South Africa’s economy – still struggling to take off
* South Africa’s growth: President Ramaphosa’s number one priority is to stimulate the South African economy, an economy that has been in the doldrums, growing by less than 2% in the past five years. This is especially important as some of the country’s main socio-economic scourges have either worsened (in the case of high unemployment rate) or had progress slowed (with regards to the eradication of poverty). However, we expect GDP growth to recover meaningfully only during H2 2019.
* GDP per capita: While real GDP per capita improved steadily from the mid-1990s, the trend visibly reversed from 2015 on the back of lackluster GDP growth that has been outpaced by population growth.
* The consumer: Faced with higher unemployment rates as well as insipid overall wealth, consumer spending has been low. Consumer confidence also remains downbeat.
* Production: Activity was adversely impacted by operational difficulties, particularly electricity cuts by Eskom. Although we expect there to have been some recovery in Q2 2019 as electricity supply normalized, we still don’t expect it to be significant at least until H2 2019.
* The rand: Although the South African exchange rate has been adversely impacted by the low growth environment as well as the stressed fiscus, it has recently been strengthening due to more accommodative monetary policy, especially in advanced economies.
* Fiscus: One of the biggest threats facing the South African economy and its ability to recover is the country’s weak fiscal position, including high debt levels. The high indebtedness has resulted in the government’s being highly constrained in terms of exercising macroeconomic policy.
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