A hiccup for SA’s economic recovery
SOUTH Africa endured a watershed week with all key indicators pointing to an economy in trouble.
The country’s first-quarter growth contracted the most since 2009, registering a drop of 2.2 percent.
The negative print was followed by a drop in business confidence last month, marking a fourth consecutive month of decline.
Activity data from Statistics SA showed that the manufacturing sector which registered negative growth was also disappointing at the start of the second quarter, dropping 0.6 percent in April.
April retail trade sales and mining production are due this week and will provide a sense of how each sector started the second quarter of the year.
John Ashbourne, Africa economist at Capital Economics, said initiatives undertaken by President Cyril Ramaphosa would take months or, in some cases, years to fully take effect.
“He has had a few early successes, including a well-received budget and some long-overdue personnel changes at key government agencies, but South Africa’s policy framework remains essentially the same as it was under (former) president (Jacob) Zuma,” Ashbourne said.
The negative economic indicators come at a time when a delegation of the International Monetary Fund is visiting the country to gauge its economic health.
The lender had previously revised its South African growth projections to 1.8 percent this year.
Fitch analysts have held various meetings with private and public-sector role-players in recent weeks, and may well release their mid-year rating
New leadership has had a positive effect but it will take time to reverse damage from Zuma years.
review next week.
Citadel chief economist Maarten Ackerman said sluggish economic figures demonstrated that investors needed to have more realistic expectations of the changes currently being implemented by new leadership.
“Changes such as the efforts being made to provide greater regulatory certainty, reduce unemployment and promote investment are all encouraging, but these changes may take months, if not years, to bear fruit given the structural issues in the economy,” Ackerman said.
“To date, the government’s leadership change has had a hugely positive impact on confidence and trust, but we need time to turn the economy around.”
NKC Africa Research said the economy was cowering from years of mismanagement under Zuma.
NKC Africa analyst Elize Kruger said it would take some time for the damage to be reversed.
“Despite a hesitant start to 2018, we still believe that improved confidence levels will foster renewed investment interest in the South African economy and should, in time, lift economic growth more meaningfully, while a synchronised global economic recovery should also remain supportive,” Kruger said. – Kabelo Khumalo
A petrol attendant gets ready to fill up a vehicle tank. The tumbling rand has led to one of the highest fuel price increases in SA yet.
President Cyril Ramaphosa has made many changes but it will take time for them to take effect.