HONEYDEW, SOUTH AFRICA // The Builder's Warehouse superstore in this Johannesburg suburb is packed with goods for those looking to improve their homes or build new ones, and the road leading to it is lined by people offering their labour, stark evidence of the first recession to hit South Africa in nearly 20 years.
Holding up signs advertising the tools of their trade, from paintbrushes and putty knives to plumbing implements, whenever a driver pulls up, the vehicle is instantly mobbed by eager would-be employees.
But fewer are finding work, even though their services usually cost only 250 rand (Dh110) per day. "Maybe I got two days work last month," said Mike Dube, a plumber. "The work has gone down. Last year was busy, last year was better."
Then, he was often working six days a week and could afford monthly visits to his wife and child, who live several hours away in KwaZulu-Natal province. These trips home are much rarer now.
Bright Chisarima, 29, fled the ruins of Zimbabwe's economy, but has found little relief. "Sometimes I can spend the whole month without working." he said. "There are a lot of people who are scrambling for the same job. Six months ago it was rather better. Maybe in six months there will be no jobs at all."
When the global financial crisis first hit last year, South Africa went largely unscathed. Its banks, having been isolated from the worst excesses of the subprime crisis by exchange controls that limited their ability to take part in international markets, were relatively unaffected.
Government regulations had also clamped down on the banks' domestic lending in previous years, as concerns had been raised about excessive consumer borrowing.
But in a globalised economy, no country is an island, and the hopes that South Africa might weather the storm have collapsed spectacularly, with two of its most important industries, mineral exports and car manufacturing, suffering badly during the downturn. Plunging commodity prices have caused mining operations to be suspended, and car sales have fallen by record margins.
Last week, the government announced it was officially in recession. Gross domestic product had fallen by an annualised 6.4 per cent in the first quarter of 2009, adding to a smaller drop at the end of last year.
It was the worst contraction in more than 25 years, and is the country's first post-apartheid recession.
To try to revive growth, the reserve bank has cut interest rates by 450 basis points since December, with the last 100-point cut coming last week.
But with inflation slipping only slightly, to 8.4 per cent, still well above its target range of three per cent to six per cent, the scope for further reductions is limited. The rand, which reached a nine-month high of 7.8888 against the dollar yesterday, has economists worried that a strong currency will hurt exporters at a time when factory output is flagging.
Tito Mboweni, the central bank governor, yesterday said a strong currency "may help in terms of the inflation outlook, but in terms of the whole balance in the economy, these levels might be unwelcome".
"This week's avalanche of economic data offered little prospect of relief for South Africa's shrinking economy," wrote Brendan Boyle and Benjamin Bradlow in the Sunday Times.
"The economy is likely to double the extent of job losses seen so far," Standard Bank's chief analyst, Goolam Ballim, told the newspaper. "There's still some shedding that is likely to occur in the retail and manufacturing sectors."
It is a situation that will only add to the challenges facing Jacob Zuma, the country's new president.
Having been elected on promises of material improvement for South Africa's poor, he and his finance minister, Pravin Gordhan, face the worst economic conditions the African National Congress has encountered during its 15 years in power.
Predictions of zero growth for the year have been dismissed as "wildly optimistic". But without growth, the ANC will be hard pressed to meet the demands of its allies in the trade union federation, Cosatu.
It has been less than a month since Mr Zuma was sworn in, but there have been calls for him to deliver quickly on promises, despite the difficulty of doing so when economies react slowly to stimulus measures.
The Honeydew workers stand to gain, or lose, most from the downturn and recovery efforts. Working in an informal market with no job security, they do not even need to be dismissed; they are simply not hired when economic activity reduces.
sberger@thenational.ae
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
2025 Fifa Club World Cup groups
Group A: Palmeiras, Porto, Al Ahly, Inter Miami.
Group B: Paris Saint-Germain, Atletico Madrid, Botafogo, Seattle.
Group C: Bayern Munich, Auckland City, Boca Juniors, Benfica.
Group D: Flamengo, ES Tunis, Chelsea, Leon.
Group E: River Plate, Urawa, Monterrey, Inter Milan.
Group F: Fluminense, Borussia Dortmund, Ulsan, Mamelodi Sundowns.
Group G: Manchester City, Wydad, Al Ain, Juventus.
Group H: Real Madrid, Al Hilal, Pachuca, Salzburg.
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A MINECRAFT MOVIE
Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
Election pledges on migration
CDU: "Now is the time to control the German borders and enforce strict border rejections"
SPD: "Border closures and blanket rejections at internal borders contradict the spirit of a common area of freedom"
Torbal Rayeh Wa Jayeh
Starring: Ali El Ghoureir, Khalil El Roumeithy, Mostafa Abo Seria
Stars: 3
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Volvo ES90 Specs
Engine: Electric single motor (96kW), twin motor (106kW) and twin motor performance (106kW)
Power: 333hp, 449hp, 680hp
Torque: 480Nm, 670Nm, 870Nm
On sale: Later in 2025 or early 2026, depending on region
Price: Exact regional pricing TBA
Specs
Engine: Electric motor generating 54.2kWh (Cooper SE and Aceman SE), 64.6kW (Countryman All4 SE)
Power: 218hp (Cooper and Aceman), 313hp (Countryman)
Torque: 330Nm (Cooper and Aceman), 494Nm (Countryman)
On sale: Now
Price: From Dh158,000 (Cooper), Dh168,000 (Aceman), Dh190,000 (Countryman)
