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Don't blame Zuma for everything - economist

Oct 13 2016 22:00
Carin Smith

Cape Town - Don't blame President Jacob Zuma for all South Africa's economic problems, Dr Azar Jammine, director and chief economist of Econometrix, said on Thursday.

He was the opening speaker at the Beyond Retail 2016 event.

"A lot of SA's economic slowdown was not Zuma's fault. He could not have predicted that commodity prices would go down and neither the weather conditions which have led to the drought," Jammine told delegates.

"Much of SA's economic performance is dictated by global economic factors. Yes, there are also domestic factors that exacerbated the slow down, but much of it has been due to the global economy. At least the International Monetary Fund (IMF) says both will improve over the next few years and we already see that in a little improvement in commodity prices recently."

At the same time, Jammine said he was angered to hear earlier this week that Finance Minister Pravin Gordhan had been summoned by the National Prosecuting Authority (NPA).

"All my forecasts are based on one assumption: it excludes the terrifying possibility of what would happen if National Treasury is captured by populous forces whose objective is to grab the public purse of SA for their own benefit," said Jammine.
 
"What if Gordhan disappears from the scene? Then international investors and ratings agencies will look over the precipice as they have seen Gordhan as a stabilising factor. We will then not only see one downgrade, but many and the next thing would be the rand that will plummet to R20, R30, R40 and more to the dollar as government will have massive debt to get out of. There would then also be a severe recession."

Jammine, however, said he would suggest that this worst-case scenario will not materialise. He pointed out that the rand did not fall as far as people expected on the latest Gordhan news, because there are so many of the opinion that Gordhan will not be "gotten rid of".

Structural weaknesses

Jammine explained that there are some major structural weaknesses in the SA economy, which prevents it from growing faster. The major fault lines for him are health care, primary education and antagonism between employers and the labour market.

He is also concerned that agriculture, mining and manufacturing have not seen much growth the last eight years. All the growth has been in retail, transport, financial services, personal services, and from the side of government itself.

"Unfortunately the retail sector itself is now finally also coming under pressure. Segments of the sector, like durable goods, are feeling the pinch most as consumers are under pressure."

Jammine said one of the big opportunities created by the current economic situation in SA is the export market.

"The rand is still very cheap and costs are rising at a slow pace. This is providing a wonderful opportunity for exports, because inflation has not picked up sharply," said Jammine.

Retail sector

"Is the retail sector saving our economy?" asked Jammine.

He pointed out that consumers are carrying too much debt and are reluctant to borrow more. At the same time a growing population, growing middle class and increased urbanisation should impact retail positively.

Due to the weak rand, he sees international tourism as an important possible impact for SA retail.

"Gauteng is gaining enormously in attraction for the retail sector because of its consumers. The Western Cape comes second," said Jammine.

Another reason why the retail sector has been outperforming the general SA economy, said Jammine, is the marked increase in life expectancy in SA. A further factor is the affluent middle class which, although in the minority, is still important for the retail sector.

The extent to which the retail sector could outperform the rest of the economy has, however, slowed down.

Read Fin24's top stories trending on Twitter:

pravin gordhan  |  jacob zuma  |  sa economy  |  retail
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