Why we are worried and hopeful about South Africa right now: Standard Bank

Standard Bank Group chief executive Sim Tshabalala is “cautiously optimistic” about South Africa’s economic outlook for 2020.

Speaking at a Deloitte presentation on Thursday (30 January), Tshabalala said that “it’s likely that 2020 will be a bit better than 2019”.

“World output growth is forecast to accelerate from 2.9% last year to 3.3% this year, which is actually quite a big improvement in percentage terms,” he said.

“The US economy will probably slow down slightly – but not enough to cause contagion.

“Both the UK and the EU should benefit slightly from reduced uncertainty – now that Brexit is irreversible, and seems as if it will end up as a fairly ‘soft’ exit from the EU. The recovery in Europe will be positive for sub-Saharan Africa.”

Things are less optimistic for the South African economy, which is forecast to grow only 0.8% this year – up from 0.4% in 2019, he said.

“The Reserve Bank, one should say, is somewhat more optimistic, forecasting 1.2%. Either way, this is not a good outlook.

“Unless things change quickly, South Africa will suffer another year of falling per capita income and rising unemployment.”

The upside

However, Tshabalala said it is definitely possible to imagine an ‘upside scenario’ for South Africa.

Among other changes and reforms he said that this would include:

  • A clear and sustainable resolution for SAA.
  • The short-term reforms proposed last year by the National Treasury, such as the introduction of multi-year multiple entry visas for businesspeople and an efficient e-visa system for Chinese and Indian tourists;
  • Completing a spectrum auction;
  • Holding a new, much faster and more certain round of procurement for independent power;
  • Making the regulatory changes needed to allow more self-generation of electricity by large firms;
  • Improving the operational performance of Eskom.

“According to the National Treasury’s modelling, if this kind of scenario played out, South Africa might be able to grow about one percentage point faster – taking us from roughly 1% to roughly 2% by the end of the year,” Tshabalala said.

“Will this scenario happen? We will just have to wait and see. But the early signs seem quite positive.

“The political barriers to achieving some of these reforms don’t seem insurmountable, so I’m mildly optimistic that South Africa might grow a bit faster than predicted in 2020.”

Tshabalala warned that short-term economic forecasts are a lot like weather forecasts for the next day or two.

“There’s not a lot you can do – except remember to bring your umbrella.”

However, he said that he is generally more optimistic about South Africa in the longer term.

“People can’t do much about tomorrow’s weather. But – as almost everyone now accepts – we actually can do a lot to affect the planet’s climate – both for good and for ill.

“Similarly, people, firms and even governments can’t do much about short term economic conditions. But we can do a lot about the underlying forces that determine the long-term rate and pattern of economic growth.”

Read: Here’s where the rand could go by the end of 2020

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Why we are worried and hopeful about South Africa right now: Standard Bank