When Deputy Finance Minister Nhlanhla Nene said earlier this month that things are “not going how we anticipated”, he was talking about tax revenue.
But just as easily he could have been speaking about the rand-dollar exchange rate, petrol price hikes, Chinese economic data, the gold price or his boss’s plan to review tax income.
Recent months have brought the consumer a barrage of bad news. A combination of local and global factors have led to blow after blow.
Perhaps the most visible sign of distress is the weakness of the currency.
At the end of May, the rand fell below the psychologically significant R10 to the dollar mark.
On June 11, it plunged to a fresh four-year low of R10.36. Despite a slight recovery, it has danced around the R10 mark ever since, touching R9.91 on the morning of July 17.
A weak and volatile economy
Annabel Bishop, group economist for Investec bank, said not only had the currency been weak but it had also been volatile.
She said that it began the year at R8.45 to the dollar.
“Thin trading conditions have exacerbated its weakness in June and July, driven by uncertainty, repositioning and reduction in participation.”
But, in spite of its overall volatility, the rand had been “in a pretty stable range since the end of May”, said an emerging markets economist, Peter Attard Montalto.
And perhaps by way of comfort, other emerging market currencies have also taken a knock amid talk of the United States Federal Reserve beginning to end quantitative easing.
Both the Turkish lira and the Hungarian forint slid 0.3% before Fed chairperson Ben Bernanke’s Wednesday address to Congress, reported Bloomberg.
Unique difficulties
Nevertheless, South Africa has its unique difficulties. Last quarter’s statistics showed lower than expected gross domestic product growth figures with 0.9% growth in the last quarter.
This has led to several international institutions reining in their predictions for growth.
The most recent of these took place this week, with the International Monetary Fund adjusting its growth forecast for the South African economy from 2.8% to 2%.
“The South African economy is not an island and our current low rate of growth can partially be attributed to the slow rate of growth in the global economy,” said Craig Pheiffer, head of private client asset management at Absa Bank in a note to investors.
“Slowing growth in China and recessionary conditions in Europe, two of the largest importers of our goods, have hurt exports and domestic manufacturing production,” he said.
“Slower global growth has also translated into a lower demand for commodities and commodity prices have fallen.”
The embattled mining sector
The already embattled mining sector has borne the brunt of this. Earlier this month, the price of gold fell to its lowest level since 1982.
The spot price was $1 291 an ounce on July 17. Goldman Sachs forecasts that the gold price will drop to $1 050 by the end of 2014, Bloomberg has reported.
“That [the drop] further hurt export revenues but it has also made for less profitable mining production, mining closures and retrenchments,” said Pheiffer.
On top of this, the sector is currently embroiled in fierce wage negotiations because of the battle for dominance between the ANC-supporting National Union of Mineworkers and the rival Association of Mineworkers and Construction Union.
But, although commodity prices might be flailing, oil prices have increased steadily. Brent crude oil has gone up from R800 a barrel this time last year to just below R1 100 a barrel this year, and was R1 067 on July 17.
As a result, consumers have been hit with massive fuel price hikes. The beginning of July saw a whopping 84c a litre added to the price of unleaded 93 and 95 octane petrol. Diesel rose 78.2c a litre.
There will be another significant increase in the first week of August, with the petrol price expected to rise 61c a litre. Motorists inland will be paying a record high of R13.84 a litre and those at the coast, R13.47.
With Nene recently hinting that tax hikes may be a necessary salve for the fiscus, there is very little comfort for South Africans other than the realisation that they are not alone.