US shale becomes world’s lowest-cost oil

US shale reserves are the lowest-cost option for future oil production and are likely to attract more investment than competing projects such as deepwater fields, according to a leading industry adviser.
About 60 per cent of the oil production that is economically viable at a crude price of $60 a barrel is in US shale, and only about 20 per cent is in deep water, said Wood Mackenzie, the consultancy.
Companies with US shale assets are likely to be at a competitive advantage over the next few years. Producers that rely on oilfields in higher-cost regions such as the North Sea and the deep waters off west Africa will have to cut costs or face shrinking output.
After the oil price plunge that began two years ago, production costs have been cut across the industry, but far more so in US shale.
Average costs per barrel have dropped by 30 to 40 per cent for US shale wells, but just 10 to 12 per cent for other oil projects, said Simon Flowers of Wood Mackenzie.
US shale regions that two years ago were in the middle of the cost curve for future oil supplies are now down towards the lower end.
Investments in the Eagle Ford shale of south Texas on average need a Brent crude price of $48 a barrel to break even, on Wood Mackenzie’s calculations, while projects in the Wolfcamp formation in the Permian Basin in west Texas need $39.
“There are more opportunities to invest in the US, and that’s where the investment will take place,” said Mr Flowers.
“If your investment options are in deep water, you’ve got quite a task on your hands. You might be asking: ‘Should we be getting into tight [shale] oil?’”
Brent was trading at $47.59 per barrel on Wednesday.
US companies that have shale oil reserves, including Chevron and ExxonMobil, have stressed the flexibility of those assets, which are developed with many wells costing a few million dollars each, rather than the multibillion-dollar projects often required for offshore production.
On Wood Mackenzie’s calculations, Brazil’s deepwater oilfields are so large that some will be commercially viable, but higher-cost regions could struggle to attract investment.
The number of large projects being given the go-ahead by oil and gas companies averaged 40 a year between 2007 and 2013 but dropped to just eight last year, according to Angus Rodger, also of Wood Mackenzie.
Although there has been a small flurry of investment decisions in the past few weeks, including the Chevron-led $36.8bn expansion of Tengiz in Kazakhstan, Mr Rodger expects only about 10 new big projects will go ahead this year.
While the economics of US shale are generally more attractive, Mr Flowers said the time taken to mobilise finance and workers to increase drilling and production meant that global demand could outstrip supply in a few years. That could drive oil prices to $80 to $85 per barrel in 2019-20, he added.





  

