So, for lack of a better description, we’re pretty fucked, right. Our economy has not only been effected by Zuma’s silly political plays, but there has been quite a build up to what was the final push. Having spent most of January below 50 on the Manufacturing PMI – which at one point fell to 43.5 – it indicates contraction. Capital Economics’ Africa economist John Ashbourne has much to say on the subject:
The dire performance of the manufacturing sector is especially disappointing given the depreciation of the rand, which has boosted external competitiveness.
Moreover, this soft patch for the manufacturing sector comes at a time when South Africa’s crucial mining sector seems locked in structural decline.
Unlike many African peers, the South African mining industry was struggling before commodity prices fell: gold production has halved since 2005 as a result of rising costs and the depletion of reserves at aging mines.
Bleak, ne?
So at the moment, South Africa has become an unhealthy dependent on its service sector. And, as you know, it’s not only the mining industry that is messing us around. Hello, there’s a massive draught out there, too!
We doubt that highly indebted South African consumers can continue to ramp up spending indefinitely, and have long argued that the economy is effectively living on borrowed time.
The decaying electricity grid could yet collapse, spurring a prolonged power crisis. Labor relations remain fraught; another round of strikes could cripple the mining sector. And it is increasingly likely that South Africa credit rating will be downgraded to junk. Unemployment will probably remain among the highest in the world. … Political protests are already becoming more common, and a sustained period of economic stagnation will raise tensions and cause more South Africans to question the political and economic bargain that underpins the post-Apartheid settlement.
And growth wise? Capital Economics analysts have downgraded their 2016 forecast for South Africa’s economy to a “sclerotic” 0.5%, below consensus, and 1.3% in 2017.
That would make South Africa one of the world’s worst-performing major economies. Even if the economy narrowly avoids a recession, per capita incomes will fall as the population grows.
The key risk in South Africa is not an acute crisis, but a period of stagnation that could strain the country’s political and economic institutions to the breaking point.
Damn, son. Maybe that money JZ pays back can go straight into repaying our debts or some shit. Gosh.
[source: businessinsider]
