Share

SA's economic woes could make EFF more potent - expert

Cape Town - If South Africa’s economic situation doesn’t improve, attracting the young and unemployed could make the EFF a more potent force, according to Mark Mobius, an emerging markets fund manager at Franklin Templeton Investments.

Mobius, who recently visited South Africa, pointed out that SA’s debt position, however, is not as bad as some other countries’ - including Brazil - although the government debt-to-GDP ratio has risen to the current 46% from 25% to 30% in 2008.

"There is a general consensus among observers that plenty of government waste exists, with unnecessary spending, corruption, public sector inefficiencies and inflated pricing," said Mobius.

"At the same time, the government’s wage bill is rather high - the number of people employed in the public sector increased to 2.69 million at the end of the 2014 from 2.16 million in 2008."

READ: Trump and emerging markets: Don't panic

Mobius said SA has been lacking any real growth drivers over the past year, and estimates for 2017 gross domestic product (GDP) to remain lacklustre, although slightly better than in 2016. The International Monetary Fund (IMF) is projecting growth of 0.8% this year, while National Treasury predicts growth of 1.3%.

"On the fiscal side, the government is trying to manage the deficit as best it can with Finance Minister Pravin Gordhan at the helm, but the slow economy and a small but highly taxed base makes it harder to grow government revenues," said Mobius.

"Revenue is dependent on a healthy tax base, but the percentage of households receiving at least one social grant increased to 45.5% in 2015 from 29.9% in 2003."

Higher food and fuel prices ignited inflation last year, but Mobius believes better rains, more abundant crops and a stronger currency should help prices stabilise, along with interest rate stabilisation or even a rate cut.

"Overall, we are cautiously optimistic, but think the situation will remain tough. The South African consumer will likely continue to remain under pressure from higher utilities, transport costs, low wage growth and constrained credit," said Mobius.

"While South Africa has its challenges, the consumer sector is one where we continue to search for potential opportunities. We think economic improvement and the increased spread and acceptance of technology could prove drivers for companies in this space."

Read Fin24's top stories trending on Twitter:

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
19.00
-0.5%
Rand - Pound
23.95
-0.2%
Rand - Euro
20.50
-0.2%
Rand - Aus dollar
12.35
+0.0%
Rand - Yen
0.13
-0.5%
Platinum
895.30
-0.2%
Palladium
991.47
-1.0%
Gold
2,193.25
-0.1%
Silver
24.44
-0.8%
Brent Crude
86.09
-0.2%
Top 40
67,836
+0.2%
All Share
74,046
+0.2%
Resource 10
56,127
+0.8%
Industrial 25
103,468
+0.2%
Financial 15
16,484
-0.2%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders