February 09, 2018

Currency News

Weekly forex update 09/02/2018 – Zuma’s exit

Weekly forex update 09/02/2018 – Zuma’s exit

What we know

Following on from the first lines written here last week, it’s been another case of much ado about nothing.  There’s been no shortage of headlines and sound-bites this week regarding the ongoing power-struggle in government, but quite unbelievably, still no concrete announcement.  Since the weekend, and even more so since the announcement of the SoNA delay, it has become apparent that the writing is on the wall for Zuma.  There doesn’t seem to be anyone who considers the issue to be anything other than a matter of time at this stage.

Nevertheless, the market has seemed to dislike the drawn-out nature of the saga and having recovered on Tuesday, we have since given up close to 2% from the best levels.  Whether this is a case of risk aversion in the face of uncertainty or perhaps a case of the best case having already been priced in is hard to say – certainly it’s the million-dollar question at the moment (answers on a post-card, please).  Post politics, perhaps a career in rugby for Mr Zuma?  He’s proving harder to shift than a Springbok front-row…..(from the days of Uli and Os, not the current bunch!).

Away from domestic politics, the big news on the week was the sell-off in global equity markets on Monday and Tuesday.  Sharp declines in most major indices, together with a pick-up in volatility measures certainly shook the complacency out of many investors.  The fact that the selling came seemingly in response to a better than expected outlook for the US economy provided a timely reminder that sometimes it’s best to not over-think these things.  However, a global increase in risk aversion would certainly be another headwind for the ZAR.

What others are saying

05 February 2018

News 24| News


“Malema said, among its planned actions against Zuma, they were considering approaching the courts to interdict Zuma from addressing the nation.”

06 February 2018

RMB Bank | Global Markets Daily


“Speculation about an imminent removal of President Zuma has intensified. His removal must surely now mostly be in the price, but we would still expect a knee-jerk reaction when it transpires. Any bounce in the rand, however, would be limited if global markets were collapsing.

News 24 | ANC NEC meeting called as Zuma still refuses to step down

“As far as I’m concerned the struggle to save Zuma is no longer winnable. I’m actually surprised that he is fighting to be allowed to deliver Sona. Can you imagine the insults opposition parties will be hurling at him?”

Investec Morning Report

“Giving Zuma a very prominent public platform not only risks him making a “crossing the Rubicon”-style speech… Unless the ANC’s internal processes resolve expediently, SA politics are set to turn very publicly ugly and divisive again which will be of no help in shoring up sentiment, especially should Zuma continue using all his available means to drag out legal and party proceedings against him.”

The Huffington Post | ComedyStephen Colbert Mocks Donald Trump’s Badly Timed Economy Boasts

View the video here

“Remember when Donald Trump told us we’d be tired of winning?” asked Colbert. “Well, evidently the stock market is exhausted…The stock market is just like the rest of us,” he added. “It spent January working on improving itself, then in February said f**k it.”

07 February 2018

Eye Witness News | Maimane: Jacob Zuma will end up in Prison


“He faces 783 charges of corruption, racketeering and I’m stating it here on record, I’m not going to drop that case against Jacob Zuma. He will end up in Johannesburg prison.”

Fin24 | Economy Adjust or hike? Gigaba’s VAT options to plug Treasury’s revenue hole


“According to PwC, Gigaba could change the zero-rated VAT status of certain items. Among the biggest money spinners here could be fuel…”

“Tiered VAT rates? The purpose of which would be to provide for a higher rate on those items that are purchased by the wealthy,” said PwC.

08 February 2018

Herald Live | AudioMashatile: We were going to fire Zuma after Wednesday’s NEC meeting


“Addressing investors at the Mining Indaba in Cape Town on Tuesday, just hours before Ramaphosa announced the postponement of the NEC meeting that would have decided Zuma’s fate, Mashatile said Zuma would have been recalled from office if he did not step down.”

“President Zuma basically said to us: ‘I’m not going anywhere, I’m not convinced by you guys so I’m not going to resign. You can go back and report to your national working committee and the NEC that I said I’m not resigning’,” Mashatile said.

Eye Witness News | Ramaphosa Warned Over Handling of Zuma’s Exit


“Deputy president Cyril Ramaphosa has been warned he could come off as looking weak in his handling of President Jacob Zuma’s exit… Ramaphosa says he’s certain the outcome of the current process will address all concerns around Zuma’s position and unite the country.”

