I was in London for the EU referendum – and voted Remain – and the bizarre leadership events that followed, and then in the US for the party conventions and the subsequent “Trumplosion” or “Trumpocalypse”, as Republican Party insiders are dubbing the past disastrous week.
The news there is that, after an extraordinary series of gaffes, Donald Trump has now fallen 15 per cent behind Hillary Clinton in the polls and the pugnacious billionaire has created so many problems for himself that some Republican establishment figures are begging him to drop out of the race.
I am now back in South Africa, where we have had an election of our own in which the ANC suffered its worst results in 22 years.
A downcast and humbled president Jacob Zuma, fighting to stay in power until his term expires in 2019, is being unmercifully teased about his pre-election remark that the “ANC will rule until Jesus returns”. Gleeful opposition leaders are claiming to have seen Jesus on a bus in Port Elizabeth, the scene of the ANC’s biggest loss, or walking across Zoo Lake in Johannesburg, where the party’s vote slipped below 50 per cent.
In its own way, the results are just as extraordinary as anything happening elsewhere in the world. For the first time since South African’s transition to democracy in 1994, the ANC’s overall support dropped from 62.9 per cent in 2011 to 54.4 per cent, reflecting the lethal combination of a compromised president, a limping economy, factional battles within the party and poor service delivery in many municipalities.
It has lost its majority in four of the big metros, including the capital, Pretoria, prompting some commentators that, like Zimbabwe’s Zanu (PF), it will become a predominantly rural party. But even in the rural areas, traditionally ferociously loyal, the swing away from the ANC was huge: 13 per cent in Limpopo province, in North West by 16 per cent, in the Free State by 9 per cent and in Mpumalanga by 8 per cent. If that doesn’t topple Mr Zuma then nothing will.
The one thing that is not toppling is the South African rand, which earlier this year dropped to a record low of R18 to the US dollar and R24 to the pound.
On Friday, just before the US jobs data, it touched R13.63/$, and R17.8/£, its highest level for the past year. If that sounds counterintuitive, consider this: the UK’s vote for Brexit has led to a fresh round of monetary stimulus by the world’s major central banks to contain the fallout on their economies. As expected, the Bank of England last week unleashed a package of stimulus measures, which included slashing interest rates to a record low of 0.25 per cent, with more to come if that doesn’t work (which it probably won’t).
In Japan, the government approved a stimulus package equivalent to 5.6 per cent of the country’s GDP to boost growth and analysts reckoned it would have to do more to achieve its target of 2 per cent inflation (the current rate is minus 0.2 per cent).
The yield on the benchmark UK 10-year gilt (bond) now stands at a record low of about 0.63 per cent and the equivalent bond yields in Germany and Japan are in negative territory.
By contrast, the South African Reserve Bank has raised rates by a cumulative 200 basis points since 2014, lifting the yield on the local benchmark bonds to 8.55 per cent.
Not surprisingly, that has made it a destination of choice for global investment flows, with a net R53.76 billion flowing into South African bonds so far this year, compared with R15.68bn in the corresponding period last year, according to the Johannesburg Stock Exchange data.
Peter Attard-Montalto, Nomura’s senior emerging market economist, forecasts that the global economic environment will remain supportive for currencies such as the rand for at least the next few months, although any sign of the US Federal Reserve pushing interest rates up will have a weakening effect. Although the indications are that the Fed will keep interest rates steady when its open market committee meets next month, the latest payroll figures, published on Friday, show that US employers last month, and for the second straight month, hired far more workers than expected. That has kept alive the prospect of an interest-rate increase later this year.
On that basis the rand should hold on to its recent gains for another few months. But Mr Attard-Montalto forecasts it could end the year back at R17 to the dollar.
Even the elections can’t alter the economic fundamentals of a country which, under Zuma, has lost its way.
Ivan Fallon is a former business editor of The Sunday Times
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