There was a time when all the international analyst reports you’d read about South Africa would be pointing to the inevitability of South Africa’s descent to a failed state.
Hardly surprising as South Africa likes to live on the brink of self-destruction and it’s often only crisis which brings us back to our senses. 2017 has proven to be a critical inflection point and the world is taking note of the political and economic changes that the new administration under Cyril Ramaphosa has been able to implement.
It’s refreshing to see a new perspective coming through from globally respected researchers, who are backing up the sentiment-fuelled hype that accompanied South Africa’s early stage turnaround story at the World Economic Forum gathering at Davos in Switzerland in January. Barely two years before, even the crickets had abandoned the SA HQ at the Kirchner museum in downtown Davos as a sense of helplessness prevailed.
A growing number of analysts are upgrading their growth forecasts and are starting to see a real sense of political and economic renewal, but they do warn there are some serious risks.
A research note this week from investment bank Goldman Sachs points out that while the reforms President Cyril Ramaphosa is introducing are likely to boost short-term sentiment, support some growth over the medium term, and over the longer term finally address some of the structural issues we face, it varies little from the noble objectives of the all-but forgotten National Development Plan (NDP).
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It’s not a bad thing, but it’s certainly not going to give the country the charge of adrenalin it needs to kickstart growth and create jobs.
“Mr Ramaphosa’s focus on economic stewardship and reform does appear to mark a political inflection point for South Africa,” says Goldman Sachs economics analyst Andrew Matheny in a report circulated to clients.
Some areas of concern include public sector wage increases. At 7% - amidst tight budgets - this may be the chance for the president to reduce the number of civil servants on the state ticket in order to cut the size of the public-sector wage bill, or at least mitigate it. There are worries about the mining charter and SOEs, particularly Eskom, and to a lesser extent SAA, which are in perpetual need of state support.
The key concern from Goldman Sachs is not whether there is political will or a desire for growth, but the implementation of the sorts of policies that will get it going and keep it there.
As the political machinations in North West are ably illustrating this week – political change is hard. Vested interests will fight hard to preserve a status quo that suits them and the battles are going to be messy.
In the apparent chaos, lies an opportunity, says the Goldman Sachs report: “The market does not yet appear to be pricing in meaningful structural reforms and we can see scope for a significant further re-rating higher of growth expectations.”
Its growth forecast is on the high side relative even to National Treasury and global institutions such as the IMF and World Bank, none of which see SA growing faster than 2% this year. Goldman is pencilling in 2.4%, although it warns there are plenty of risks and own goals South Africa must avoid in order to achieve this.
Bruce Whitfield is an award-winning multi-platform financial journalist and broadcaster.
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