A renewed nationalism is stalking Europe

Nationalism is one of modern Europe’s strongest traditions, but it fell into disrepute after the second world war. Amid the avalanche of crises that have struck the EU over the past decade, of which Britain’s vote to leave the bloc is the latest example, nationalism is making a reappearance.
It takes a different form from the nationalism born in the 1789 French Revolution and buried in 1945. Today’s political and economic conditions are a world apart from those of 19th-century Europe, when many peoples rising to national consciousness had no state of their own. They are a world apart, too, from the 1918-1939 age of ideological extremes — fascism and communism — and severe economic hardship.
Contemporary Europe is, fundamentally, a peaceful and prosperous continent. The EU provides a framework for extremely close co-operation among national governments. It entrusts considerable power to supranational institutions, such as the European Commission, the European Parliament and the European Court of Justice. At a popular level, too, European societies are better acquainted with each other than ever, thanks to advances in communications, education and the ease of mass travel.
Yet nationalism, in new guises, is back on the stage. Its most obvious manifestations are, firstly, a stronger determination on the part of governments to defend their national self-interest within the EU and, secondly, the rise of rightwing populist nativism.
Both developments reflect profound political and social trends. There is a general mistrust of political elites, partly in Brussels but mainly at national level. More specifically, European voters of the moderate centre-left are losing faith in the capacity of 20th century-style social democracy to deliver economic security and protect identity.
The instinct to defend national self-interests in Brussels was never, of course, completely absent even in the heyday of EU integration in the 1980s and 1990s. However, it has soared to new heights amid the eurozone’s struggles to hold itself together and last year’s refugee and migrant emergency.
It is visible in the paralysed effort to deepen Europe’s banking union by means of a common deposit insurance scheme. It is visible in the ceaseless search by some governments to find ways of bending legally enshrined rules on fiscal discipline. And it is visible in a commission decision last week to let national parliaments have a veto over the terms of an EU-Canada trade deal. National self-defence is likely to torpedo a proposed EU-US trade accord, too.
A year ago, the EU’s “five presidents” — of the commission, European Council (which groups national leaders), European Central Bank, eurozone finance ministers’ group and Parliament — published a report on advancing economic, financial, fiscal and political union. Copies of the tepidly received report are gathering dust in the filing cabinets of national capitals.
No big push on integration is conceivable until after next year’s French presidential election and Germany’s parliamentary elections. Even then, it may not happen. France’s centre-right opposition Republicans, who are well-placed to win the presidential contest as well as the ensuing legislative elections, envisage stricter national border controls, a reduced role for the commission and more national influence over common EU policies. This stance has much in common with that of Poland’s conservative nationalist government.
The second form of nationalism in today’s Europe is radical rightwing populism. This is a more potent force than leftwing radicalism, as can be seen in the defeat of Podemos in Spain’s election last month, the increasing unpopularity of Greece’s Syriza-led government and the blind alley into which Jeremy Corbyn and his neo-Marxist allies are leading the UK’s Labour party.
The radical right, at least in western Europe, is less anti-Semitic than it was during France’s Dreyfus affair in the 1890s and under German Nazism. Rather, it is Islamophobic and anti-immigrant. In October, Austria will stage a re-run of its presidential election that may see a candidate of this type become the EU’s first such democratically chosen head of state.
Yet the radical right is more than nativist. It draws on a well of angry attitudes among sections of society that are offended not only by multiculturalism, or by losing out in a globalised economy, but by liberal values as such. Surveys of British voters in the June 23 referendum on EU membership show that one of the surest guides to whether someone would vote Leave was whether they supported a return to capital punishment.
Part of the appeal of rightwing populism is that it hammers away relentlessly on the theme that mainstream political parties, especially since the end of the Cold War, are almost indistinguishable from each other and offer no proper choice. Not without reason, the parties are depicted as corrupt and detached from everyday life. But far from everything is running in the populists’ favour.
Their chief weakness is that they have no economic policies beyond an iconoclastic rage at the euro, free trade and foreigners alleged to be parasites on the welfare state. The new nationalism, in its radical rightist colours, has no credible solutions for a modern Europe that, despite all its troubles, must pin its hopes for a better future on mutual co-operation and an open face to the world.



Tony Barber



Fonte: FT

After Brexit, the EU’s faultlines run through Rome

Europe’s faultline runs through Italy. Such was the candid opinion of one participant in a conference held last weekend by Eliamep, an Athens-based think-tank. Few other participants dissented.
By “Europe” everyone understood, primarily, the 19-nation eurozone. For the question on the minds of European policymakers is where, and to what extent, political, financial and economic contagion may spread from Britain’s June 23 vote to leave the EU.
The sharp falls in Italian banks’ share prices since the British referendum indicate where financial markets smell the danger of contagion. But Italy is the focus of attention not only because of its undercapitalised banks, colossal public debt and miserable economic growth.
Rather, EU governments and the markets sense trouble ahead in the way that Italy’s uncertain political outlook feeds into these problems, making them even harder to tackle. Their paramount concern is the referendum on far-reaching constitutional reforms that Matteo Renzi, Italy’s centre-left prime minister, plans to hold in October.
If voters reject these reforms, Mr Renzi says he will resign. Naturally, the ever-inventive, insouciant premier is free to retract his promise. However, he has staked much on this referendum, having described the reforms as essential for Italy’s reconstruction as a responsibly governed nation.
Defeat would damage Mr Renzi and risk driving Italy into prolonged political and economic instability. Confindustria, Italy’s employers’ group, predicts that defeat would cause the economy to shrink by 0.7 per cent in 2017 and 1.2 per cent in 2018.
Apart from putting Italian banks under more stress, such a recession would undo the good work of Mr Renzi’s government since 2014 in restoring a modicum of economic growth and modestly reducing unemployment. In a country that has recorded almost no growth since it became a eurozone founder-member in 1999, and whose public debt is more than 130 per cent of annual economic output, this would be a heavy blow.
Equally important, defeat for Mr Renzi might boost the fortunes of the anti-establishment Five Star Movement. This party, founded by the blogger-comedian Beppe Grillo, opposes the constitutional reforms. It is wholly inexperienced in government at national level, but it showed its strength last month by winning mayoral elections in Rome and Turin.
At present, the movement is just a few percentage points behind Mr Renzi’s Democratic party (PD) in opinion polls. Parliamentary elections are due in 2018 and only a rash forecaster would write off the Five-Star Movement’s chances. A referendum defeat for Mr Renzi may place the fate of Italy, a nation crucial to the survival of Europe’s currency union, in the hands of an idiosyncratic party that merrily talks of pulling the country out of the eurozone.
Yet a referendum victory for Mr Renzi would not eliminate all risks. The essence of his reform proposals is that Italy should dismantle its bicameral legislature, established in the 1948 constitution, and concentrate power in the lower house. Meanwhile, an electoral law passed by his government guarantees an absolute parliamentary majority for the party that wins a national election.
Mr Renzi’s advisers defend these reforms on the grounds they will cure Italy of its chronic governmental instability. More than 60 governments have come and gone since 1945, holding office, on average, for little more than a year each. Should the reforms take effect and lead to a PD victory in 2018, a five-year spell of strong government dedicated to economic reform might indeed ensue.
But if the Five-Star Movement won, it would find itself — thanks to Mr Renzi’s reforms — in firm control of a legislature reshaped to emasculate opposition to the ruling party.
Several banana skins lie in the EU’s path over the next 12 months, from a potential victory for the far right in Austria’s restaged presidential election in September to next year’s Dutch legislative and French presidential elections. But Italy’s referendum may be the most slippery banana skin of them all.



