EO102 South Africa

South Africa – Economic forecast summary

Economic growth is projected to pick up moderately in 2018-19, as stronger activity in trading partners boosts exports. Investment will support growth in 2019 on the assumption that business confidence increases and policy uncertainty fades. Despite persistently high unemployment, private consumption will expand as wages increase moderately and food prices stabilise.

Falling inflation leaves room for a moderately expansionary monetary policy to support activity. Unexpected slippage of the budget deficit is contributing to growth in the short term, but is also creating more pressure to contain rising public debt and is raising the risk of a further credit downgrade. Improving the efficiency of public spending and better controlling the deficits of state-owned enterprises are necessary to raise fiscal credibility and create room for public investment to foster growth and reduce social inequality.

The high dependence on external financing is the main source of financial vulnerability. Low investor confidence and credit rating downgrades in 2017 have contributed to a net outflow of foreign investment. To cushion the transmission of external shocks to the financial system, implementation of the financial sector regulatory reform should be accelerated and foreign-currency-denominated debt issued by private entities further monitored.

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South African Economy Submersion into Slowness

The SA economy has gone into recession, at the same time that it tries to absorb continued political shockwaves in the wake of GuptaLeaks and the recent cabinet reshuffle.

Statistics South Africa (StatsSA) announced on Wednesday, that the economy shrank by 0.7% in the first quarter of 2017.

This is the second consecutive quarter that the country’s gross domestic product (GDP) declined following a 0.3% contraction in the fourth quarter of 2016.

Two consecutive quarters of negative growth is the most widely accepted definition of a recession, according to StatsSA and the last one experienced by the country followed on from the global financial crisis during 2008 and 2009.

Despite hopes that a recovery in the agriculture and mining sectors would save South Africa from a contraction – steep declines in a host of other sectors outweighed the potential gains.

The trade and manufacturing sectors “were the major heavyweights that stifled production, with trade falling by 5,9% and manufacturing by 3.7%” StatsSA said.

Meanwhile the electricity, gas and water industry contracted by 4.8%, according to the agency, due largely due to a decreases in electricity produced in the first quarter.

The amount of water distributed also decreased driven by continued restrictions in some parts of the country still recovering from the drought, is said.

The news comes after a late night cabinet reshuffle by Jacob Zuma, prompted ratings agencies to downgrade South Africa’s credit rating. Although agencies S&P Global and Fitch held off from further downgrades last week, the recession is unlikely to boost the country’s prospects of a ratings improvement any time soon.  In its decision S&P retained its negative outlook for the country.

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World Bank slashes South Africa’s economic growth outlook

The world Bank on Tuesday slashed the country’s economic growth outlook for this year to 0.6%, from 1.1% it forecast earlier in the year, and said that South Africa’s second quarter growth of 2.5 percent would be insufficient to restore positive per capita gross domestic product (GDP) growth for the year.

However, the bank said it expected South Africa’s economic growth for next year to be 1.1 percent, with a growth of 1.7 percent expected in 2019 supported by an improvement in commodity prices and strengthening balance sheets of households.

Paul Noumba Um, World Bank country director, said in an environment, where the national budget was constricted, South Africa could turn to encouraging private innovation as one of the several ways in which to improve the lives of the poor.

“South Africa’s productivity growth is diverging from global growth and the country risks falling further behind its peers. This would be to the detriment of the poor, for whom a growing economy is necessary for jobs, and a sustainable system of social grants,” Noumba Um said.

Last month Statistics South Africa (StatsSA) said South Africa’s weak economic growth, high unemployment, and greater household dependency on credit and policy uncertainty condemned 30.4 million into poverty between 2011 and 2015.

The World Bank report also found that productivity in South Africa fell by 6 percent between 2007 to 2016 and attributed this to insufficient private sector investment in innovation. The report further revealed that the country’s private research and development (R&D) expenditures decreased by about 40 percent since 2009 with lower productivity growth having cost the country 0.7 percent of foregone annual GDP growth since 2008.

Sebastien Dessus, the World Bank program leader, on Tuesday said that South Africa had produced less overtime with the same amount of labour and capital since the global financial crisis.

“Given South Africa’s untapped potential for absorbing and adapting foreign technologies, private R&D can be turned into a more powerful driver of corporate profitability and economic growth.”

“Innovation can help improve the lives of the poor through the provision of better and cheaper goods and services, and expand economic opportunities through the introduction of disruptive technologies that can lower barriers to competition,” Dessus said. In July, the SA  Reserve Bank halved its forecast for 2017 growth to 0.5 percent from a previous forecast of 1.0 percent and the 2018 forecast to 1.2 percent from 1.5 percent. In 2019 the reserve bank said it saw growth of 1.5 percent, down from 1.7 percent it had initially pencilled in.

