Nedbank has warned that South Africa’s economic progress is risky, with political issues continuing to worry investors. The warning came in the bank’s ‘Guide to the Economy – May 2018’ which was published at the weekend.
“Economic performance in the first quarter did not match the strong bounce in financial markets and in confidence seen early in the period. The news has been mixed, with manufacturing and mining activity easing, but consumer spending remaining relatively firm,” said Nedbank.
”On the positive side, the new government leadership has continued to move against corruption in the state-owned enterprises and against individuals associated with state capture, although much still needs to be done on this front.
“Unfortunately, progress on much-needed economic structural reform has been slow. The government needs to move quickly to provide an enabling environment for the private sector to expand, create jobs and meet societal needs.
“While economic growth is forecast to improve this year there are still risks that threaten to weigh on confidence and so contain growth.
“There has not been great progress on crafting an acceptable new mining charter, and much energy is being spent on the debate on land expropriation without compensation.”
Nedbank said all parties agree that accelerated land reform is necessary, but moves to change the constitution are seen as an unnecessary threat to property rights more generally and will probably hurt investment prospects in the short term.
It added: “Government’s approach to land reform…. has taken a potentially dangerous turn, threatening private property rights and fueling social tensions.
“Another obstacle is whether government will be able to implement the structural reforms needed to accelerate growth. Our view is that progress on that front will be relatively slow ahead of the elections next year; hence our forecast for only moderately faster growth over the next three years.
“We expect economic growth to quicken to 1,8%, 1,9% and 2,4% in 2018, 2019 and 2020 respectively from the 1,3% recorded in 2017.
“Improved global growth prospects, firmer international commodity prices and positive political developments should underpin business confidence and encourage fixed investment plans by the private sector – which accounts for the bulk of fixed investment in the country.
“The recent signing of delayed renewable energy deals is good news and will provide a needed boost. However, strong growth in private sector fixed investment will still be hindered by sufficient production capacity and lingering policy uncertainty in the short term.
“Growth in investment spending by general government will be supported by National Treasury’s announcement in the budget of a shift in spending from consumption to capital investment.”
President Cyril Ramaphosa recently set a target for boosting investment in SA by $100bn.