Investors look for clarity on policy

Policy uncertainty ahead of President Cyril Ramaphosa’s State of the Nation address (Sona) creates a downside risk for growth prospects, a report by global economic forecast and analysis group FocusEconomics says.

There is uncertainty about land reform amid fears that expropriation without compensation will discourage investment and undermine SA’s efforts to address the triple challenge of unemployment‚ poverty and inequality.

There are concerns about crisis-hit Eskom, which is regarded as the biggest risk to the economy.

Investors are also worried about the push to change the ownership of the Reserve Bank. In March, Ramaphosa said the ANC had taken a “clear resolution that the Bank should be owned by the people of SA”.

Reserve Bank governor Lesetja Kganyago has insisted on the Bank’s independence, arguing that nationalising the central bank would be too risky for the economy. Credit ratings agencies have also warned SA not to tamper with the independence of the central bank, saying it could lead to ratings downgrades.

Ramaphosa, who was sworn in at the weekend, is due to deliver the Sona on June 20 against a downbeat economic backdrop. He is expected to provide legislative and regulatory clarity during the address. FocusEconomics analysts see SA’s economic growth at 1.2% in 2019, down 0.2 percentage points from April’s forecast, and at 1.7% in 2020.

In its consensus forecast for Sub-Saharan Africa for June 2019, FocusEconomics analysts state that economic activity should pick up some momentum in 2019 but will nonetheless remain lacklustre largely due to policy uncertainty.

The result of the May 8 general election provides Ramaphosa with a clear mandate to govern – raising expectations over his commitment to push through much-needed structural reforms, FocusEconomics said.