No growth: here is why

South Africa’s problems run a lot deeper than a lack of confidence, which explains why economic growth has remained lacklustre despite a stronger world economy and constructive changes on the local political front, an economist has argued.

“The change in the political leadership has certainly supported confidence, but it isn’t just confidence that is holding us back,” senior economist Nicky Weimar told delegates at the Nedgroup Investments Summit.

At the beginning of 2018, some economists said the local economy could grow more than 2% this year, but growth has continued to disappoint despite a supportive global backdrop.

Forecasts now put real GDP growth closer to 1%.

And while commentators spoke of “Ramaphoria”, the narrative has changed to “Ramapausia”, highlighting a step change in tone.

Weimar said South African businesses face real obstacles.

Firstly, they have to rely on a public sector hollowed out by state capture and corruption.

Weimar said cleaning up a mess of this scale imposes significant costs on businesses and households in the form of higher taxes, cuts in government spending and the rising cost of production due to higher electricity tariffs and other state infrastructure costs.

Secondly, most businesses operate in a highly uncertain policy, legislative and regulatory environment.

Weimar said the country continually entertains ideas to the radical left of the spectrum and the fret of these ideas materialising in economic policy adds to the risk of investment and expansion in SA.

Businesses also operate in a hostile environment. The labour market remains dysfunctional, wage growth outstrips productivity, and strikes are a frequent occurrence, which adds to production cost.

Firms rely on expensive and unreliable economic infrastructure of inefficient state-owned enterprises. The new leadership has not done anything to materially improve things, she said.

Moneyweb

JSE Limited released half-year results on Thursday afternoon, showing a 7% growth in group revenues and a 34% increase in headline earnings per share. After a soft 2017, the numbers showed an increase in activity across all of the group’s market segments.

“It is a reflection, certainly in the first quarter of the year, of a more positive sentiment in the country,” said the exchange’s CEO, Nicky Newton-King.

“Volumes were slightly softer in the second quarter, but it was

South African businesses are up against huge obstacles.

Nicky Weimar Senior Nedgroup economist