State graft scandals killing off investor confidence — report
Investors are becoming increasingly risk averse in the face of continuing political drama fuelled by a string of corruption scandals engulfing President Jacob Zuma, and a widening graft scandal involving numerous international firms, according to a new Consensus Forecast report on sub-Saharan Africa.
Zuma has come under pressure to resign amid mounting evidence that he and some of his ministers had breached the government’s code of ethics in dealings with the Gupta family.
Evidence of graft has also been piling up against multinational companies implicated in the leaked Gupta e-mails.
Global professional service company and one of the big four auditors, KPMG, recently conceded to having acted improperly when it did work for Guptaowned companies.
Global consultancy firm McKinsey is under pressure for its role in facilitating corruption at Eskom in collaboration with the Gupta-associated Trillian. Bell Pottinger has hogged the headlines over its work for the Guptas and its racially divisive campaign against “white monopoly capital”.
According to a report by global economic forecast and analysis group FocusEconomics, the uncertainty in SA’s political and economic climate caused business confidence to fall to a more than 30-year low in August.
Fixed investment deteriorated in the second quarter of 2017, swinging to a 2.6% contraction from the 1.3% expansion recorded in the first quarter.
FocusEconomics Consensus Forecast panellists see investment falling 0.4% in 2017, which is down 0.1 percentage points from August’s estimate.
However, the report notes that data released in the second quarter show SA has escaped the grip of a downturn that had resulted in the economy briefly entering a technical recession.
GDP grew a seasonally adjusted 2.5% quarter on quarter in contrast to the 0.6% decline in the first quarter.
“Following two consecutive quarters of contraction, economic activity expanded at a modest pace, primarily thanks to a stellar performance by the agricultural sector amid improved weather conditions,” the authors of the report state.
“Exports also supported the economy’s return to positive growth dynamics, swinging to a double-digit expansion after a drop in quarter one. The upturn seems to have continued into quarter three as contraction in manufacturing output eased.”
“Looking ahead, the economy is expected to languish for the foreseeable future. The recent … downgrades are indicative of vanishing confidence … and will not help lower public borrowing costs.”