Tony Barber



Fonte: FT

Economists’ rare unity highlights peril of Brexit

Britain is a week away from its historic economic decision on EU membership. Economists have never been more united in supporting a vote to remain, yet the profession increasingly appears incapable of persuading the public of Britain’s national interest.

Economic history is clear. The UK’s growth of national income per head has been the fastest in the G7 since joining in 1973, having been the slowest between 1950 and 1973. EU membership has served Britain well and has not prevented domestic economic renewal.

A battery of evidence shows the EU creates trade rather than diverts it. All other relationships with the EU and others throw up greater tariff or non-tariff barriers. Trade enhances competition and productivity growth, the elixir of prosperity. Britain is not burdened by EU red tape; its most damaging regulations are home grown. Although EU immigration is unlikely to make the British-born much better off, there is no evidence migrants take jobs and precious little that they harm wages or public services.

The economic assessment is rounded off by the concern that the uncertainty associated with Brexit is highly likely to depress economic activity in the short term, ensuring a much greater hit to the public finances than any possible savings in membership fee sent to Brussels.

Though they do not come to precisely the same assessment of harm, the consensus is striking. While George Osborne’s warning of an immediate tax-raising Budget might be jumping the gun, economists agree higher taxes or lower spending would be necessary. Although economists stand to gain from Brexit — economics does well in a crisis — their lives will not be sweet after a Leave vote for three reasons.

First, good economists know the difference between big and small; they know what is true and fair, and they can put economic claims in the correct context. Such knowledge should be celebrated, but Michael Gove, the leading Brexiter, scorns serious economic research because “people in this country have had enough of experts”.

The Leave campaign has delighted in being the enemy of good economics and shows every sign of continuing after a victory, when it will surely get its fingers on the levers of power. Instead of addressing the arguments, the Leave campaign invariably plays the man not the ball, accuses independent research bodies of being hired hands of European funders, and incorrectly states that authors of many reports were in favour of the UK’s euro membership. A particular low was the insinuation by Steve Baker MP that Mark Carney, the Bank of England governor, was still acting as the mouthpiece of his former employer Goldman Sachs.

Second, some economic officials have been granted constrained powers to take decisions for the public good. The BoE controls interest rates. The Office for Budget Responsibility produces the official forecast that underpins tax and spending decisions. Competition authorities help arrange the playing field on which companies compete. Parliament’s ultimate sovereignty comes in the ability to remove these powers. But that is not enough for many Leave campaigners such as Jacob Rees-Mogg MP, who sought to bully the BoE into silence and called for Mr Carney’s head. Such threats will impede vital economic truth-telling after the referendum.

Third, economics itself is on the line. If leaving the EU turns out to be beneficial, the profession will enter a crisis that will dwarf its inability to see the global financial crisis coming. More likely, if economists are right but had insufficient influence, few will find satisfaction in saying, “we told you so”.

This is a pivotal moment for Britain. It is also a crucial time for economics. For once Britain’s economists have spoken with one voice. Britain should not leave the EU, they say. You have been warned.



