Publications
Partners
Johannesburg – Economists expect growth to average around 1% for 2017 and among the reasons for this is uncertainty following the Cabinet reshuffle in March.
During a panel discussion at the Discovery Financial Planning Summit, held in Sandton on Monday, economists shared their projections for the economic outlook.
The panel of experts included Colin Coleman, head of investment banking of Goldman Sachs sub-Sahara Africa, Nazmeera Moola, economist and strategist at Investec Asset Management and Ettienne le Roux, chief economist at Rand Merchant Bank (RMB).
Goldman Sachs’ growth forecast is at 1.5%. However Moola said that growth expectations had been revised down from 1.7% to 0.9% following the Cabinet reshuffle in which President Jacob Zuma replaced Pravin Gordhan with Malusi Gigaba as finance minister.
Moola said that growth would stem from stronger commodity prices, a greater agricultural harvest and improved tourism numbers.
Le Roux said that RMB’s growth forecast was between 0.5% and 1% for 2017 and between 1% and 1.5% for 2018. He added that improved production in the mining sector, following an uptick in commodity prices would contribute to growth.
He explained that the growth rate isn’t improving faster over a number of factors linked to uncertainty.
For one, corporates are not investing and are being “very cautious” about spending money, said Le Roux. Business confidence is low as CEOs are uncertain about the future. In this case, corporates do little to build new capacity. “In the current environment of political uncertainty they instead focus more on cost cuts.”
Le Roux said that CEOs would be looking to boost efficiency and to restructure given the economic environment.
Tax to cut into income growth
He added that consumers are under pressure because their incomes are under pressure given moderating wage inflation and a higher tax burden. “A higher tax burden will shave off one full percentage point off income growth,” said Le Roux.
As a result of the pressure, consumers have been dipping into the pension and provident funds when switching jobs, choosing cheaper short-term insurance and medical aid to save money and more tenants are delaying payment on their rent, he said.
Both consumers and corporates are being cautious about how they spend money, said Le Roux.
He added that the falling inflation was a reflection of the weaker economy. With consumers being pressured companies have been facing increasing competitive pressure.
“Companies don’t have pricing powers,” he said. Companies are not quick to change prices as this would risk them losing market share.
SUBSCRIBE FOR FREE UPDATE: Get Fin24's top morning business news and opinions in your inbox.
Read Fin24's top stories trending on Twitter: Fin24’s top stories
