SA unlikely to achieve 2.5% growth by 2017

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