South Africa’s Economy: A New Hope?
Writer Craig Lemboe, Senior Economist at the Bureau for Economic Research
After a dark time for the South African economy, green shoots are starting to emerge amidst political positives and rising consumer confidence. What does this mean for the future of local growth?
The medium-term prospects for the South African economy have improved. The developments which have led to this more upbeat take on South Africa’s economic future have their roots in political – rather than purely economic – developments. This is reflected in a sharp rise in both business
and consumer confidence in the first quarter of 2018, despite very little improvement in underlying business conditions or income generation.
The RMB/BER Business Confidence Index jumped by 11 points in the first quarter of 2018 (see Figure 1.1). The index has only risen by so much – or more – in a given quarter in 15 other instances since it was first compiled in 1975. In addition, also in the first quarter of the year, the FNB/BER Consumer Confidence Index rose to an all-time high of 26 (see Figure 1.2). Both of these indicate increased optimism and, with that, an increased willingness by businesses and households to engage in meaningful economic activity.
• Business and consumer confidence are on the rise in South Africa, reaching record highs in the first quarter of 2018.
• Policy certainty and increased optimism are encouraging for the private-sector fixed- investment outlook.
• An improvement in private-sector capex growth is likely to be an important domestic growth driver over the medium term.
• While government attempts to steady the fiscal ship, concerns and risks must still be carefully monitored, not least of which is the precarious financial position of many state-owned enterprises and the land redistribution debate.
Figure 1.1: RMB/BER Business Confidence Index % rating satisfactory
100 80 60 40 20 0 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18
Figure 1.2: FNB/BER Consumer Confidence Index Index
30 20 10 -
-10 -20 -30 -40
Source: Bureau for Economic Research
28 An Absa Investment publication
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