Chris Giles



Fonte: FT

Brexit imperils the confidence of strangers

Suppose that the Leave campaign, which one might call Project Lie, wins the referendum next week. How bad might the economic consequences over the next few years be? Alas, they might be very bad indeed.

Mark Carney, governor of the Bank of England, noted when launching the May Inflation Report: “The [Monetary Policy Committee] judges that the most significant risks to its forecast concern the referendum.” Moreover, he added, “a vote to leave the EU could have material economic effects — on the exchange rate, on demand and on the economy’s supply potential — that could affect the appropriate setting of monetary policy”. The latest Inflation Report adds that the campaign has already partly caused sterling’s depreciation.

The UK Treasury has provided a thorough analysis of short-term risks. This is, inevitably, controversial. But it is important to remember that the Treasury is notoriously sceptical about the EU. Its main scenario is that gross domestic product would be 3.6 per cent lower after two years than if the UK voted to stay, unemployment 520,000 higher and the pound 12 per cent lower. Under a worse scenario, GDP would be 6 per cent lower, unemployment 820,000 higher and sterling 15 per cent lower. The Institute for Fiscal Studies has added that — instead of an improvement of £8bn a year in the fiscal position if the net contribution to the EU fell — the budget deficit might be between £20bn and £40bn higher in 2019-20 than otherwise.

Far more important than such inevitably uncertain forecasts is the analysis of the three channels through which Brexit would work in the short term. These are the “transition effect”, which would come from the perception that the UK had become permanently poorer; the “uncertainty effect”, which would come from unavoidable ignorance about the post-Brexit policy regime; and, finally, the “financial conditions effect”, which would work via the perception that the UK was a less appealing and riskier place in which to invest money.
An important question is whether modelled possibilities capture all the tail risks. The answer is that they do not.
The Treasury argues that the economy might reach a “tipping point” after which worse outcomes would occur — thus “a shock to sterling might cause a sudden contraction in foreign currency lending to UK banks”. Since about half of banks’ short-term wholesale funding is in foreign currencies, reduced access to such funding could then cause further significant financial instability.

An obvious source of fragility is the huge current account deficit. This reached 7 per cent of GDP in the last quarter of 2015. Mr Carney has stated that the UK is dependent on “the kindness of strangers” for sustaining its current standard of living. More precisely, it depends on their confidence. The current account deficit brings risks even in normal times. But the uncertainty caused by Brexit might cause a sharp turnround in capital flows. Net inward foreign direct investment might collapse, for example. The results could include a sharp decline in sterling, a fall in the prices of sterling-denominated bonds and a jump in the inflation rate.

If this were merely caused by a negative shock to demand, the MPC could respond with expansionary policy. Even so, it would be forced into unconventional policies, possibly including negative rates, given how low interest rates are. But, if Brexit were also viewed as a negative shock to supply (as it would almost certainly be), the case for monetary offsets would be weaker. The higher prices would then be a way to deliver the needed suppression of real demand. (See charts.)

A crucial source of fragility, on which the Treasury naturally says nothing, is political. After the referendum, the UK would cease to have a government in any meaningful sense. The Conservative party, with a tiny majority, would be deeply divided between its pro and anti-European wings. The opposition Labour party is already deeply divided on this and many other issues.
Out of this morass would have to come a competent government with a view of what it wants to achieve in complex negotiations with the rest of the EU and the world. It would then have to undertake these negotiations with partners that have many other concerns and would regard the UK with a poisonous blend of hostility and contempt. It would have to decide whether to keep or modify the laws created by more than four decades of EU membership and, if the latter, how to do so. It would have to manage the impact of Brexit on the coherence of the UK and its relations with Ireland. While doing all this, it would have to manage the economy, the fiscal position and the minutiae of political life. Anybody who believes the leaders of the Brexit campaign could manage all this is surely taking illegal drugs.

Moreover, the consequences of Brexit are unlikely to be limited to the UK. The direct impact of British economic instability on the world might not be large, though the eurozone is not in a good position to cope with negative shocks. But the indirect effects might be sizeable. Outsiders might view the UK’s departure as a sign that the EU is a sinking ship. Inside the EU, nationalists and xenophobes would take heart. Brexit might, in such ways, prove an important blow to the EU. At the least, it would force a huge diversion of attention and effort. Yet perhaps the most important consequence might be as a signal of the sheer power of populist forces. If the UK can choose Brexit, maybe Donald Trump will become president of the US.
Brexit, in sum, might be a big economic shock and not just for the UK. This is largely because of the fragility that precedes it and the many uncertainties that would follow it. The referendum is itself irresponsible. The outcome might well prove devastating.

