“The economy has slowed down…but just a little,” explained a colleague in Johannesburg. “Here in South Africa, we’ve had very good growth over the last few years. Now, GDP growth is down to about 4%…but it’s still good.
“And there’s a lot of activity. People are starting new businesses. People are making money. In fact, there’s probably too much activity. Traffic is terrible in downtown Johannesburg. So many people are getting cars. And we don’t really have the infrastructure to keep up with them. What’s more, we’re running out of energy. They cut the power off a couple of hours at a time. There just isn’t enough capacity…and it takes a long time to add new generators. So, they try to apportion what power there is. We have to run a generator whenever the power goes out.
“Yes, there are a lot of problems here. But the story is basically good. People who never had any money before are entering the modern economy. South Africa is booming. And I think it will continue to boom until 2010. We have the World Cup coming. They’re going to spend a fortune on transportation and infrastructure to get ready for them…unless the money is stolen.
“Tomorrow, the central bank is expected to put up its key lending rate to 14.5%. But just look at the headline: ‘Consumer confidence on the rebound’. They’re putting up rates to stop inflation…but inflation isn’t that bad…just about 6%.”
The Daily Reckoning Australia