SA Needs Action – and fast!

Author: | Published by KLCBT on at 13:17:35 | Last Updated On: 15 March 2019

This was at the heart of the message given during the key note address by Maarten Ackerman, Chief Economist at Citadel, during the KLCBT’s annual budget speech breakfast.


Following an indisputably tough 2018, the year ahead should provide some welcome relief for emerging markets given the US Federal Reserve’s more cautionary approach to hiking interest rates, a possible US-China trade agreement that should calm global economic volatility, and the promise of further Chinese stimulus.

Unfortunately for South Africa, however, local economic growth is likely to remain fairly muted at around 1.2% in 2019, as the Budget Speech confirmed what many already knew or suspected: the country’s fiscus is running at the very edge of the line, and just one misstep in the coming months will see credit rating agencies call a foul.

Two of the country’s key metrics are already firmly in the red zone, with a debt-to-GDP ratio that has been revised upwards to stabilise at 60.2% in 2023/2024, and a budget deficit now expected to reach 4.5% in 2019/20.

Add to that the elephant in the room, weighing upon the fiscus: Eskom.

Credit rating agencies, and perhaps most importantly Moody’s, seem to be giving us the benefit of the doubt for now, but the reality is that without action, and fast, Eskom and other beleaguered State-Owned Enterprises will soon tip South Africa’s fiscus over the edge into junk status.

Despite this, government’s focus is unfortunately likely to remain on politics rather than economics in the run-up to the May elections.

The country’s direction after the elections will then depend on the election outcome.

If Ramaphosa can get the mandate needed to implement the policies necessary to boost the economy, business and consumer confidence will likely rebound, supporting the financial markets.

Add to this scenario a more favourable global environment, and we could also see some welcome relief for South Africa, the JSE and the currency in the second half of the year.

However, if Ramaphosa fails, we could see a repeat of 2018, with an economy slowly going nowhere and a currency under further pressure.

Download full presentation:  Global economic overview – February 2019

Published in Lowvelder – 8 March 2019:

Download article:  Experts comment on 2019 budget Lowveld Media 8 March 2019