The South African economy is expected to remain in the doldrums as disruptions to power supply continue to raise concern.Senior Nedbank economist Nicky Weimar said the bank had capped its expectations of growth at 0.9% for 2020. “The slow pace of structural reform also impacts the outlook that is again very weak as it was last year and the year before.”Weimar told FTW that growth was expected to increase to 1% in 2021, peaking at around 1.5% in 2022.“Playing into this bleak picture are the massive power constraints in the system and also the fact that there is no quick solution to this problem. At the same time South Africa’s structural constraints have caught up with it. Whilst there is constant talk of reform, it is never done,” she said. “All of this has had a cumulative effect, eroding the competitiveness of the country.”It had also placed its mining and manufacturing sectors under tremendous strain, she said.All of South Africa’s banks have echoed similar sentiments, and while many political role-players have considered the approach to be too conservative, the World Bank on Thursday added it s voice to the debate.It said that South Africa could achieve 1.4% at best, but it was completely dependent on government’s ability to improve structural reform, address policy uncertainty and the current power crisis. Weimar said this was not expected to happen in 2020, meaning growth of less than 1% was just about a given.“For business it will all be about how to best contain costs,” she said, indicating that companies, especially in the manufacturing sector, were struggling to maintain profitability in the face of increased costs.“Those exporters that are able to gain the efficiencies have some opportunity thanks to the weak rand,” she said, but indicated that for the most part tough circumstances were expected throughout 2020.“Unless there is meaningful progress in the reform of the energy market first and foremost, South African producers will remain under severe pressure.”
INSERT: Expectations capped at 0.9% – Nicky Weimar