Reuter| Market News: FOREX-Dollar holds ground as euro comes under pressure


“The dollar/yen seems to be capped by uncertainty in the equity markets, which will likely keep it in a range,” Yamamoto added. “But maybe the equity market downturn won’t last for long, because the world economy is solid.”

Quotient Financial Solutions | Tax and SARS commentary from John Lightfoot

Quotient Financial Solutions

We are back into full swing for the year. Provisional taxpayer’s deadline was 31 January and what a truly awful and frantic last two weeks of January it was. It would appear that every single person in South Africa who submitted a tax return has gone for audit necessitating more time, effort and money. I heard that there was one guy, who lived in Beaufort West who didn’t go for audit, but I can’t be sure.

SARS are bludgeoning the golden goose to death.

Of course, when you read the below, it all makes sense. Having destroyed the institution and filled it with his lackeys and acolytes, Moyane needs money to feed the machine.

See below two examples of breathtaking incompetence and downright criminality that is now running this spaza shop.

  1. Jonas Makwakwa (SARS 2ndin command) received a bonus of R930,000 in the 2016/2017 financial year, SARS’ annual financial statements have revealed. He worked for six months only before getting suspended on allegations of corruption and money laundering. Not only did tax boss Tom Moyane sign off on Makwakwa’s bonus, he also did so unilaterally in an act pitting SARS against the Auditor-General. The Auditor-General did not take kindly to this move, labelling it unlawful and indicative of a “serious internal control deficiency” at SARS. Stuffing ATMs with cash… Nice job if you can get it. By PAULI VAN WYK for SCORPIO (published in “Daily Maverick”). Feel free to read the entire article – it beggars belief.
  2. Secondly, we, as in QFS received an extremely non-specific letter saying that Quotient owed money. “My compliance” was checked, statements drawn and a huge amount of time wasted. No money owing.

A final demand was then received, threatening legal action (with a case number as well!). So the whole catastrophe and rigamarole was gone through again (looking for this non-existent debt). I conduct Quotient’s tax affairs with military precision and know this was not the case, but, in the time honoured fashion, God help you if you don’t respond to SARS letters of demand/ threats of legal action etc etc. So the time is wasted.

Eventually after not being able to find out what the legal demand was for, I spent seventeen 17 minutes (waiting and then speaking to her) on a  telephone call with a lovely, extremely courteous and helpful young lady. Turns out that I and Quotient don’t owe any money. So this has been a waste of more hours of my life on SARS.

This is happening to our clients as well (we’ve just received another one of these as I type).

I am typing slowly here – so that SARS can get the message. They are generating threats of legal action against taxpayers who do not owe them money.  I’ll  repeat that. They are generating threats of legal action against taxpayers who do not owe them money.

The loss of credibility and trust that people have in SARS is astounding – particularly in the context of the State Capture/ Jacques Pauw/ Gutpa leaks/ firing of Gordhan etc etc etc etc.

This completely avoidable waste of time is costing us, our clients and the South African economy Millions and Millions of Rands – as SARS need to employ people to generate letters demanding money from people who don’t owe them money and then employ people to deal with the all of the enquiries from people who have been threatened with legal action (who don’t actually owe any money). We, as in tax practitioners, need to waste our lives on a matter/ event/ letter which should not even have been raised.

The CR17 machine needs to take serious, immediate and drastic action.?

What we think

Like a season of The Bold and the Beautiful or Days of Our Lives, the final, disgraceful chapter in Zuma’s Reign of Corruption and Incompetence is feeling like a never-ending saga at the moment (please G-d, just let’s not have his long lost identical twin brother show up in the season finale).

We do believe that we’re almost there and that when SoNA is finally delivered it will indeed be by President Ramaphosa.  This is undoubtedly positive, notwithstanding that any progress is coming off an incredibly low base.  Our view is that such change is largely priced in; however, we would expect a short-term ZAR rally when it is finally confirmed.

Of greater importance in our view, then, is the Budget Speech in two weeks.  While we would hope, although don’t expect, that this will be given by someone other than Malusi Gigaba, the reality is that whoever delivers the budget and indeed, whatever it is they say, will be hard-pressed to present satisfactory short- to medium-terms solutions to the country’s economic challenges.

With this in mind clients who are able to wait a week or two (and who have the stomach for volatility and potential negative surprises) may benefit from doing so.  For the rest, we continue to believe that current levels remain attractive both in terms of the outlook and challenges facing the new leadership of the country and relative to the levels of the past two years.

Have a great weekend!