Stagnating growth, inflationary pressures

SOUTH Africans would have been worse off had the international ratings agencies downgraded the country to junk status at the end of last year, as this would have pushed about 160 000 people into poverty, said André Roux, a professor in economics at the University of Stellenbosch Business School (USB).

Roux was a key speaker at a seminar in Cape Town – presented by USB and the Institute for Futures Research – on how developments in the economy, politics and education will influence South African organisations this year.

In a presentation on the outlook for South Africa, Roux said a number of factors influenced South Africa from a global perspective last year, including tepid growth and low inflation, fiscal balances, monetary relaxation, commodity prices, changing demographics, ecological concerns and inequality.

Roux said South Africa currently had stagnating growth and inflationary pressures while the country’s unemployment continued to grow. He said if South Africa were downgraded at the end of last year, short term borrowing costs would have risen by 60 basis points, while 1 percent would have been shaved off the country’s gross domestic product.

“We are on the brink of junk status, according to Standard and Poor’s and Fitch ratings agencies. The primary objective of the South African Reserve Bank is to protect the value of the economic currency in the interest of the balance. Labour constraints in South Africa have moved sideways. Investment spending fell by 6 percent,” said Roux.

Roux said every South African would have been R1 000 worse off and also 160 000 people would have been pushed into poverty, had South Africa been downgraded to junk status. Facts from the external environment and the impact of Brexit include that South Africa is the biggest recipient of British foreign direct investment, totalling 30 percent in 2014. On the other hand, Britain accounts for about 20 percent of South Africa’s exports to the EU.

Roux added that in 2015, UK residents represented 17 percent of overseas tourists visiting South Africa.

He said there was a need to create new trading agreements with the UK and renegotiate some of the key trade agreements with the EU in order not to further raise the uncertainty faced by South African businesses.

Meanwhile, Piet Naudé, a director at USB said, on financing higher education, government spend was R50 billion in financing higher education. The state contribution declined from 49 percent to 40 percent in 2014.

On technology, Martin Butler, a senior lecturer in Information Systems Management and Technology Futures at USB, said there were approximately 27 attempts of cyber crime a minute.

“It (cyber crime) is more common than what you think, has a higher impact than what you think, is more sophisticated than what you think. It is the responsibility of all managers in organisations. It starts with your employees and with you.”

Butler said the average total cost of data breach in South Africa last year was R28.6 million.

He said cyber crime is a big problem because the internet accounts for large public networks with vast sets of anonymous traffic, large sets of valuable information on the internet and vast amounts of unsecured networks.

Every South African would have been R1 000 worse off and 160 000 people pushed into poverty.