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SA trying to grow economy with Uno engine in Ferrari body - expert

Oct 13 2017 21:15
Carin Smith

Margate – The South African economy is like a car with a Ferrari body but an Uno engine, according to Thabi Leoka of Argon Asset Management.

She told delegates at the 47th Annual General Assembly of the Airline Association of Southern Africa, that the country looks good, but its economy - which is supposed to drive it - “just does not have enough fire power” to accelerate. 

She reckoned Ethiopia could push South Africa down to 4th largest economy in Africa – with Nigeria and Egypt taking up the top spots.

She said her worry about SA is that it keeps falling year on year in the rankings for investments. "It is a problem, because SA is supposed to lead in growth and investment in Africa. Yet, we are really dragging [down] the rest of the continent,” said Leoka.

“Investors are supposed to see SA as an entry point to the rest of Africa, but if we drag in terms of investments, then SA loses its image as being such an entry point.”

She mentioned Mauritius and Botswana as top African destinations in terms of economic growth and political stability.

Political risk 

Leoka said that the main problem with Africa’s growth was that political risk was high in many of its fastest growing countries.

“The sovereign rating of SA is very topical. It is important to have investment grade. The lack of political will to address this is a big problem and if many politicians are corrupt, it makes matters even more difficult,” she said.

“Negative news also puts investors off about a country. It can also impact the tourism sector.” 

In her view SA should be growing its manufacturing sector. This sector is, however, stagnant due to policy uncertainty.

“Currently SA is not working hard enough to get out of junk status. We are also all waiting to see what will happen with SAA and with the mini budget,” she said, referring to Finance Minister Malusi Gigaba's inaugural Medium-Term Budget Policy Statement to be delivered on 25 October.

She said if SA's budget deficit widens in addition to the political instability, "we are in trouble". 

"With good leaders in place, however, I think we can change the country around.”

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aasa  |  sa economy  |  gdp growth  |  rating agencies
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