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SA one of top 10 risks to the world in 2017 - Time

Jan 04 2017 10:58
Matthew le Cordeur

Cape Town – South Africa is one of the top 10 risks to the world in 2017, a report in Time magazine revealed on Tuesday.

Time magazine gave South Africa a special mention as the 10th risk to the world, with the tag line “Struggling South Africa”.  

“The deeply unpopular President Jacob Zuma, beset by corruption allegations, is afraid to pass power to someone he doesn’t trust,” American political scientist Ian Bremmer explained in his report.

“The resulting infighting over succession stalls any momentum toward crucial economic reform in the country and limits South Africa’s ability to offer leadership needed to stabilise conflicts inside neighbouring countries.”

The country’s gross domestic product showed a worrying 0.5% growth in 2016, far below the 5% growth required by the National Development Plan to create 11 million jobs by 2030. Nomura economist Peter Montalto forecast SA growing by only 1% in 2017 and 1.6% in 2018.

A lack of growth will not help the increasing unemployment figures, causing social instability and further increasing inequality. Unemployment figures hit a 13-year high in November 2016, with 27.1% job seekers unemployed in the third quarter of 2016.

What won’t help matters is if South Africa is downgraded to junk status. It avoided being plunged into non-investment grade status in 2016, but analysts warned that 2017 could see rating agencies Standard & Poors, Moody’s and Fitch move to downgrade the country, warning of political noise.

The noise focuses on Zuma, who has yet to face 783 fraud, racketeering and corruption charges. The Constitutional Court in October 2016 refused to hear the National Prosecuting Authority’s appeal on the North Gauteng High Court judgment, which reinstated the charges.

Zuma survived a call by ministers at a National Executive Committee meeting in November to step down as his relationship with the Gupta family comes increasingly into focus. His term as ANC president ends at the end of 2017 and as state president in 2019.

Finance Minister Pravin Gordhan will be expected by business leaders to continue his efforts at keeping spending in check and finding ways to further convince the rating agencies that SA is still open for business for investors.

However, the country moves into a year when the 9.6 GW nuclear procurement deal will take centre stage alongside the African National Congress (ANC) succession battle.

Should Gordhan and National Treasury block any major nuclear deal, he could face the same fate as Nhlanhla Nene, who was unceremoniously fired in December 2015. That would send markets into turmoil, especially if his successor pushes through the ratings-unfriendly nuclear deal.

The last editorial in the Sunday Times of 2016 warned the country to brace itself for “a tough year ahead”.

“We must brace for a bumpy ride in 2017, which is shaping up to be a most challenging year for the ANC - the source of most of our problems,” it explained on 30 December.

“There is no debate that this year will go down as one of the most eventful in our 22-year-old democracy.”

South Africa’s rand also faces a rocky year, which will be affected by Time’s other top 10 risks.

It lists its leading risk as the uncertainty America faces with a Donald Trump presidency, while a Chinese overreaction to Trump is the second biggest risk.

“Provocations from Trump, and the sheer number of places where US-China tensions might play out - North Korea, Taiwan, Hong Kong, the East and South China Seas - make 2017 a dangerous year for China, and all who depend on it for growth and stability,” Bremmer said.

Other risks are a power vacuum in Europe, a pause in economic progress, technology disrupting the Middle East, political interference with central banks, conflict between Trump and Silicon Valley, Turkey’s ongoing crackdown and North Korea’s improved nuclear capability.

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