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Strikes could tip SA into recession, warns economist

Jan 21 2016 12:01
Carin Smith

Cape Town – The labour market is the greatest cause for concern in the South African economy for 2016, according to Isaac Matshego, economist of Nedbank’s group economic unit.

“If we see prolonged strikes in mining and manufacturing, it could tip the SA economy into recession,” he warned at the Nedbank VinPro information day on Thursday.

On top of that he expects inflation to rise above the 6% target band, which creates the expectation of interest rate hikes by the SA Reserve Bank (Sarb).

It is the weakening rand that causes inflation to rise, he explained. Nedbank expects Sarb to hike interest rates next Thursday.

The only positive Matshego foresees about Sarb's current hiking cycle is that it is shallower and will stretch over a longer period than, for instance, in 2006/2007.

As for economic growth in SA, Matshego said although the International Monetary Fund cut its expectations from 1.39% to 0.7%, Nedbank is even more pessimistic and foresees growth of only 0.2% in 2016 and 0.9% next year.

Economy needs to plug holes

“Nevertheless, I think SA’s economy still has a lot of potential, but we need to start to plug the holes so that when the perfect storm hits us, we only let a little water into our house,” he said.

“At the moment, however, we have too many holes in our house.”

Matshego believes it is important to speed up implementation of the National Development Plan (NDP).

“The NDP sets out clearly what needs to be done. I am not a political analyst, but it seems the big problem with delays in implementing the NDP lies in opposition from some labour partners of government,” said Matshego.

As for the wine industry in particular, he said the anticipated positive impact of the weak rand on wine exports is negated by local wine producers' rising production costs. This includes increasing electricity and labour costs.

vinpro  |  wine  |  sa economy  |  agribusiness


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