Cape Town - The country’s general elections next year have economists on tenterhooks as they wait to see the outcome.
They warn that local and international investors are “sitting on their hands” waiting for the result.
Professor Raymond Parsons, from North-West University Business School, said the economic outlook would be shaped by global economic trends, geopolitical developments, domestic infrastructural challenges, effective implementation of reform commitments by the government and the pending elections in the country.
Parsons said South Africans would be glad to see the back of 2023 “with its persistent fault lines”.
Daniel Silke, the director of Political Futures Consultancy, said the ANC would be tempted to dish out more cash to appease the electorate.
“Economic growth has been pretty stagnant, flatlining in SA for a number of years; unemployment remains stubbornly high.
“In an election year, government always wants to have some spare cash to dish out, be it an increase in civil servants pay or other kinds of benefits in terms of social grants.
“The big challenge for the ANC is that it has run out of money, and it is an election year and it is showing difficulties in getting over 50% in overall support in opinion polls. The big challenge for SA is how much can the government spend in order to encourage some voters to continue to vote for the ANC?” said Silke.
Dawie Roodt, an economist at the Efficient Group, said the ANC would remain in power after the elections and things would change only after five years, once the ANC had been ousted.
“Confidence in the economy is at an all-time low… and is likely to remain like that until at least after the election. So investors are sitting on their hands, waiting for the elections.
“And if there is a dramatic change in the elections in terms of a real change in government, I don’t think we’re going to see much. So it is more of the same.
“The ANC will be in government still, one way or the other … and that is going to be really bad news for SA,” said Roodt.
Hugo Pienaar, the chief economist at the Minerals Council, said the rand would be jittery before the elections.
“There is always a bit of uncertainty leading to an election so that might create some jitters for the rand and also in the aftermath of the election, to the extent that we have coalition government, especially in important provinces like Gauteng, that might also create a bit of uncertainty.
“I don’t think the elections are going to be positive for the economy. On the contrary, depending on the outcome and whether indeed we have multiparty coalitions in important provinces, it may create quite a bit of uncertainty and weigh on consumer and business confidence in the second half of this year, post the election,” he said.
Economists agree there might be some positive news for our economy, depending on the global markets.
Silke foresees a better global environment next year with a weaker US dollar.
“The strength of the US dollar has undermined the SA rand and many other developing market economies, so if we see a weaker US dollar next year, with interest rates in the US coming down, that also will have a knock-on and more positive impact on SA, with lower interest rates, and one would also hope a marginally stronger rand, which will help the battle against inflation.
“We should see inflationary figures coming down as well.”
Pienaar said there was optimism in global financial markets as the fight against inflation had been won.
“This could provide the opportunity for Central Banks in US and Europe, perhaps even in the UK, to start reducing policy interest rates in 2024.
“What this means for SA is there is somewhat support for the rand exchange rate from international factors, because if global interest rates move lower, that tends to supports assets in emerging markets like SA. In terms of our own inflation or the rate of increase in inflation, I think that inflation, as internationally, will moderate in 2024 and with lower global interest rates, this should provide some scope for the SA Reserve Bank to also reduce our borrowing costs in 2024,” said Pienaar.
Roodt said that although he foresaw headwinds internationally, he expected interest rates to come down, which would be good news for the economy.
Parsons said South Africa’s economic performance next year would be driven by trends in exports, consumer spending and investment.
“There is increasing evidence that rates of inflation are easing, with both the CPI and PPI showing sharp declines in November 2023. Inflation is now well within the SARB’s inflation target range of 3% to 6%,” he said.
The economists agree that all the issues bedevilling the economy, like load shedding, corruption and inefficient state-owned enterprises, would continue to haunt the economy in the new year.
Roodt didn’t think SA would get a grip on corruption soon.
“Will we ever get a grip on corruption and the stranglehold that it has on the SA economy? I’m afraid not, at least not soon, because the ANC is the source of most of our problems in SA,” he said.
Pienaar sees an easing in load shedding with less frequency than this year.
“This is both as Eskom starts to bring some of its units … on board and also as more green energy generation capacity comes online … So that is a positive for the economy,” he said.
Silke said the state had proved to be “an absolute failure at running its own state-owned enterprises”.
“It desperately needs the investor and expertise input from the private sector across the board. If it doesn’t encourage this through positive relations with the business community, I’m afraid the existing deterioration… will continue at pace. So the State has some critical choices to make.”