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What to expect in 2018 in SA

What to expect in 2018

Nel told MyBroadband there have been a few consolidations in 2017 that will come to fruition next year, and consumers will reap the benefits.

“South Africa is still a tumultuous market for any businesses to operate in, but uncertainty only fuels classifieds from the ground up,” he said.

“A weaker economic outlook and high unemployment creates greater consumer interest and participation in the space, because of the ease of entry and associated cost savings.”

This should see new players enter the market, coupled with increased marketing spend and investment from established businesses.

Nel said Gumtree will also remain true to its goal of helping South Africans trade successfully.

“We’ve been the number one classifieds platform in terms of our size and popularity for a number of years now, but we’ve never taken that for granted.”

“2018 will see a renewed focus on the quality of the user experience, their needs, concerns, and goals.”

The platform will also offer its clients improved advertising services through Gumtree Media.

“South Africa is on the cusp of a new, smarter era of online advertising and Gumtree will lead the charge,” said Nel.

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Bumper harvest helps keep economy afloat

Bumper harvest helps keep economy afloat

The South African economy grew by 2,0% in the third quarter of 2017 (seasonally adjusted and annualised), down from a revised 2,8% in the second quarter. Agriculture, mining and manufacturing were the main drivers of the expansion, while there was a contraction in general government services resulting from low employment numbers in the public sector.

After recording an increase of 38,7% in the second quarter, the agriculture industry continued to power ahead, expanding by 44,2% in the third quarter.

This is the largest quarterly jump in agriculture production since the second quarter of 1996. Increased production of field crops and horticultural products were the main contributors to growth, with notable increases in the production of maize and vegetable products.

This season’s maize crop is expected to be the largest on record. The Crop Estimates Committee  have pegged commercial maize production for this season at 16,74 million tonnes, more than double the 7,78 million tonnes produced last year (2015/16), and higher than the current record of 14,66 million tonnes harvested in 1980/81.2

Mining and manufacturing were the other major contributors to economic growth in the third quarter. Increased gold and platinum production saw the mining industry grow by 6,6%, while the 4,3% rise in manufacturing was spurred on by increased production of both petroleum and metal products.

Finance and business grew by 1,2%, helped along by increased activity in financial mediation, insurance and auxiliary services. There was also positive growth in personal services (0,9%) and transport and communication (0,6%).

Four industries, however, saw a decline in economic activity in the third quarter. Falling employment numbers in the public sector saw general government services posting its third consecutive quarter of negative growth, contracting by 0,7%. Other notable industries that saw a decline were trade and electricity, water and gas. Despite a rebound in retail trade sales, falling wholesale trade sales pulled the trade industry down by 0,4%. The electricity, water and gas industry experienced a 5,5% contraction, a result of falling electricity generation and demand.

Other highlights from the third quarter 2017 GDP release:

  • Unadjusted real GDP was up by 0,8% year-on-year in the third quarter of 2017.
  • The South African economy grew by 1,0% in the first nine months of 2017 compared with the first nine months of 2016.
  • Nominal GDP in the third quarter was estimated at R1,17 trillion.
  • Expenditure on GDP grew by 2,1% in the third quarter, spurred on by a rise in household consumption spending and fixed investment. There was, however, a fall in government consumption spending. Exports were down, but imports were down more, resulting in an improvement in net exports (i.e. exports less imports) and, consequently, a positive contribution to total growth from the external sector.
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Why Do People Choose To Live In South Africa?

Johannesburg, 23 November 2017 – Globally mobile individuals, also known as expatriates or ‘expats’, who choose to live and work in South Africa, cite the adventure (74%), a better quality of life (72%), or to gain international experience (67%) as their reasons for accepting assignments in the country. These reasons are likely to be similar for expats living and working throughout Africa, given the continent’s rapidly evolving markets and abundant natural beauty.

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This is according to the 2017 Cigna 360° Well-being Survey, which looks at the health, well-being, and sense of security among 2 000 expats living in 20 markets across five continents.

Expats around the world, including those working in South Africa, share a high level of concern about the quality of medical care available in the countries they are in. With this in mind, more than half of these individuals consider medical insurance coverage to be a very important factor when considering a move overseas.

Perceptions of physical, financial, social, family and work health among expats were also examined and compared with all working people in the 2017 survey.

“Our 360° Well-being Survey captures the sentiments of an expat environment that is rapidly evolving. Overseas assignments are becoming shorter – a decade ago, going overseas typically meant a three or four-year relocation, but assignments today can be for less than 12 months,” explains Gilles Nyssens,  Business Development Director Africa at Cigna.

