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Risk-off environment exposes SA’s weak fundamentals

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The global risk-off environment, brought about by fears of a US recession, has further exacerbated South Africa’s economic woes. “When the tide goes out, you tend to see which countries are exposed in terms of weak fundamentals,” says Annabel Bishop, Investec Chief Economist.

 

In this Investec Focus radio podcast, Investec Chief Economist Annabel Bishop discusses local and international concerns affecting the South African economy.

 

Annabel Bishop on rand volatility

“Typically, you do see quite a bit of volatility in the domestic currency in the middle two quarters of the year. In the Northern Hemisphere summer period, we tend to see heightened sensitivity to global market events.

“So if you have a risk-off event like the recent escalation of trade war tensions between China and the United States and concerns that the FOMC might not cut interest rates as much as previously was expected – those concerns were exacerbated in terms of the market impact and that’s quite typical for this time of the year. This given that trading conditions are fairly thin as the bulk of market traders in the Northern Hemisphere do tend to go away on their summer vacations now.”

Read Annabel’s Rand Note.

On underlying fundamentals for SA currency and markets remaining weak

“When the tide goes out, you tend to see which countries are really exposed in terms of weak fundamentals and of course with the global financial markets seeing a risk-off period, essentially the tide flowing out, then you see some of South Africa’s worries really being exposed, particularly in the run-up to the medium-term budget policy statement.

“That mini-budget we get, halfway through the fiscal year, gives us an update on government finances and of course the great worry around Eskom and its financing – what’s the quantum of debt that’s going to likely be transferred to the South African government balance sheet?”

On the proposed Debt Relief Law

“The worry [with the new Debt Relief bill] for the banking system is that such write-offs can have a significant impact on the banks’ books themselves. Conversely, this comes at a time where debt forgiveness could see some increase in borrowing.”

On an IMF bailout

“The IMF has said that South Africa is not, at the moment, in a situation which would require IMF rescue, which only happens when you go into a balance of payments crisis, so if we were unable to make payments on our government debt, particularly hard currency and foreign payments. South Africa is not deemed to be in that territory at the moment.”

On Brexit’s impact on SA

“There’s been a lot of increased relationships with South Africa in terms of trade. The UK is looking to foster deeper trade relationships and business ties with SA. If we do see a hard Brexit, strong breakaway from the EU for the UK, it will look to foster trade relationships and deals with other countries.”

On a potential US recession

“We have seen concern that the United States might not cut interest rates by as much as needed in the face of what could be a weakening in US economic growth and global economic slowdown.

“If we do see a situation where it looks like the United States will really go into a recession then I don’t think the Fed would hesitate in terms of cutting interest rates. But at the moment the US economy is deemed to be doing fairly well and I think there’s a friction between what the markets expect and what’s been communicated by the FOMC.”

 An interest rate cut from the FOMC?

“Markets are pricing in an 80% chance of a cut in the next meeting which is in September and slightly less than that for October and then perhaps around about 50% in terms of the December cut. Although these probabilities do change quite a bit.” BM

 

 

This article originally appeared on Investec’s FOCUS.

 

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In other news…

South Africa is in a very real battle. A political fight where terms such as truth and democracy can seem more of a suggestion as opposed to a necessity.

On one side of the battle are those openly willing to undermine the sovereignty of a democratic society, completely disregarding the weight and power of the oaths declared when they took office. If their mission was to decrease society’s trust in government – mission accomplished.

And on the other side are those who believe in the ethos of a country whose constitution was once declared the most progressive in the world. The hope that truth, justice and accountability in politics, business and society is not simply fairy tale dust sprinkled in great electoral speeches; but rather a cause that needs to be intentionally acted upon every day.

However, it would be an offensive oversight not to acknowledge that right there on the front lines, alongside whistleblowers and civil society, stand the journalists. Armed with only their determination to inform society and defend the truth, caught in the crossfire of shots fired from both sides.

If you believe in supporting the cause and the work of Daily Maverick then take your position on the battleground and sign up to Maverick Insider today.

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African News

Facebook suspends apps as Cambridge Analytica investigation marches on

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At the weekend Facebook provided an update for those following its ongoing investigation into the apps on its platform.

This investigation was of course brought about by the Cambridge Analytica scandal that breached the surface in March 2018. In lieu of that incident Facebook has been scrutinising the applications developed for its platform.

“We initially identified apps for investigation based on how many users they had and how much data they could access. Now, we also identify apps based on signals associated with an app’s potential to abuse our policies,” explained vice president of product partnerships at Facebook, Ime Archibong.

“Depending on the results, a range of actions could be taken from requiring developers to submit to in-depth questioning, to conducting inspections or banning an app from the platform,” Archibong said.

To date Facebook has looked at millions of applications on its platform and suspended “tens of thousands” as it investigates them.

There have been a few cases where Facebook has had to ban an app from its platform completely. The reasons for a ban range from inappropriate data sharing to violating Facebook’s terms and conditions. With that having been said, Facebook says it has found no evidence of data misuse other than what it has already notified authorities about.

