Important Announcement from your editor:

As we head towards our 100th edition of MoneyWeek South Africa, you may have already heard the publication is moving online. It’s the progressive force of creative-destruction at its best. Instead of relying on the postal service, your magazine will be delivered instantaneously to your inbox every week! This is just one of the ripples MoneyWeek is sending through cyberspace. We’re also now live on twitter, so go check us out for up to the minute news and views... 

From Gareth Stokes, MoneyWeek editor, SA

Dear MoneyMorning reader

As we pen this, the country’s regulators are preparing a “too little too late” assault on South Africa’s very own Bernard Madoff. The alleged mastermind of the latest failed business “opportunity” is Barry Tannenbaum, grandson of Adcock Ingram’s co-founder. Early estimates – a local attorney claims to represent investors who contributed R400m to the scheme – put total losses in the R2bn to R10bn bracket. Why do South African investors fall hook, line and sinker for financial scams?

It’s not like the so-called Ponzi scheme can be viewed as fresh bait! It’s a financial con named after Charles Ponzi, who offered investors fantastic returns by exploiting an arbitrage opportunity in the early-1900s US postal coupon system. By May 1920, he was sitting on $420 000 [approximately $4.59m today] and the money just kept rolling in. His Securities Exchange Company was such a hit, existing investors were reinvesting their ‘profits’ and mortgaging their homes to invest more. But the entire business was based on attracting new investor capital. It imploded when panicked investors tried to exit en mass. Tannenbaum’s operation is painfully similar. It promised investors 20% per six week cycle as a share of a lucrative “active pharmaceutical ingredients” import business. The business case – which included falsified purchase orders from leading domestic pharmaceutical manufacturers – and an impressive list of contributors – proved irresistible! “Lesson learnt?” you ask. At least until next time!

These investors are going to miss their hardearned cash as the green shoots of economic recovery take root. Local markets have been buoyed by President Jacob Zuma’s inaugural State of the Nation Address, the successful kick-off of the 2009 Confederations Cup and the close proximity of the 2010 Soccer World Cup. But it’s not all plain sailing. Each promise is shadowed by fear. Zuma’s promise of zero tolerance for corruption is offset by allegations of massive public sector tender fraud involving as many as 2,000 civil servants. And the green shoots of domestic economic recovery pale slightly against the latest manufacturing, mining and electricity data. It’s clear the recessionary conditions that blighted Q1 2009 are still deeply entrenched.

Concerns over higher levels of debt and slower GDP growth aside, the country also has to digest an alarming spike in its current account deficit. Already at 6.3% of GDP, the number’s likely to worsen on the back of poor export numbers. Commodity and vehicle exports account for a large slice of the country’s trade account and show little sign of a recovery in the short-term. You can’t mention current account deficits without a thought for the currency. The rand remains one of the top performing emerging market currencies this year – despite every conventional measure suggesting it should go lower. The rand’s saving grace is the net R23.8bn of foreign capital inflow to the local bond and equity markets in the first quarter of 2009. If this underpin is removed, the rand will devalue significantly!

International foreign exchange markets are a speculators dream. Long the domain of institutional investors, recent trading innovations have opened the way for private investors to get a slice of the action. In MoneyWeek's cover story this week, Tim Bennet takes a look at how you should approach the fastpaced, high risk world of currency speculation.

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Turning to the markets...

The JSE all share index climbed 1.07% on Friday. The gold mining index gained 2.41%. Resources added 1.04%. Banks fell 0.56% while financials grew 0.09%. Industrials bounced 1.01% and the platinum mining index closed down 0.62%.

London's FTSE100 jumped 1.52%. The Dow Jones closed down 0.19% and the Nasdaq rose 1.09%.

Tokyo's Nikkei added 0.75%. Hong Kong's Hang Seng flew up 2.52%.

Brent crude is currently trading at $69.30 per barrel.

Spot gold's trading at $933.45 and platinum was last quoted at $1202.00.

And here's how the rand is performing against the major currencies:
R/$ 8.13
R/₤ 13.39
R/€ 11.30