A hic­cup for SA’s eco­nomic re­cov­ery

The Sunday Independent - - Business Report -

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

FILE PHOTO: ITUMELENG ENGLISH

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.

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