Despite government claims to
the contrary, growth in South
Africa has been described as a
“lost cause”.
Luke Doig, senior economist
at Credit Guarantee Insurance
Corporation (CGIC), suggested
to FTW that you had to present
an attractive economic or
business climate if you were
going to attract FDI. And that
is sadly missing in SA at this
present moment.
“The composite leading
business cycle indicator is
trending ever lower and the
country is unlikely to realise
growth of 2.5% by 2017. Stats
SA informs us that almost
470 000 people have been
added to the ranks of the
unemployed over the course of
the last year.
“June has seen fuel prices
hiked by almost 50 cents per
litre, and with current underrecoveries
running at almost
70 cents per litre for petrol and
50 cents per litre for diesel,
this could take petrol prices
to within reach of the peak of
R14.39 per litre seen in April
last year. That was when the
exchange rate was around
R10.50 to the US dollar; it is
some 15% weaker now.
“And then we have mooted
electricity price hikes of an
additional 12.6% which will hit
industry and consumers hard.
“The 34-country
Organisation for Economic
Co-operation and Development
(OECD) expects global growth
to slow this year to 3.1%
from 3.3% last year, so local
manufacturers and exporters
have their work cut out.”
Doig noted that this
was further reinforced by
HSBC’s local manufacturing
purchasing managers index
(PMI) falling to 50.1 in May
from 51.5 in April, indicating
that a meagre majority felt
that operating conditions were
satisfactory.
Consumer spend grew at
a pedestrian pace of 1.4%
last year while savings by
households (as a percentage of
disposable income) contracted
for the ninth consecutive year
in 2014.
“So,” Doig asked, “as the
economy limps along, is it
opportune to hike rates? To
counter that, it may not be wise
to just hike prices like every
utility does.”
He was also adamant that
the much-lauded National
Development Plan (NDP)
was “in effect a lame duck as
factions within the ruling party
seek to benefit where they can”.
Doig added: “The country
needs a game changer in order
to boost potential growth
from 2.5% to above 4%. But
that is unlikely given the
myriad constraints facing the
economy. Cadre deployment
has been a dismal failure and
taxpayers are being asked to
foot the bill.
All of which, Doig told
FTW, did little to present a
pretty economic picture of
SA to those seeking countries
in which to lodge profitable
foreign direct investment.
INSERT & CAPTION
The country needs
a game changer
in order to boost
potential growth to
above 4%.
– Luke Doig
