The South African Unemployment Crisis
The Q2:2021 Quarterly Labour Force Survey (QLFS) painted a bleak picture of South Africa’s labour market and the economic environment overall as the 34.4% unemployment rate ranked the country as having the highest unemployment rate in the world. The hopes of many that there would be an improvement in the third quarter were cut short this week when StatsSA reported that the Q3:2021 unemployment rate has gone up to 34.9% with the expanded definition unemployment rate at 46.6%. There are 11.5 million unemployed people of which 7.6 million are actively seeking work and 3.9 million are discouraged. A breakdown of the most affected by the unemployment rate according to demographics shows that South Africa has unemployment rates of 77.4% for the youth, 51.1% for Africans, and 55% for African females. Of the 660 000 decrease in the number of employed persons, 7 out of 8 sectors recorded job losses while the finance sector recorded employment gains.
Country Risk and SA's Judicial System
Law enforcement is happening at “a fairly relaxed pace,” Minister Pravin Gordhan” (Public enterprises).
Law enforcement agencies are institutional structures that play a critical role in the development of politically stable societies. However, the impact of their stability and effectiveness extends beyond the socio-political. Economic growth is also anchored by the stability and effectiveness of a country’s institutions, including law enforcement, given the crucial role the latter plays in determining the perceived risk of investing in a country.
A country’s level of risk has three determinants: economic risk, financial risk, and political risk. The effectiveness of Law enforcement institutions plays a crucial role in determining the latter. Political risk analysis is centered around democratic accountability, level of corruption, law, and order, bureaucracy. To improve South Africa’s Political risk level, the wheels of justice need to turn at a higher speed to reduce the list of those “waiting in the queue” to be charged and prosecuted for engaging in the looting from state-owned entities.
Didi Set To Delist From The New York Stock Exchange
It’s less than 6 months since Didi, listed in the U.S, and the Chinese ride-hailing giant has announced its plan to delist from the New York Stock Exchange and list in Hong Kong. This comes against the backdrop of a 44% plunge in Didi shares since its IPO on June 30, as well as a crackdown on U.S-listed tech companies by China. The announcement that Chinese regulators had asked the firm’s executive to formulate a plan to delist from the NYSE as a result of concerns over the leakage of sensitive data given Didi reportedly went ahead with an IPO before addressing the cybersecurity issues that the authorities wanted to be solved, resulted in a sharp decline in stocks. This is set to negatively impact the massive stakes held by SoftBank and Uber who according to FactSet own over 30% of Didi.
When a call for certainty creates uncertainty: The Fed vs. US Stock Markets
This week, the call by Federal Reserve Chairman Jerome Powel for policy certainty has created uncertainty in the U.S and global stock markets. This came after the Chairman made a call for policymakers to lay down the use of the term “transitory” when referring to the expected inflation path given the possibility that the observed upward inflationary pressures may not be temporary. The inflation rate in the U.S has been on the rise, even exceeding central bank targets. Ex-ante, it is plausible for the stock market not to anticipate policy rate hikes by the Fed when the inflation path is transitory, however, lack of action may result in higher future inflation to the detriment of consumer purchasing power. Powel’s recent remarks about the inflationary path, which are in contrast to his previous remarks, have left stock markets uncertain about the path the policy rate will follow, this leaves their investment positions vulnerable as they await a clearer policy stance from the Fed.