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Lack of policy certainty overshadows Ramaphosa's good work - Nedbank's Nicky Weimar

Sep 11 2018 12:07
Carin Smith

The problem in South Africa is that President Cyril Ramaphosa has started many positive initiatives, but has not delivered policy certainty – especially regarding land expropriation without compensation, according to Nicky Weimar, senior economist at Nedbank.

That is why not much of Ramaphosa’s proposed interventions translated into meaningful economic growth or job creation, in her view.

“In the melodrama that is SA politics, it is fair to say most changes were for the better. Ramaphosa has shown some determination to address corruption, restore fiscal discipline and restore broken SOEs, which are essential for economic recovery,” Weimar said at the Rode Reim Real Estate Conference on Tuesday.

She emphasised that SA, is however, still a long way from reaching these goals, but at least Ramaphosa has made a start in that direction.

To her the most worrying factor reflected in the latest gross domestic product (GDP) data – which shows that SA is in a technical recession – is the sharp decline in domestic trade – a sector that makes up 60% of the country’s economy.

She also worries about the weak fixed investment. "It shows that companies are not willing to borrow money to expand at the moment."

Weimar also does not think government spending will drive the SA economy in the years to come, since government simply does not have the money to spend.

“If you want employment growth and consumer spending you need a private sector wanting to expand. I believe we are not seeing this as ultimately private companies will expand only if the expected returns will exceed the risk,” said Weimar.

“Yet, in SA we have piled up the risk and the cost and reduced the returns. Companies have to function within intense policy uncertainty. The government should, therefore, not be so flabbergasted that companies are not investing in the country.”

The challenges companies face are further negatively impacted by high costs, cumbersome regulations, unreliable service delivery from SOEs and “aggressive and destructive unions”, she added.

Nedbank does not expect dramatic job creation and increased household spending.

Weimar believes house prices and the demand for mortgages will continue to drift sideways.

“We have been told many things about what land expropriation will not be, for instance that there will be no land grabs and that food security will not be compromised. What we have not been told is how it will be ensured that land expropriation does not spiral out of control,” said Weimar.

“If SA wants to do better than 3% economic growth, we need policy certainty and structural reform and I do not think SA’s progress will be fast on either.”

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