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Ratings countdown: At the mercy of whirlwinds

Whirlwinds are twisting SA's reputation ahead of various rating reviews and amid labour, government and civil society narratives, says economist Cees Bruggemans.

A WEEK before the rating agencies start their public pontifications about our net worth (investment grade or junk - it sounds so crass, nearly Trumpian), there was the first real hint of a labour market reform move (secret strike ballot, minimum national wage, phased in over three years), perhaps most unwilling in certain quarters, but force majeure and all that.

There was also yet another hint all that all is not well between government departments and the mining sector. It took a court last week to lay down the rule that officials shouldn't be overly trigger happy in imposing regulatory interventions which lead to far too much lost mining production. And of course there is the mining charter, which apparently just doesn't want to reach finality, especially as government argues right past the industry.

Between these two extremes, one wonders what the rating agencies will say. Our wind is definitely not blowing uniformly from one corner. Instead, we have whirlwinds twisting our reputation this way, then that way.

This aside of the third quarter of 2016 likely being a negative GDP quarter. Growth is still going to hell instead of looking up. Retail and manufacturing is weak and the motor trade is dismal, with a few more such niches.

The president likes to govern from the centre, while the clever public goes through the courts to get the satisfaction it seeks, or otherwise shows its displeasure at the state of things in a more basic manner.

But none of this gets us really focused; waylaid is a better term. Confidence is zapped at every turn, the wheels are moving ever slower in slow motion, and we await political events that may take their sweet loving time.

But if we can't quite get it up ourselves (growth), with even the impact of lower inflation next year neutered by higher taxes and lowered government spending ceilings, there are a few things you can't take away from us.

The global growth cycle seems to be turning, if gradually, and the nosedive of the commodity cycle seems a year behind us, with metal prices having bounced back impressively, even if Billiton keeps saying it expects a relapse of some kind. On average we are ahead, something that will support us next year as well.

Farming has two bad years behind it. With enough rainfall we should see some kind of revival in output. Prices and the weak rand may give further boosts to farming income, but it remains a small sector.

Much hope is pinned on Trump setting the world on fire with supportive economic policies. But his mix of choices could work better when looking for sustainable growth rather than just a burst, with more inflation and a stronger dollar.

What's more, the angry mob that put him in the White House wants things he may not quite be able to deliver in a four-year term. Sustainable middle class jobs giving real income security? Some people will get lucky, but it is unlikely that everyone will. And will that lighten the anger or deepen it further, with what kind of consequences?

Europe is rapidly approaching another crisis environment, one in which its own Trumpian noises may succeed in tearing much apart. Governments old and new may opt to change policy direction on migrants, trade, fiscal matters and growth. This is something the ECB, like the Fed, will be watching with close interest. Will it be sustainable or just a flash in the pan, a one-year or more wonder but ultimately not doing the “right” things and running out of runway?

Meanwhile, global disturbances could also be rearranging our playing field. Especially the rand (weaker) and interest rates (not quite the peaking cycle we hoped for), and of course those rating agencies sitting in judgement, also throughout 2017-2018, needing the wisdom of Solomon.

*Cees Bruggemans is chairperson of consulting economists Bruggemans and Associates. Opinions expressed are his own.

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