Emerging South

Some people really don't get it.  Wayne Mc Currie of South African RMB Bank is one of them.   Soon the South African Reservee Bank should announce the December inflation figures.  In November the CPIX consumer price index was at 12,8%, coming from 13,6%.  12,8% is still massively high (by way of comparison, the consumer inflation index of the last 12 months in Brasil was 6,39%, less than half the South African inflation. 

Now Mister Warne Mc Currie claims:
"Now in South Africa, to divide our market into two - the non-resource shares - we know there's good news coming. So with the banks, the retailers, we know interest rates are coming down, inflation's coming down, the price of petrol's coming down - despite what the oil price has done in the last couple of days. But after the peak it's actually a massive fall - when diesel went above R12 and petrol went above R10/litre. So there'll be a massive fall. Of course, in the next three/four months the inflation numbers are just going to plummet. So we will see further - and quite significant - interest-rate cuts. So for let's call it the consumer shares, the outlook is actually reasonable. We just don't know yet about the resource shares. Now, they have rallied. Some of the resource rallies have actually been strong, simply because they fell so much."

The simplistic man believes that all will be well just because inflation is coming down a bit (but still double digit); mainly because oil prices went down.  The man fails to talk about South Africa's massive negative current accounts, the painful fundamentals of South African's energy-import depence, the fact that South Africa became a net food importer. And worst of all, Mr. Wayne Mc Currie fails to understand the massive negative impact of South African's Brain drain: more tha n 2.100 South African doctors are emigrating to Canada, mainly because of the skyrocketing crime in South Africa.  And when Mr. Wayne Mc Currie believes consumption will be the "all good like before" in South Africa; he should check the fundamentals and understand that South African's are already swimming in debt.  A slightly lower interest rate won't structurally solve this.