Martin Wolf

Fonte: FT

Here is one export Germany should not be making

When, in April, Wolfgang Schäuble, Germany’s finance minister, sharply criticised the policies of the European Central Bank, he was expressing a distinctive macroeconomic approach which shapes the views of German economists and policymakers alike. It is based on the strong conviction that problems of aggregate demand are of secondary importance as long as prices are sufficiently flexible. This explains the German insistence on structural reform as the solution to almost all economic problems and the quasi-religious fixation on the “black zero”, the balanced fiscal budget with no red ink.

On the face of it, this German exception in macroeconomics is difficult to explain. Students in Germany read the same textbooks as their counterparts in other countries, and in advanced studies the same economic models are used. But behind the textbooks and models lies an economic philosophy called “Ordnungspolitik” which is not found outside Germany. Its guiding spirit is Walter Eucken, who taught at Freiburg university until his death in 1950. In a recent speech marking what would have been Eucken’s 125th birthday, Angela Merkel, the chancellor, insisted that the principles of the “Freiburg school” remained relevant.

There were two aspects to Eucken’s economic philosophy, one positive, the other negative. On the positive side was a commitment to freedom of contract, open markets, private property and robust antitrust policy. On the negative side was a rejection of Keynesianism.

From the experience of the Great Depression, John Maynard Keynes drew the conclusion that active demand management is necessary. Eucken, by contrast, believed that “full employment” policy of the sort advocated by Keynes would lead to a centrally planned economy. And while Keynes saw the Great Depression as the result of the inherent instability of the market economy, Eucken attributed it to an insufficient flexibility of wages and an inadequate monetary order. In his view, flexible prices and wages and an adequate monetary order were a reliable antidote to market instability.

In his aversion to the pursuit of full employment through fiscal policy, Mr Schäuble is an obvious heir to Eucken. This is also true of prominent German economists who, during the eurozone crisis, have ignored the effects of austerity on demand, out of a deep-seated belief that structural reforms can solve all problems.

How has such a narrow economic paradigm survived for so long in Germany? The answer is simple: German economic policy using this approach has been quite successful. But this is only because Germany’s economy, despite its size, is extremely open. The ratio of exports to gross domestic product is 46 per cent. In Japan, the figure is 18 per cent and 13 per cent in the US.

This openness allows Germany to pursue a passive macroeconomic policy at home and benefit from active demand-side policies pursued in other countries. About 60 per cent of the German current account surplus is with the US, the UK, France and Italy, which all have relatively high fiscal deficits. In short, Germany’s economy is supported by the demand management policies of countries that are heavily criticised by German academics and policymakers.

From a global perspective, this freeriding on the demand policies of other countries is questionable enough. But the German approach becomes positively dangerous when politicians try to apply policies which can work in isolation in a very open economy to a large and not very open currency area like the eurozone. In the present situation of chronic demand deficiency, insisting on the “black zero” for large currency areas, or even at the global level, would create a black hole in the world economy.



Peter Bofinger is professor of economics at Würzburg university and a member of the German council of economic experts



Fonte: FT

Africa has to go through its own industrial revolution

Capitalism is failing Africa. A relatively small number of entrepreneurs have prospered on the continent in the past decade, becoming the face of the “Africa Rising” narrative. But hundreds of millions more have remained poor and unemployed, and lacking electricity, good schools and access to adequate healthcare.

The collective gross domestic product of the continent’s 54 nations is roughly $1.5tn — less than that of Brazil alone, at more than $2tn. Africa, with 70 per cent of the world’s strategic minerals, has about 2 per cent of world trade and 1 per cent of global manufacturing.

Capitalism has been the greatest creator of national wealth in world history, lifting billions out of poverty from Singapore to China, and from South Korea to Brazil. But Africa stands on the cusp of a lost opportunity because its leaders — and those who assess its progress in London, Paris and Washington — are wrongly fixated on the rise and fall of GDP and foreign investment flows, mostly into resource extraction industries and modern shopping malls.

They are in thrall to orthodoxies better suited for more mature economies. African countries need to focus on creating broad-based growth across sectors and social classes in order to promote jobs and labour productivity. This is what improves GDP per capita, which has remained stagnant at less than $3,000 in most African countries. Africa must stop counting malls and measure jobs and their productivity instead.

