Politics hamper SA economy

SA’s economy needs political support to maintain upward momentum into next year, a Reuters poll found yesterday, just days before the ANC conference.

Medians in the poll of 26 economists, surveyed by Reuters last week, suggested the economy will grow 1.2% next year after expanding 0.9% in 2017.

This year’s estimate is 0.2 percentage points higher than last month’s poll, after the economy grew more than expected last quarter.

SA’s economy expanded 2% quarter-on-quarter on a seasonally-adjusted annual rate in the third quarter as agriculture improved again from a drought while mining and manufacturing also impressed.

To maintain momentum into the new year, a boost of confidence is needed, and that is inextricably linked to politics, said Kevin Lings, chief economist at Stanlib.

The economy outperformed last quarter because agriculture picked up where it left off before the drought.

The ANC is due to pick a successor to President Jacob Zuma at its conference that begins on Saturday and finishes on December 20.

Deputy President Cyril Ramaphosa got the majority of nominations to become ANC party leader, but the complexity of the leadership race means it’s far from certain he will win.

“If we have a better political outcome next year, irrespective of who wins in December, we could lift the growth rate to 2%,” said Lings.

Still, only one economist forecast 2% growth next year, the most bullish expectation. The most bearish was 0.9%.

The survey also showed there is a 30% chance the South African Reserve Bank will change rates at its January meeting.

Rates are expected to remain on hold at 6.75% through to mid2019 at least. Last month’s poll had predicted a cut to 6.5% in early 2019.

Risks that have changed the rates outlook are the ANC conference, the value of the rand considering further credit downgrades, higher oil prices and electricity costs. –