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“Some expats do not relocate at all—instead working on project-based assignments and even commuting via extended business trips has become common, allowing organisations to access global talent when relocation is not possible.”

South Africa-based expats mostly feel that the change has been worth it, with 68% reported being satisfied or completely satisfied with their move, and 67% satisfied or completely satisfied with their career prospects.

Given the variety of working conditions, state of infrastructure and access to resources in the rest of Africa, employers are likely to face tough challenges to satisfy expats operating in other African jurisdictions.

The survey also revealed that while 89% of South African-based expats have excellent or very good relationships with co-workers, 77% experience the same with supervisors. While these percentages are higher in South Africa than in other countries, this will probably be the case throughout Africa, considering the warmth, engagement and hospitality of most of Africa’s peoples.

However, only 37% of expats in South Africa are satisfied with the country’s economic outlook, compared to the 63% worldwide, and they too are concerned about the country’s economic woes. This leads to higher levels of insecurity, concerns about financial health and lower perceptions about their ability to take care of their family’s health and well-being.

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While the economic outlook varies from country to country in Africa, levels of insecurity and concerns about financial health may well be at similar levels for expats across the continent. This could be one of the most significant human capital challenges for organisations that depend on expat talent and that believe in nurturing this talent.

Expats generally have a lower perception of the state of their personal health and wellness than the overall working population, remaining concerned about the financial implications of falling ill.

With the significant healthcare infrastructure and delivery challenges faced in the rest of Africa, it would be understandable if this concern was acute for expats deployed in such countries.

These findings come as no surprise at a time where there is increasing pressure on corporations and NGOs around the world to demonstrate adequate “duty of care” when it comes to employees, including expats. More than a quarter (27%) of global expats, and 38% of expats in South Africa, feel subject to an insufficient duty of care, which places an onus on employers to take all reasonable possible steps to ensure the health, well-being and safety of their employees.

This percentage is expected to be higher for other African countries, where access to medical care is much more limited than in South Africa.

“The message is clear among expats – health and well-being are as much a priority as job opportunities, security and salary,” says Nyssens. “For organisations employing expats anywhere in sub-Saharan Africa, an extrapolation of the survey’s results may provide a roadmap for increasing the retention of this increasingly important employee segment.”

“For organisations that understand that expat talent deployed into African markets is more than a commodity, engaging the hopes and fears of this globally mobile employee segment is important. However, providing solutions to dilemmas faced by those building careers on this vast-continent, is equally important. Having a great health plan represents a fine start,” says Nyssens.

Hollard Cigna Health believes that the message will be similar, if not stronger and louder, within the rest of sub-Saharan Africa. Its product suite provides a fully compliant health insurance solution for the region, providing local management, regional expatriates and globally mobile staff easy access to the finest quality health care available in modern Africa and beyond.

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South Africa’s GDP grew by 2% due to agriculture

JOHANNESBURG – South Africa’s economy expanded 2% in the third quarter of the year down from an upwardly revised 2.8% recorded in the second quarter – but still beat market expectations of a 1.5% rise.

The agricultural sector showed the biggest growth in the quarter under review surging 14.9% quarter on quarter- its biggest quarterly growth in 21 years.

Higher production of field crops and horticultural products did most of the heavy lifting in the agricultural sector.

Statistics South Africa said the nominal gross domestic product (GDP) grew R1.2 trillion in the third quarter, R22bn more than in the second quarter.

Mining was up R7bn to R83bn, while manufacturing was up R9bn in the quarter to R140bn.  However, electricity was down R6bn to R39bn in the period.  Mining production in petroleum and basic metals divisions resulted in the secondary sector recording 2.1 percent in the third quarter.

Macroeconomics statistics website Trading Economics said GDP Growth Rate in South Africa averaged 2.83 percent from 1993 until 2017, reaching an all-time high of 7.60 percent in the fourth quarter of 1994 and a record low of -6.10 percent in the first quarter of 2009.

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South Africa: Finance Minister Congratulates New FIC Director

Finance Minister Malusi Gigaba has congratulated Advocate Xolisile Jennifer Khanyile on her appointment as the Director of the Financial Intelligence Centre.

“The Financial Intelligence Centre (FIC) plays a key role in ensuring that the financial system has integrity. We also believe that Advocate Khanyile will work with other industry stakeholders to ensure that transparency is improved in South Africa’s financial system in order to support higher economic growth. We wish her well in her new role,” said Minister Gigaba on Thursday.

Advocate Khanyile’s appointment will be effective from 1 January 2018.

