World Economy

South Africa Economy on Cusp of Rebound

South Africa Economy on Cusp of ReboundSouth Africa Economy on Cusp of Rebound

The South African economy might be on the cusp of a turnaround, according to senior independent economist Azar Jammine.

However, Econometrix chief economist Jammine stressed that he was not talking about an economic boom, but that the economy had possibly been through the worst and might start improving, IOL reported.

“The big proviso is that the local political scene does not degenerate and forces ratings agencies to downgrade our credit rating from investment grade to junk status where governments, parastatals and other borrowers find it very difficult and expensive to borrow money,” Jammine said at the launch of Automechanika Johannesburg 2017.

Jammine said the growth in both manufacturing and mining production had picked up nicely in the past few months, which meant the second quarter gross domestic product growth figures to be released this week would show a nice recovery from the “horrible” minus 1.2% growth recorded in the first quarter.

He said the depressed growth in the first quarter was to a large extent influenced by the configuration of public holidays in March that enabled many workers in the productive sectors to take three days of working leave to have a 10-day holiday.

In addition, Jammine said that according to the experts, the drought was over and the country no longer had an electricity supply constraint and there was therefore no more load shedding to hold back economic growth.

Jammine said despite the value of the rand being low, inflation was lower than anticipated after earlier fears that it would rocket to more than 8%.

The combination of a low currency and low inflation provided exporters with a wonderful window of opportunity to make inroads into global export markets, while low inflation also meant interest rates were unlikely to rise as much as previously anticipated, Jammine said.

The fear that a Brexit vote would lead to a slowdown in the world economy had resulted in expectations of interest rates around the world remaining lower for longer and money ironically flowing back into emerging markets, such as South Africa, reducing inflationary pressure further.

He referred to comments by Finance Minister Pravin Gordhan that if just a quarter of state capture was eliminated, it would result in a R40 billion ($277.8 million) saving in government expenditure.

“That is 1% of the GDP. In other words, the growth rate on its own could lift by 1% if only a quarter of this state capture was eliminated.