Moreover, drought conditions having abated in most parts of the country and improved electricity supply should also contribute to better growth. Treasury highlighted a combination of higher global uncertainty and the persistence of unresolved policy issues in areas such as mining, land and broadband as major risks to the outlook. In addition, a weakening of the world trading system and a deterioration in the domestic policy environment would likely translate into lower economic growth. The JSE ASI lost 1.18%.
With President Buhari still on sick leave in Britain, Nigeria's Vice President Osinbajo launched a 60-day action plan to improve the business climate in Nigeria to get the country out of recession. Investors should welcome any attempt to improve business climate in the country however the currency still seems to be a reason for concerns to most of them. The NGSE ASI gained 0.34%.
The DSE increased by 0.63%. New reports show that the value of exports of manufactured goods dropped by $272.4 million (Sh607.5 billion) last year amid a credit crunch. However, Tanzanian Trade and Investment minister Mwijage stated that the government's plan to turn the country into an industrialised middle-income economy as envisioned in the second Five-Year Development Plan was still on track. The manufacturing sector suffered a sharp drop in credit as banks adopted a more careful approach to lending to face tight liquidity. Earlier, the government decided to transfer public institutions' deposits from commercial banks to Bank of Tanzania. Total credit to the private sector decreased by 7.2 % last year.
The British embassy in Cairo announced that the Egyptian President El-Sisi and British Foreign Secretary, Boris Johnson, have finalised a $150 million loan guarantee agreement, another step forward that should help the Egyptian economy to turnaround. But what really caught attention this week, is the recommendation of the finance ministry to apply a stamp duty tax of 0.002% on bourse deals. Thus, the total tax on bourse trades will now be 0.4%. The tax will be imposed before the reapplication of the capital gains tax on bourse trades next May, and will be subjected to Parliament adoption within weeks. The EGX30 lost 3.25%.