She holds a B Juris Degree from the University of Zululand, an LLB from the University of Zululand, and a Management Development Programme (MDP) from the University of the Free State Business School.

Positions Advocate Khanyile has held include that of Director of Public Prosecutions in the Free State; acting Director of Public Prosecutions in South Gauteng and Deputy Director of Public Prosecutions in the Asset Forfeiture Unit, among others.

The FIC collects information and analyses suspicious transactions as may be reported by financial or non-financial institutions like gambling bodies, estate agents, and lawyers. The FIC works together with other regulators and provides information to law enforcers to combat money laundering and terrorist financing.

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8 ways Ramaphosa plans to fix South Africa’s economy

After winning a bruising battle for control of South Africa’s ruling party, Deputy President Cyril Ramaphosa now faces an even more daunting task: rebuilding an economy battered by years of misrule, corruption and the appointment of incompetent officials.

Ramaphosa has pledged to reignite growth, rebuild investor confidence and tackle a 28 percent unemployment rate. He’ll be the African National Congress’s presidential candidate in 2019 elections but could take over running the country even sooner should President Jacob Zuma make an early exit.

Here’s what he plans to do:


Create at least 1 million jobs within five years

Jobs will become the centerpiece of government policy. Special economic zones will be established and tax reforms and other incentives introduced to encourage manufacturers to hire.

The government will also repair its relationship with the mining industry and provide it with greater policy certainty in a bid to persuade them to take on more workers. A youth-employment program will be scaled up to provide 1 million paid internships to unemployed people within three years.


Prioritize growth and investment

The government will target 3 percent economic growth next year, up from about 0.7 percent this year, and 5 percent by 2023. It will take urgent measures to repair investor confidence, including improving institutional stability, restoring the credibility of the criminal-justice system and demonstrating that the state has the political will to turn the country’s finances around.


Contain state debt and spending

Ramaphosa will seek to ensure the government avoids an unsustainable debt trap that would place it at the mercy of its external creditors and limit its policy options. He’ll urge it to exercise fiscal discipline to ensure resources are used for development, rather than to service debt or implement populist projects.


Give the black majority a bigger state in the economy

The transfer of ownership and control of the economy to black South Africans will be accelerated under Ramaphosa’s plan. The government will investigate how to make black economic empowerment more effective and sustainable, and ensure communities and workers derive greater benefit.

It will also promote competition in the banking industry to broaden access to financing and consider establishing a new fund backed by investors, lenders and private companies to provide backing to small and start-up businesses.


Reduce the cost of doing business

Regulations for small businesses will be reviewed to make them less onerous. Energy prices will be more effectively regulated, port tariffs will be reviewed and infrastructure will be improved. Spending on new roads, power stations, ports and other capital projects will be boosted to 1.5 trillion rand ($117 billion) over the next five years.

A presidential panel will drive the implementation of large projects, reduce costs and root out corruption.


Improve the education system

The plan would get the government to work with teacher unions to improve the quality of schooling, especially in townships and rural areas. Teachers will be given additional training and support. It may be made compulsory for students to study mathematics and science until they complete school. The state would also take steps to provide free tertiary education to the poor.


Improve the management of state companies

State companies must be properly governed, managed and operated for the benefit of the public, and suitable boards and executives with the appropriate skills and experience should be appointed immediately.

The firms should consider co-investing with private companies or forming strategic partnerships with them to improve their balance sheets and ability to deliver services. The government will consider forming a company to manage all its investments in state-owned enterprises.

“It is particularly urgent that the state-owned enterprises are put on a stable footing,” Nedbank Group Ltd. CEO Mike Brown said in an open letter to Ramaphosa Monday evening. “The enormous liabilities that the SOEs are burdened with pose a risk to the entire economy.”


Clamp down on graft

A judicial commission of inquiry will be established to investigate allegations that public institutions have been looted and that private companies and individuals have gained undue influence over the state. Law-enforcement agencies will be strengthened and critical state institutions will be rebuilt.

Officials who have facilitated or been involved in graft will be immediately be removed from their posts and face prosecution. Stolen funds will be recovered and deposited in a special fund that will be used for youth training and employment.

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South Africa to take tough decisions to grow economy: Gigaba

 

JOHANNESBURG (Reuters) – South Africa’s government will take “necessary tough decisions” to stabilize public debt and grow the economy, Finance Minister Malusi Gigaba said on Saturday.

“We will take the necessary tough decisions to continue fiscal consolidation and stabilization as we move towards the 2018 budget in February,” Gigaba told a breakfast briefing before the start of the ruling African National Congress conference to pick a new party leader.