Higher energy costs are coming.

We’ve probably seen the best of the rand.

Higher administered prices from rates to VAT will suck cash out your pocket

BUT

Despite most of what you see on social media, things are going pretty well for South Africa right now.

There are a handful of issues which threaten the country’s much-needed economic turnaround.

The oil price remains stubbornly high and geopolitical tensions around Syria are doing nothing to push the dollar price of the commodity down. The rand is taking strain after such an extraordinary surge in the first quarter of this year that the Reserve Bank took the unusual step of talking down the value of the currency at its most recent Monetary Policy Committee briefing. While cognisant of the inflationary pressures a weaker currency brings, it is also worried about the negative impact it could have on exports.

Oil above $70 a barrel means fuel prices are likely to rise at least 40c a litre in May. 

Added to that, an expected tariff request from Eskom to its regulator NERSA of as much as 30%, coupled with the growing burden of municipal rates and taxes topped off by the VAT increase to 15%, and a bigger chunk of your disposable income is going to disappear to fund shortfalls in government finances and state-owned enterprises.

It’s an unhappy thought.

Bear in mind it would all have happened regardless who was in political power now, anyway. 

The country, for a frustratingly predictable and wide range of reasons, is short of money. 

There are the hoary old reasons of fraud, corruption and mismanagement, but there are also serious questions around the complicity of the private sector in, if not aiding and abetting the economic meltdown the country has experienced, at very least being complicit in its failure to properly engage with government as the country descended to the very edge of chaos.

South Africans however do seem to fare best on the brink of disaster and the reality is that we are in much better shape than we were as a country six months ago. 

Good things are happening

The president has compiled an A-team of current and former Treasury officials, including ex-finance ministers Trevor Manuel and Pravin Gordhan along with ex DGs Lungisa Fuzile and Maria Ramos to seek out R100bn in foreign investment over the next five years. He’s added to the mix newly appointed economic adviser Trudi Makhaya, former deputy finance minister Mcebisi Jonas and connected former Standard Bank CEO Jacko Maree.
It’s an audacious but not outrageous target.

Their credibility will be undermined however by the fact that Eskom is at risk of running out of useable coal at eight power stations this winter, which will raise questions in the minds of investors about just how capable the country is to overcome its multiplicity of deep and complex issues. The Institute for Race Relations is warning that unresolved issues around land restitution without compensation will also complicate the messaging and until the Mining Charter - which new mineral resources minister Gwede Mantashe says is 80% ready – no-one is going to seriously consider new investment in that sector here.

The IMF in its recent report on South Africa pointed to the inequality gap being one of the most significant risks to a sustainable turnaround in the country’s fortunes.  People denied fair access to economic opportunities for nearly a quarter of a century since the dawn of South Africa’s democracy have every reason to be fed up and that creates fertile ground for Ramaphosa’s political opponents to exploit ahead of next year’s general election.

The problem with real economic transformation is that it is long and hard, but good things are happening.

Recovery mode

Six months ago, private sector buy-in of the YES campaign, with the equally ambitious goal of getting a million young people into work experience within three years, would not have got off the ground. We would have seen Moodys downgrade us to sub-investment grade’, taking both our foreign and locally denominated debt deep into junk status. The currency would have weakened and rates would have climbed to combat the resultant inflation - rather than go down as they did at the last MPC.

The country is in recovery mode. That recovery is tenuous and will not require much to undermine it. There are no quick fixes. Just slow, steady plodding which will see the president’s critics on both sides of the political divide seek to attack the recovery.