Commodities slowdown to weigh on growth

Johannesburg - The casualties of slower emerging market growth have been the commodities markets and this makes prospects for South Africa’s economic growth particularly worrying.

This is according to Sandy McGregor, the manager of fixed interest and individual client portfolios at investment management company Allan Gray.

“It increasingly looks as if we have seen the peak of the great commodity boom which commenced in 2002 and was driven by a rapid increase in demand in developing economies, especially China,” McGregor said in a note.

He said rising export prices have rewarded commodity exporters such as Australia, Chile and South Africa with a decade of prosperity.

But now what had been favourable had become adverse. No longer would these countries be able to sit back complacently and allow the rising tide of prices to carry them ever forward to increasing prosperity.

“The prospects for South Africa are particularly worrying. While Chile and Australia have a strong skills set which will enable them to reinvent themselves and change their focus to compensate for shrinking mining revenues, South Africa probably lacks the skills and market flexibility to do this,” according to McGregor.

“This is the biggest challenge our country faces because it impacts directly on all our other problems. How will the economy grow after the end of the commodity boom?”