The time has passed for talking about South Africa as a failed state and an economy that will never recover, says Johann Els, chief economist of Old Mutual Investment Group .
So-called radical economic transformation is definitely the order of the day, but it is not the kind of RET many citizens have been worried about.Policy shifts are rather right of centre, with ever more focus on the private sector’s involvement in the economy . This is a promising prospect for the future of the country and could be the turning point to raise confidence and help economic growth.Els says economic growth has already gone up a gear. He expects economic growth at an average of 2.
OMIG expects consumer inflation to have reached a peak of about 8% last month. Interest rates could rise by another 75 basis points this year, but the end of the hikes is probably in sight. By the end of this year, that would mean a repo rate of 6.25%, which is what it was in February 2020 before the SA Reserve Bank introduced rate cuts to offer relief amid Covid-19.
According to Els, many analysts only focus on the bad news – such as political infighting in the ANC, poor infrastructure development and corruption – and, in the process, they miss important progress that can boost the country’s growth expectations.These include South Africa’s strong institutions, such as an independent central bank, the SA Revenue Service, which is being rebuilt, a strong financial sector and a healthy corporate sector.
Significant deregulation of the labour market, proper reform in the education system and a strong social pact between government, organised business and organised labour will also lead to stronger growth.OMIG believes it is very likely that Ramaphosa will win the ANC leadership election in December with a better margin than in 2017 and the traditional RET faction will lose support.
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