SA's economic growth seen stagnant as confidence wanes | Fin24
  • Android Ban

    Top US tech giants have begun cutting off vital Huawei supplies.

  • Electric Car Tax

    Electric vehicles in SA are being taxed like luxury cars, which has reduced their popularity.

  • Fin24’s newsletter

    Sign up to receive Fin24's top news in your inbox every morning.


SA's economic growth seen stagnant as confidence wanes

Mar 04 2019 22:45
Prinesha Naidoo, Bloomberg

South Africa's economic growth will probably remain stunted unless household spending and investment pick up.

While the economy emerged from a recession in the three months through September, a report from the statistics office on Tuesday will probably show growth slowed in the fourth quarter, according to the median estimate of 17 economists in a Bloomberg survey.

Gross domestic product is estimated to have expanded 0.7% in 2018, according to the government and central bank. That's almost half the growth rate of the last year of Jacob Zuma's scandal-ridden presidency.

The SA economy is struggling to gain momentum after the improvement in sentiment that followed President Cyril Ramaphosa's rise to power turned out to be temporary.

Business confidence is back at the level it was before Ramaphosa became leader of the ruling ANC in December 2017 and consumer confidence is heading the same way as reforms fell short of expectations.

That hampers domestic fixed investment, which the government estimates contracted last year, and household consumption, which accounts for almost 60% of the economy.

"There's more downside risks than there are upsides," Mpho Tsebe, an economist at FirstRand Group's Rand Merchant Bank, said by phone. Higher fuel prices and the lack of tax relief in the budget will weigh on household consumption and companies will adopt a "wait-and-see approach" to investment ahead of the May 8 general election, she said.

The return of rolling blackouts as Eskom struggles to supply enough electricity is a further drag on output. The Purchasing Managers' Index fell for a second straight month in February as load-shedding weighed on business activity in the manufacturing industry.

The ANC's need to placate its labour union allies and efforts to ensure it doesn't lose votes to the populist Economic Freedom Fighters (EFF) hamper the state's ability to implement reforms that may be unpopular, such as selling off state companies and reducing the government workforce.

South Africa's economic growth trajectory will stay stuck at around 1% until politically difficult reforms are implemented, said Dawie Roodt, chief economist at Efficient Group.

investments  |  emerging markets  |  sa economy


Company Snapshot

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

Do you think government can solve the Eskom crisis?

Previous results · Suggest a vote