Dawie Roodt, chief economist at the Efficient Group, believes that there is little reason to be optimistic now that South Africa is no longer in a technical recession.
Statistics South Africa revealed on Tuesday (4 November) that the country’s economy expanded by 2.2% in the third quarter – effectively ending the country’s negative growth trajectory.
On Wednesday, meanwhile, motorists were also granted some relief with one of the most substantial petrol price decreases in South African history taking effect.
Despite these positives, Roodt said that there were still a number of threats to be wary of heading into 2019.
“Probably the biggest threat to the economy is the fact that the ANC seems hell-bent in going ahead with its land-grab despite warnings by foreign investors that tampering with property rights was a very bad idea and would have a massively negative impact on the country’s economy,” he said.
“What this country needs more than anything else is foreign direct investment that can create jobs and alleviate the abject poverty that millions of our countrymen are finding themselves in.
Roodt said it was possible that the slight improvement in growth might stave off further downgrades from the ratings agencies which would be a positive step.
However, he cautioned that the issue of land expropriation would only hurt the country’s economy.
“What our esteemed leaders don’t seem to understand is that capital is mobile and it goes where it can make the most profit with the least amount of interference from governments. International financiers who control vast amounts of capital that could help to create jobs and alleviate poverty in South Africa are also very savvy people.
“As long as there is the slightest risk of legislation that may impact on property rights, South Africa will remain at the bottom of their choice of countries to invest in,” Roodt said.
February, March and April
CEO of Debt Rescue, Neil Roets, also warned that the underlying fundamentals of the economy remained marginal and that he saw little in the way of optimism for the millions of deeply indebted consumers who are three months or more behind in their repayments.
Roets said that, traditionally, the day of reckoning started early in the new year when holidaymakers returned to the harsh reality of school fees and the continuously increasing cost of living driving up monthly expenses.
“February, March and April are usually the three months when we see the greatest number of deeply indebted consumers knocking on our doors to have themselves placed under debt review because they were no longer able to manage their debt on their own.”
He said these were the months that debt collectors started knocking on the doors of over-indebted consumers who were no longer able to service their debt load and who were at risk of losing their property to loan sharks and debt collectors.
“While consumers are obviously going to benefit from the substantial drop in the fuel price, the marginal growth that was notched up in the third quarter is still not nearly enough to create jobs for the millions of unemployed South Africans.
“It is also not enough to help consumers who collectively owe R1.37-trillion to alleviate their debt burden,” he said.