Uncertainty persists over impact of global events on SA

Uncertainty about the impact on the South African economy of natural disasters and unrest in North Africa and the Middle East makes it difficult to correctly project the local economy for the rest of the year, says Paul Jooste, a senior manager at Coface South Africa. “The indicators being released so far for 2011 are not showing any particular trend – with one month being positive and the next a downward trend. The Reserve Bank has kept interest rates unchanged at their lowest levels in decades. Gold is touching new highs and there are indications that the economy is maintaining its slow but steady recovery.” Jooste says reduced inflation figures seen in 2010 are seemingly coming to an end and the most recent data indicate that inflation will be a major headache for the monetary committee towards the middle and end of the third quarter. “Investors are looking for safety. As for South Africa, our risk factor is still good enough to be attractive and our yield is good enough to encourage further investment. The threat of higher interest rates further strengthens this appetite from foreign investors,” he says. “Concerns regarding the effect of increases in fixed costs for local business as well as consumers are still a very real concern. Increased fuel costs, electricity costs, toll fees and wage increases all contribute to reduced company profitability and to consumer goods inflation.”