There is no shortcut to that outcome that can ignore building industrial economies based on manufacturing. African nations must reject the misleading notion that they can join the west by becoming post-industrial societies without having first been industrial ones.

Africa should be striving for self-sufficiency and to become part of the globalised production value chain. This requires the consistent development of skilled labour, linking innovation to industrial production, as well as investment — both domestic and foreign — in infrastructure and manufacturing.

Fossil power has turned out to be a mirage in countries such as Nigeria. They need to switch to a strategy based on renewable energy that is often quicker to install and is increasingly cost-effective.

If countries across Africa are to achieve inclusive economic growth on this basis, another shibboleth must be confronted: the one which decrees that for economies to prosper and grow, governments must get out of the way of business. On the contrary, governments must lead the way, with a firm hand on the wheel and by setting policy that creates an enabling environment for market-based growth that creates jobs.

They must also keep a careful eye on market actors with regulation and oversight that has wider social objectives in view. Markets must work for society and not the other way round. That, surely, is one of the lessons of the global financial crisis.




This is not an argument for a heavy-handed statist approach that would choke productivity and stifle competition. Nevertheless, a strategic role for governments remains essential. The question is whether African governments are capable of making the right policy choices. Ethiopia and Rwanda offer hopeful examples.

African countries need to remove incentives for systemic corruption if the proceeds of growth are to be widely shared. The Nigerian government under President Muhammadu Buhari has rightly withdrawn subsidies and deregulated the importation of refined petroleum products. Next, it should review its policy of maintaining an artificially fixed exchange rate, in the face of depressed income from crude oil. This has bred corrupt arbitrage in currency markets and hurt productivity.

Another key to manufacturing-based, inclusive growth is “smart protectionism” — temporary tariffs that would protect nascent industries from the cheap imports that have rendered African economies uncompetitive on the global stage. For developing countries, such as many of those in Africa, this can be achieved within the rules of the World Trade Organisation.

For capitalism to work for Africa, just as it has for China and much of east Asia, public policymakers must shake off the shackles of orthodoxy.



Kingsley Moghalu is a former deputy governor of the Central Bank of Nigeria



Fonte: FT

Brazilian real perks up as most emerging market currencies sour

Brazil’s real defied the downbeat mood in emerging market currencies, strengthening against the dollar as the market clung on to hope that the appointment of interim president Michel Temer would herald a change in the country’s economic fortunes.

Last week’s Senate vote to impeach Dilma Rousseff from the presidency was seen by many forex strategists as the culmination of the real’s political risk-driven rally which has made it the biggest gainer this year on the currency market.

The final two days of last week saw the real fall 2.7 per cent as the reality of the task facing the new Temer administration sank in. Monday’s trading, however, suggested investors were not yet ready to call the end of the real rally, pushing the currency 0.9 per cent higher.

Poland’s zloty strengthened 1 per cent, as the country surprisingly avoided a downgrade from rating agency Moody’s, and the Russian rouble rose strongly on the back of oil nudging $50 a barrel.

Much of the rest of emerging markets looked decidedly pale, not helped by soft data out of China over the weekend.

Flows data suggested sentiment in EM has deteriorated, said Luis Costa at Citigroup, probably because momentum in commodity prices had been fading and confidence in equities was weaker.

The currency market was also on alert for US inflation data on Tuesday to maintain dollar strength following its Friday rally following better than expected retail sales data.

If the dollar continued to climb and China data softened, a further rise in the currency against the renminbi would “take its pound of flesh out of the broader markets and in particular emerging markets”, said Brad Bechtel of Jefferies International.

South Africa’s rand dropped 2 per cent to a two-month low and government bonds deteriorated after the government denied a report that finance minister Pravin Gordhan would soon be arrested over controversy surrounding the tax authority, which he previously ran.

In a year marked by strong gains across EM currencies, the rand has underperformed and a combination of weak fundamentals and rising political risk meant that was likely to continue, said Win Thin, an analyst at Brown Brothers Harriman.

Slow growth has driven unemployment towards 27 per cent, and although support for the ruling ANC was likely to drop, Mr Win said the party should hold on to power at municipal elections this summer.

“President [Jacob] Zuma’s second and final term doesn’t end until 2019, and he has so far proven impervious to various scandals,” he added





Roger Blitz


Fonte: FT