Slip­ping back

SA now ex­pected to un­der­per­form rest of sub-Sa­ha­ran Africa

Finweek English Edition - - Thecompanyyoukeep -

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.

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