Policy uncertainty hammering SA, says World Bank

SA’s growth is lagging substantially behind other emerging economies as policy uncertainty continues to batter business confidence, according to a report from the World Bank.

Emerging markets are expected to drive global growth, which has recovered to its full potential since the 2008-09 financial crisis.

However, SA is expected to drag down this momentum.

While the World Bank expects SA’s economic growth to accelerate to 1.1% in 2018 from 0.8% in 2017, emerging markets are expected to average 4.5% growth in 2018.

SA has also fallen far below the global average of 3.1%.

Since the 2008-09 recession, SA’s economic growth has not been robust enough to lead to widespread job creation in the private sector, says Stanlib chief economist Kevin Lings.

“Policy uncertainty is likely to remain and could weigh on investment,” the World Bank said in an economic outlook report released on Wednesday,

The report explained that while there was strong growth in the agricultural sector as well as a rebound in the mining and manufacturing sectors, growth in the rest of the economy remained subdued.

Recent economic releases, such as the South African Chamber of Commerce and Industry business confidence index and the Standard Bank purchasing managers’ index, have highlighted the importance of policy certainty.

Standard Bank economist Thanda Sithole said there could be a rebound if the governing party worked tirelessly to restore business confidence.

The chamber said urgent economic policy action was vital for strengthening sentiment. The business confidence index increased 1.3 index points in December 2017 to 96.4 following Cyril Ramaphosa’s election as president of the ANC.

Independent political analyst Daniel Silke said that while Ramaphosa’s win signalled good news for business, there was still expected to be a level of policy uncertainty.

“The issue is that we have a deeply divided ruling party with deeply conflicting views.”

He said he expected the ANC to be at loggerheads over policy questions, which would undermine business confidence and economic growth.

“We are still locked in a weak growth cycle and I expect we will be until 2019,” he said.

He added that Ramaphosa could be the light at the end of the tunnel in terms of economic sentiment and positive rhetoric.

Business said that it had not changed its position on policy issues and that fiscal constraints had added fuel to the fire.

Policy around issues such as free higher education, a carbon tax and the Mining Charter were still hotly contested.

“We are very concerned about policy uncertainty, which won’t be alleviated until decisive action is taken around these policy issues,” said Business Unity SA (Busa) CEO Tanya Cohen.

While Busa is encouraged by Ramaphosa’s focus on strengthening the economy and the government’s relationship with business, the government needed to act accordingly, she said.

THE ISSUE IS THAT WE HAVE A DEEPLY DIVIDED RULING PARTY WITH DEEPLY CONFLICTING VIEWS