• The South African economy remains dysfunctional, with sky-high unemployment and very weak investment, but it looks like we may avoid a recession, with a bit of luck.
  • Economic activity has picked up and consumers have an interest rate cut to look forward to.
  • Tourism to South Africa is also growing nicely.
  • For more stories, go to Business Insider South Africa.


About a month ago, many people were stunned by the news that SA’s economy shrank by an appalling 3.2% in the first quarter of this year  compared to the last quarter – the worst performance in a decade.

Weak levels of investment and more than 270 hours of loadshedding as well as a gold mining strike and a weak grape harvest wreaked havoc on the economy.

At the time, there was little hope that we would escape a recession (two consecutive quarters of a shrinking economy). But it looks as if South Africa may just pull it off. While the economy is still dysfunctional with sky-high unemployment and very weak investment levels, here are some of the encouraging signs: 

Economic activity has picked up

New numbers show that manufacturing output increased by 4.6% in April 2019 compared with April 2018, with the vehicle sector manufacturing up almost 19%. Wholesale trade sales rose by 5.5% in April 2019 compared with April 2018, while retail trade sales rose 2.4%. Retail sales of clothing and footwear jumped more than 6%, and of household furniture, appliances and equipment by almost 5%.

The prophets of doom who were early predictors of a technical recession in the second quarter must be disconcerted by a series of extraordinarly positive economic data for April, economist dr Roelof Botha wrote in a column on Netwerk24.

“It looks like the economy will surprise friend and foe with a solid growth rate in the second quarter."

We are exporting more

South Africa recorded a R1.74 billion trade surplus in May, SARS revealed on Friday. This means we exported more than we imported. Exports jumped more than 8% to R112 billion.

More tourists are arriving

According to data from Statistics SA, more than 217,000 overseas tourists arrived in April – 11.9% more than in April 2018. The number of tourists from Germany jumped by almost a third and those from the UK rose by more than 25%.

Your retirement savings have been fattened up

The local stock market saw its best start in 12 years, jumping by more than 10% over the past six months. The JSE’s all share index is within reach of its all-time record high. Unfortunately, shares of SA-focused companies remain weak – but mining and global firms have rocketed. Platinum shares have jumped 60%, while gold shares are up 46% with the gold price at a six-year high.

 We are almost two weeks away from a rate cut

At its meeting last month, three members of the Reserve Bank’s Monetary Policy Committee voted to keep interest rates unchanged, while two voted for a 25-basis point cut. Following the disastrous GDP data, the majority of members are now expected to vote for a cut at their next meeting on 18 July. On a R2 million bond, a 25 basis point cut will mean a saving of around R300 a month.

More fund managers believe we won’t be ‘junked’

South Africa is still clinging to a single investment grade rating: unlike S&P and Fitch, Moody’s has not downgraded our government bonds to “junk”. If it does, our bonds will be dropped from the all-important Citigroup World Government Bond Index, which contains only bonds that are investment grade. This will have massive consequences: many investments funds won’t be allowed to invest in South African bonds as a result, and it could lead to an exit of money.

Last month, only a quarter of the international fund managers surveyed by Bank of America Merrill Lynch believed that we would not be kicked out of the index. This has now increased to 50% - this means that half  of fund managers now expect us to keep our investment grade rating from Moody’s. On top of that, the survey also shows that for the first time in six months, managers see our bonds as 'undervalued'.

Load-shedding seems to be a thing of the past

More units of the embattled Medupi power station are now online, and the station is now contributing 7% of South Africa’s electricity. Eskom has downgraded the country’s power-grid alert status to “yellow” from “red”, just one level above “green” – when no loadshedding is expected.

The civil service wage bill may be shrinking

One of South Africa’s many problems is a bloated civil service, whose salaries consume more than 35% of all government spending. But according to the  South African Reserve Bank’s latest quarterly bulletin, released last week, growth in annual average pay in the public sector halved from 10.7% in 2017 to 5.3% last year. While this hike is still above the average inflation rate, it is a step in the right direction.

The rand is eyeing R14/$

Less than a month ago, the rand was trading at R15.02 for a dollar. But a combination of relief over a possible trade deal between the US and China, and confirmation that the US central bank will lower interest rates (which makes the dollar less appealing than the rand, which still earns a fat interest rate) has bolstered the local currency.

This has helped to secure a sizable petrol price cut this week, and will help to keep imported prices in check.

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