10 April 2019

 is relatively stable at present, with modest economic growth
predicted, owing to a number of economic, public and political factors.

This was unpacked at a panel discussion during Standard & Poor’s
(S&P) Global’s yearly South Africa conference, hosted
under the theme ‘Navigating South Africa’s Credit Landscape in
Changing Times’.

While the country retains stable credit ratings for now, which is
important to unlock foreign capital and investment, it requires greater growth,
which entails a consistently good political framework and stability in the

S&P analyst Gardner Rusike indicated that its
rating for South Africa was currently at BB
with a stable outlook, adding that it has not changed the stable rating for the
past two years.  

The reason for this favourable outlook includes several factors, such as
the role of the central bank in anchoring inflation policy, and the role
of the judiciary, which provides good checks and balances.  

The company’s forecast of South Africa’s economic growth outlook,
at 1.6% this year, is quite positive compared with the forecasts made by

National Treasury’s Duncan Pieterse indicated that treasury was
concerned about a number of factors when forecasting the country’s economic

He said Treasury prepares four forecasts, two of which are made public,
and the other two internal. It is currently in the process of updating its
Budget forecast.

Factors include the situation in China, not only its growth, but also the larger
structural shift away from consumption, which will affect South Africa’s export performance. 

There is also the indirect link to Brexit, with South Africa’s automotive sector highly exposed
to Britain for exports.

In terms of domestic factors, Eskom and other State-owned entities are
included, both in terms of risk to the country’s fiscus and potential economic

There is also the scenario of extended load-shedding on the country’s
economy to consider.

On the upside, better prices for materials such as palladium bode well
for the country’s exports and this is being revisited in the updated forecast.

Meanwhile, Bureau for Economic Research chief economist Hugo Pienaar indicated that,
according to a number of indicators the company has looked at, the data shows
that the country has not performed that well in the first half of the year to

Therefore the organisation is taking a more pessimistic view than others
this year, with a likelihood of 1% to 1.5% growth.

BNP Paribas senior economic
analyst Nic Borain
predicts a lower voter turnout at this year’s election, typical of maturing
democracies and, based on this, expects the ANC to garner less support this
year, while opposition parties’ share of the votes is likely to rise.

If this outcome manifests, investors would view the stability as
favourable, said Borain.

Pienaar noted that if the ANC gets a high 60% or more, the narrative is
likely to be that Cyril Ramaphosa will have a freer rein
to push through reforms. This could then lead to a repeat of the “Ramaphoria”
experienced last year, with markets initially rallying – but the big questions
is if this can be sustained.

However, he cautioned that this view does not account for the internal dynamics of the ANC, which, if it does get high numbers, may implement reforms, but this will take more time than the public and markets expects.

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