Schoeman said South Africa was unlikely to reach 3% gross domestic product (GDP) growth over the next two years. Picture: Simphiwe Mbokazi/Independent Newspapers
Nicola Mawson
Citi South Africa yesterday said it believed that the country was showing early signs of economic recovery and could exit the Financial Action Task Force’s (FATF) greylist by the middle of next year, in spite of stubborn economic and structural issues.
The FATF increased monitoring on South Africa and placed it in a greylist after finding several areas of concern, including inadequate anti-money laundering controls.
Gina Schoeman, Citi South Africa economist, said during a virtual briefing yesterday that South Africa had emerged from the elections as “quite a mature democracy”
Schoeman said South Africa was unlikely to reach 3% gross domestic product (GDP) growth over the next two years.
“A 2% to 2.5% range seems more likely,” she said.
Schoeman’s prediction comes on the heels of a shocking GDP print for the third quarter released on Wednesday that showed the economy had contracted 0.3% in the three-month period.
South Africa’s partnership between the government and the private sector, with phase two launched in early October, set itself the “stretch goal” of adding a million new jobs to the economy through adding 3% to GDP growth by 2025.
“The economy is searching for more of an incremental improvement that can sustain rather than a euphoric J curve that falls down because the highs got too high,” said Schoeman.
“Our medium-term outlook still does not have growth going to 3%, but that's also because we do take a relatively cautious approach. We still see South Africa move towards more structural improvements, but we have to wait and see it in order to be able to model it into our forecast. We can look at an upside risk scenario, of course, and then you can get to 3%,” she said.
Following Wednesday’s shock GDP numbers, Schoeman said all eyes would be on the last quarter of the year.
She added that the economy was “fortunate” in that it came out of an election successfully at the same time as inflation was “hitting rock bottom”.
Inflation at 2.8% is incredibly low, given South Africa’s 3-6% target range “and huge amounts of inefficiencies that often drive up inflation,” said Schoeman.
Citi anticipated next week’s print coming in at 3.5%, and South Africa will be “enjoying inflation with the three in front of it until the middle of next year”.
Schoeman anticipated a 25 basis point cut in January – the next time the Reserve Bank’s Monetary Policy Committee meets again – and 25 basis points cut in March.
“We are very likely to enjoy very low inflation for quite a lot longer, and it doesn’t seem to be something that could easily take that way. You would need extremely higher currency weakness and oil prices in order to unwind the basic that we currently see in good situation in the South Africa CPI basket,” said Schoeman.
The Euromonitor International’s Eyes on Africa 2025 report, commissioned by L'Oréal Paris, yesterday pointed to disposable income per capita for South Africans growing at a compound annual growth rate of 4% to reach $8 530 (R153 995) by 2040. This compared with a global average of R201 692.
However, business leaders were concerned.
Spiros Fatouros, the CEO at Marsh McLennan Africa, said an Executive Opinion Survey published yesterday showed that the persistent threats of economic downturns, labour shortages, increased protectionism, and elevated inflation “are at the forefront of senior executives’ concerns as we approach 2025”.
Th report was conducted by the World Economic Forum.
“While we are witnessing some positive trends in the global economy, the findings of this year's Executive Opinion Survey highlight a significant level of anxiety among business leaders in South Africa,” said Fatouros.
BUSINESS REPORT