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The resignation of Jacob Zuma as president of the country and his replacement with Cyril Ramaphosa could be the biggest boost to business and consumer confidence since 1994, Bureau for Economic Research (BER) deputy director George Kershoff said this week.
Kershoff said at the Gordon Institute of Business Science’s 2018 economic outlook conference that he expected the survey of business and consumer confidence that the BER would conduct in February and March would see a significant improvement in confidence.
Business confidence was expected to rise from 34 index points in the fourth quarter of 2017 to higher than 50 index points in the first quarter of 2018; consumer confidence was expected to climb from -8 in the fourth quarter of 2017 to zero in the first quarter of 2018, he said.
Kershoff made these estimates of what business and consumer confidence could be based on “historical experience”.
The election of Ramaphosa this month could result in the biggest surge in confidence since the 1994 elections.
“I’m sticking out my neck, but I would not be surprised if it turns out to be the biggest we have ever seen both in business and consumer confidence,” Kershoff told City Press in an interview on the sidelines of the Gibs conference.
“The last time we had such a big change was after the 1994 elections,” Kershoff said.
This improvement in sentiment would help kick-start local economic growth, he said.
“The hard work is to sustain this level of confidence,” Kershoff said.
“The statesmanship of Ramaphosa, his leadership and vision are very good – in a sense a cheap way to boost the economy – you know you can build confidence in that way.”
Other positives for local confidence included the global economic environment and lower local
inflation.
The negatives for the outlook for confidence included raising taxes, cuts in government expenditure and the drought in the Western Cape.
Kershoff said sustaining higher business confidence could be achieved through sorting out the mining charter and launching criminal cases against high-profile people involved in corruption.
It would be ‘very difficult’ for the new administration under President Cyril Ramaphosa to get the government’s finances back on a ‘sustainable fiscal path’, Konrad Reuss, S&P Global Ratings Africa head, said this week.
Reuss said that the South Africa government’s Achilles heel was the weakness in the country’s growth performance, he added Gordon Institute of Business Science’s 2018 economic outlook conference before the Budget Speech was delivered.
He said that the South African government was heading down a path where its debt would become unsustainable and the contingent liabilities for which it was responsible for where raising.
Another area of concern for Reuss was that the country’s GDP per capita forecasts for South Africa had fallen from 2011 to 2016 but had recovered in 2017.
South Africa’s growth was lagging behind world and emerging markets, he added.
Reuss said that the South Africa government wouldn’t swiftly recover its investment grade rating like South Korea, which pulled out of ‘junk’ status within a year. On the other hand, Indonesia took over 19 years to get back to investment grade.
Abedian: SA yet dealt with the predatory system
South Africa is having a moment of ecstacy on the political front but has yet to deal with the unwinding of the sophisticated, extractive predatory system that serves to damage the economy, Iraj Abedian, Pan African Capital CEO, said this week.
There has been a sophisticated, efficient and intelligent looting syndicate made of “fake politicians, fake business people, fake auditors, fake lawyers, fake bankers and fake accountants”, he added.
“I don’t think we have dealt with the issue. We have become ecstatic on the political front. We haven’t yet dealt with the unwinding of the sophisticated, extractive predatory system that serves to damage the economy.“
“Economics are not just about animal spirits [sentiment]. Economics at the end of the day is a series of sophisticated short term, medium term and long term measures.”
Gina Schoeman, Citibank economist, said that she had upgraded her local growth forecast, for the first time in seven years, for this year from to 1.5% due to improved confidence as well as a stronger rand.
Like Abedian, she said that what was key for South Africa was structural growth rather than sentiment.
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