Treasury can still save the economy

National Treasury can play its role in lifting the country from the economic malaise.

This is the view of Nedbank’s senior economist Nicky Weimar. To avoid further damage in terms of further downgrades by S&P Global Ratings, Fitch and Moody’s, Treasury could help to restore investor confidence.

“Part of restoring confidence is to take a less confrontational view with business and start engaging with business.

“We need better economic policies that encourage economic growth,” Weimar said.

SA’s GDP contracted by 0.7% in the first quarter of 2017 from a 0.3% contraction in the previous quarter – meaning the country is in a technical recession.

“The government would have to position itself as a pillar for the economy, free up the market to drive up capital expenditure and employment creation. They will have to tackle corruption.”

Tackling corruption means restoring good governance at beleaguered state-owned enterprises, including Eskom, Transnet and South African Airways, and avoid further “stupid mistakes”.

“This technical recession still might not be over.

“There is still considerable downside risk and this would impact future sovereign risk ratings,” Weimar said.

The good news is that the world is in risk mode and investors are willing to take on risk.

“Capital flows might move to equity markets. Global risk appetite really drives the value of the rand.

“If commodity prices can start to rise then we should see SA benefit. If the political environment stabilises, we should see a recovery. It will be slow because there is a lot of damage done over the past seven years and that can’t be undone in a hurry.”

Thabi Leoka, economic strategist at Argon Asset Management, says turning the economic fortunes requires implementing policies. “We had the National Development Plan (NDP) that was endorsed in 2012….If we had adopted the NDP, it would have triggered some level of growth and certainty.

“Our problem is that we tear policies apart before we adopt them and we have done so with every single plan.”

There is a lot of damage done over the past seven years and that can’t be undone in a hurry. Nicky Weimar Nedbank’s senior economist