The year could still be a mean one — Mr Grinch

ASOUTH African optimist is someone who looks both ways when crossing a one-way street. It’s the way we are wired. When things go wrong, we expect the worst. When they go well, we overestimate the upside.

This time last year, the country was enveloped in a pall of despair. The currency was in free fall and its calamitous slide would only be arrested on January 18, by which time there were forecasts that a dollar would cost R19 by year-end.

Team South Africa arrived at the World Economic Forum in Davos last year punch-drunk with no one to talk to as the good news stories shifted to the political changes in places such as Iran and Argentina.

This week, however, the delegation should have more bounce in its step. Things are looking up — if only a bit.

Expect economists to start raising their growth forecasts and investment analysts to make more positive assumptions about future company profits. But, just like the forecasts of calamity were wide of the mark for 2016, be careful of being caught out as politicians begin to crow about a broad economic recovery. The country remains vulnerable.

We may have dodged two rounds of near-junk status downgrades, and the president, who this time last year appeared to have gone rogue, is now back in his box, but this doesn’t mean 2017 is going to be any less messy politically than last year.

In fact, matters will probably get worse before they improve as factions of the ANC push their preferred leadership contenders and undermine anyone who dares to openly challenge the president’s chosen successor, Nkosazana Dlamini-Zuma — who he believes will cover his back when he is no longer there to do so himself.

Although the JSE All Share index returned a big fat zero to investors last year, with the index ending practically where it started, there were tenuous signs of some recovery in the broader economy.

Our current account is in better shape than 12 months ago, thanks to a prudent National Treasury keeping our deficit under control, and, with better rainfall in most maize-producing areas, things start to look up a bit as inflation tapers and the Reserve Bank is finally able to provide some interest rate relief.

The biggest risk we face this year is complacency about the future as the economy shows early signs of recovery. Just as we let down our guard, the true vulnerabilities of the global economic system are likely to be revealed and our failure to make market-friendly reforms will be brought to bear.

Why does 2017 look better economically?

Global optimism has picked up since the Brexit vote. Thanks to a weaker pound, global UK companies are reporting higher profits and the FTSE 100 this week registered its longest record-breaking streak in history — at the time of writing there had been 10 consecutive days of record closes since Christmas. Although Europe has continued with quantitative easing, and the threat of a self-destructive British exit from the EU remains possible, they appear to have taken more of a back seat. And despite the long-term consequences of president-elect Donald Trump’s planned infrastructure splurge in a country already running an almost $20trillion deficit, there is hope that it will provide further stimulus to a tentative US recovery.

At least the first half of 2017 is shaping up to be positive for the economy and for investors who buy shares in companies that underpin it. Mad politics aside, it’s likely to be a pretty solid start to the year fuelled by Trump’s economic promises.

Why, then, am I being a bit of a new-year Grinch?

Bitter experience teaches me to be perpetually cautious. In 2008, the last time the Whitfield household undertook a massive residential renovation, the wheels came off the global economy. The builders move into our new home in a couple of weeks to do it all over again.

Whitfield is a public speaker on the political economy, and an awardwinning financial journalist, writer and broadcaster