Prepare for a rough ride

THINGS ARE GOING TO GET A LOT WORSE BEFORE THEY GET BETTER Sirens should be ringing loudly in your head. The real pain will be felt in the middle and lower-middle class.

There is no more money, as Moneyweb’s Ryk van Niekerk summed it up after Wednesday’s medium-term budget policy statement. There is not really any good news either. Worse, there’s zero evidence that the situation will improve.

Look around you. The cranes in Sandton are slowly reducing in number, as mega head office projects signed off five or more years ago are completed. House prices have gone backwards (after inflation) since the 2007/2008 peak, and the market has been almost flat for three-plus years. Consumer spending is stuttering along.

Panicked emigration sales flood neighbourhood groups on Facebook. Those who have had the means to leave, have left.

And there’s nothing that will change this picture. Economic growth has “decoupled” from the rest of the world, both developed and emerging markets alike. Finance Minister Malusi Gigaba could only vaguely refer to a global environment that “may be helpful, as growth is improving, despite persisting risks”.

Fracking in the Karoo, once heralded as the catalyst to kick-start growth and job creation, is all but dead. Government’s world-leading renewable energy programme stumbles from one acting Eskom CEO and energy minister to the next.

Add to this the toxic stew of almost-guaranteed further cuts to our credit rating, rising borrowing costs and a mountain of sovereign debt (R2.53 trillion and climbing).

What confidence local and international investors (providers of capital), as well as the ratings agencies, have in this medium-term budget framework remains to be seen. Pragmatic efforts at “fiscal consolidation” are out the window.

Government debt-to-GDP will reach eye-watering levels of over 60% within the next five years.

It’s not clear how we get back to above 1% growth in the medium term, never mind 2% as Wednesday’s downwardly-revised, but still fairytale forecasts suggest.

Deferring the “tough” calls – many of which must be made in February – to yet another committee suggests Gigaba doesn’t have the confidence, political capital or expertise to make them himself. Most of this isn’t of Gigaba’s making.

The “involvement” of the International Monetary Fund is already being floated as a possibility by Treasury. Beware of bankers bearing bailouts.

I cautioned in July that things were bad out there. Right now, sirens should be ringing in your head. Be prepared, no matter how insulated you think you’ll be.

Most readers, however, will be fine. The real pain will be felt in the middle and lower-middle class. Small towns will continue to face migration to the metros, soaring unemployment and negative growth.

But… everything will be fine. Until it isn’t.

Hilton Tarrant works at immedia.