SA now expected to underperform rest of sub-Saharan Africa
AS WE MOVE THROUGH the second year of global crisis, two things are becoming clear, two hopes dashed. First, this is developing from “just” a banking crisis into an economic slowdown, if not outright recession. Second, “uncoupling” – whereby a crisis in the United States might not be felt worldwide – is a castle in the air.
Those who hoped – including me – that continuing growth from China and India would insulate South Africa have been proved wrong. The cutbacks by the Merafe/ Xstrata ferrochrome operation are just the latest illustration of that.
While SA under the Mbeki regime was great at denialism, one had hoped for better things from its successor. But what’s one to make of the ludicrous statement by National Treasury director Lesetja Kganyago: that a drop in the rand will help narrow the current account deficit without pushing inflation to new highs, because our exports will become more competitive?
What world is he living in? US dollar prices and demand for SA’s exports are both falling, while imports, which will become more costly, must remain high if essential infrastructure spending is to continue.
In its latest downgrading of the rating outlook, Standard & Poor’s expects the current account deficit to be 22% of current account receipts in 2008 and says the weak rand will make that worse. Fact is, it’s broadly expected SA will underperform the rest of sub-Saharan Africa over the next year or so. International agencies still predict 5% to 6% growth for the region as a whole: I reckon SA will be lucky to get close to 4%.
African mini-conglomerate Lonrho, always exuberant, is even looking for 20% growth in Angola. SA, on the other hand, is on balance slipping back in league tables of international competitiveness and attractive places in which to do business. Put it all together and we’re in for a bumpy ride.