Of course, it’s worth remembering that Facebook is not doing this of its own volition. You may recall the social network was ordered to pay a $5 billion fine by the Federal Trade Commission for its woeful privacy practices.

In addition to the fine Facebook has to have greater oversight over app developers and you may see fewer “What Game of Thrones prop are you” type quizzes on Facebook in the future.

“We have also developed new rules to more strictly control a developer’s access to user data. Apps that provide minimal utility for users, like personality quizzes, may not be allowed on Facebook. Apps may not request a person’s data unless the developer uses it to meaningfully improve the quality of a person’s experience. They must also clearly demonstrate to people how their data would be used to provide them that experience,” explained Archibong.

The social network says that it is constantly learning from last year’s incident and working to ensure it doesn’t happen again.

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Cloud and IoT cybersecurity threats demand an army of security experts

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By 2022, 1.5 billion devices with cellular connections are expected to be scattered around the world

These devices which form the Internet of Things (IoT) coupled with the adoption of cloud services has the potential to create an even more complex cybersecurity landscape and businesses ought to be prepared.

Even today, as the Internet of Things grows, the attack vectors we face in 2019 are far more different than those we saw even five years ago.

What’s more is that according to specialist security sales executive at T-Systems, Lukas van der Merwe the threats a business faces are more sophisticated and more persistent.

“The development of IoT has seen the advent of a multitude of smart devices that are connected to the Internet, which traditionally ran on closed and secure Operational Technology (OT) networks. This can impact an organisation’s risk profile, as these devices are open to a number of new vulnerabilities,” explains van der Merwe.

“Ultimately, the implications of a cyberattack could range from shutting down a small manufacturing plant to affecting power distribution across half of the country,” he warns.

Despite the rise of these threats, the solution remains somewhat the same – a good IT and security team.

That having been said, the rapid adoption of new technologies coupled with the growing cyber threats means that IT and security teams are struggling to keep up with new developments.

“There is a multitude of platforms, developed by third parties, that are constantly changing and growing, based on consumer demand. These are deployed and adopted by the organisation at a pace that the internal security team cannot keep up with. So, your subject matter expert is no longer a subject matter expert in your environment, because your environment has become so much more complex,” explains deal solutions manager at T-Systems South Africa, Andre Schwan.

The manager says that businesses can no longer rely on one person or a small team to handle cyber threats.

Due to the nature of the landscape a team made up of individuals that are experts in specific fields that can address a multi-cloud, multi-device and IoT environment.

In lieu of this a firm can tap up a security service provider that can assist in this regard. Especially in respect of South Africa, cybersecurity skills may be in short supply so drawing on a provider’s services may be the best option.

“The right partner can provide R&D, broad experience and development across a client’s environments, bringing much deeper capability and security experience at a much lower cost than if the client did it themselves,” Schwan explains.

While a firm may be hesitant to look outside of its walls for help, the rising threats mean that any firm can become a target. Perhaps then it’s time to consider employing the service of a firm made up of cybersecurity experts rather than going at it alone.

[Image – CC 0 Pixabay]

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Facebook lists countries backing the stability of its Libra cryptocurrency

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When Facebook first debuted its new cryptocurrency, Libra, a few months ago, the general reaction was mixed. Most people were hesitant to use “Zuck bucks” if the divisive social media company was behind it, whereas governments raised concerns over stability of the currency and what the endgame was for Facebook.

While we cannot speak for consumers, governments have been poking around under the hood of Libra, with those in the European Union in particular wanting to know more about the cryptocurrency.

To that end Facebook sent a letter to German politician, Fabio De Masi, in a bid to explain how the cryptocurrency is backed and that it will not suffer from the same volatility and instability that Bitcoin and others suffer from.

Having read the letter, published by Der Spiegel, it goes on to list the countries and currencies that will be backing Libra. Perhaps unsurprisingly the United States is the largest backer, with the dollar accounting for 50 percent of its backing. The US is followed by the EU at 18 percent, Japan at 14 percent, Britain at 11 percent and Singapore with seven percent.

As Reuters points out, it is rather telling that the Chinese Yuan has not been listed, with tensions between the US and China potentially scuppering any plans that Facebook has for Libra in Southeast Asian markets.

It’s also interesting to see that no African, South and Central American countries or currencies are backing Libra at this stage.

With Facebook noting that it is a solution designed specifically with the previously unbanked in mind, many of which live in those aforementioned regions, not having backing in those areas may mean a launch in less developed nations is still some ways off for Libra.

Added to this is continued uncertainty in the EU, with French and German officials having already raised issues regarding how a cryptocurrency like Libra could prove destabilising for their economies, not to mention others.

With the cryptocurrency facing heavy scrutiny before it has even been launched, which is still unknown at this stage, it’s clear that Facebook has an uphill battle on its hands with Libra, not to mention whether its intended target audience are even interested in the platform.

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