What the govt can do to help boost SA trade

Johannesburg – The Consumer Goods Council of SA (CGCSA) is cautiously optimistic about an improved trading outlook in the consumer goods sector during 2017, despite tight household budgets and muted economic growth prospects.

According to CGCSA CEO Gwarega Mangozhe creating policy certainty is one of the most important things the SA Government could do for trade.

"Policy certainty will encourage companies to invest if policies are consistent, red tape is reduced and there is cooperation between Government, big labour and companies. SA must not forget that there are a number of other territories that have the potential to attract capital away from the country," Mangozhe told Fin24 on Monday.

"If the SA government could create policy certainty, then continued fiscal consolidation by Treasury and big labour, big business and government working together will feed into the notion of inclusive growth. Then we could have an overall optimistic outlook for trade in 2017."

In his view good work has been done, particular involving cooperation between big business, big labour and Finance Minister Pravin Gordhan. If that can continue and business start saying slowly it can invest long term, then SA could see more growth.

The CGCSA hopes for a better performance of the economy as output in key sectors is expected to improve. It, furthermore, hopes that over time the end of the drought will have a positive impact on food prices and food inflation.

He said the jury is still out on whether SA could achieve the revised growth of 1.7% as it is by no means a sure thing. Especially in agriculture, it will be a while before it could be established whether the recent rain will have a positive impact on output in the sector.

READ: SA consumers 'holding back' on big purchases

Mangozhe said consumer spending remains affected by high household debt, which have affected available disposable income.

“In response, CGCSA members in the retail trading sector have since last year, and continue to, focused on providing value to consumers by improving internal efficiencies and passing on the resultant savings achieved to consumers through discounted and special prices on selected basic and non-basic products,” explained Mangozhe.

“We expect this trend to not only continue during 2017, but to become the norm as the competitive landscape is changing. This is because cost conscious consumers are now always searching for bargains.”

Other factors which could impact SA's economic growth, according to Mangozhe, are Brexit and the Trump presidency.

"Trump could impact SA trade in the manner in which his foreign policy is geared to the US. Will he see Africa as a priority? One does not expect him to touch Agoa, but anything is possible with him," said Mangozhe.

"Another very important factor is SA's credit rating. We have had a reprieve, but the question is whether we will be able to meet our own inner compact. If SA does not do enough to grow the economy and the ratings agencies decide to downgrade, it will impact the economy."

Challenges to trade Mangozhe highlighted include that business confidence is too low. This also impacts investment by business.

"Last year there was a complaint that private companies are 'hoarding' sizeable reserves. That points to a lack of confidence. The question, therefore, is whether large companies will loosen the purse strings to invest and create jobs. The SA economy has to create jobs. It is not tenable to have so many unemployed youth," said Mangozhe.

Lastly, he said stability of the rand is another important factor for trade.