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SA has 6-12 months to sort itself out, warns Investec's Jeremy Gardiner

Sep 14 2017 10:44
Carin Smith

Cape Town - South Africa has about six to 12 months in which to sort its problems out, otherwise things will start getting worse again, warned Jeremy Gardiner of Investec Asset Management.

This is the window period during which, in his view, various global factors will still cause a more positive ripple effect to somewhat stabilise the SA economy.  

"We are in trouble and we need to be aware of that. It is such a pity, because at the beginning of 2017 SA was destined to grow again as emerging markets found favour again," Gardiner said at the annual congress of the SA Council of Shopping Centres (SACSC) taking place in Cape Town.

"That is how we started 2017, but then came the Cabinet reshuffle, which turned things around again. Pravin Gordhan had to exit his job purely for doing it properly."

Downgrade

Gardiner pointed out that all the ratings agencies are waiting for the outcome of the ANC's leadership election conference in December. If they downgrade SA even further, about R120bn of certain overseas investments in the country will be forced to be withdrawn, hitting the rand hard.

"So, if we don’t fix our situation quite fast and we get downgraded, we will stay in junk for a while. This will mean, among other things, more job losses and the poor suffering the most," he said.

"We could so easily have avoided it. If the finance minister switch was not done, I think it was unlikely that we would have been downgraded."

At the same time there are still some positive aspects that could impact the SA economy, in his view. The nuclear deal, which would have cost SA an added R1trn in debt, has been shelved for now due to civil society raising its voice in court.

Furthermore, commodity prices are likely still going to rise; the drought ended; and inflation is slowing sharply.

December

"But what will happen in December? It is very important for President Jacob Zuma to have a (next) president sympathetic to him in order to pardon him for criminal charges. If Nkosazana Clarice Dlamini-Zuma is elected, it will be 25% investor unfriendly – so investor unfriendly option and the SACP and others might break away," said Gardiner.

"A Cyril Ramaphosa victory, on the other hand, could bring back good people like Pravin Gordhan, Trevor Manuel and Tito Mboweni."

In Gardiner's view the most likely outcome will be a compromise to make the ANC "stumble along" until the 2019 elections.

"We are up the creek without a paddle and will be even more so if something happens to make foreign investors nervous. Yet, there is no need to change the government. All I want to see is a stable ANC running the country by getting good people to run it," Gardiner concluded.

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