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7 Nov 2016

SA Economy May Have Turned the Corner



See the article below Carin Smith / Fin24 on Old Mutual Investments group chief economist, Rian le Roux.  We need a bit of positive news, isn’t it? 


South Africans have to guard against being overly pessimistic, Old Mutual Investment Group chief economist Rian le Roux told Fin24 on Thursday.


"I think SA has turned the corner as far as the weak economy is concerned. The shocks are fading and maybe there could even be interest rate declines next year and a better year for mining. So, the economy can start to surprise us," said Le Roux.


"The last five years the growth path surprised on the down side, but I think into 2017 we might finally have a raise in activity."


He said if one looks back over the last number of years at shocks like load shedding, food inflation, the rand and a host of strikes, one can see a lot of those issues have started to stabilise.


"Clear confidence in the economy is deeply depressed, driven to a large extent by the state of the economy, but over the last while there have also been positive aspects like the case against Finance Minister Pravin Gordhan being dropped and the report by the Public Protector being released," said Le Roux.


However, le Roux says that it’s too soon to tell what kind of political and economic impact the contents of the report will have.


“The bottom line is that the release order shows that mounting pressure against state capture, corruption and the patronage network is starting to yield results,” he said.


"I think on the margin politics are taking a turn for the better. Yes, the economy is still quite weak and it looks like the third quarter will be quite weak too and consumers are under pressure. There is no question about it that in the shorter term there are lots of headwinds still."


When one looks "deeper" into 2017, he thinks a number of these headwinds could become tailwinds. The weaker rand is certainly good for tourism and competing exporters.


The big question


"I think we should guard against becoming overly pessimistic. The question is, however, whether it is possible to acquire confidence boosting policy measures, especially in the arena of the labour market and if we could get politics on a more stable footing," he said.


"Those in the manufacturing sector say uncertainty is one of the biggest reasons for not investing."


He thinks peak inflation is also now clearly in sight and that there is a reasonable chance that SA could again escape a ratings downgrade to junk at the end of the year.


"The big issue is the longer term. The first goal must be to reduce the negative outlook. That will require economic growth and high levels of confidence, which will require a more stable political environment," he said.


"People forget the reverse is also true. When one thing is a boost, other things get a boost too. Of course I don't think we are out of the woods but don't be overly pessimistic.


Friendly Greetings


Andre Delport

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