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The rand exchange rate \u2013 which has been increasingly sensitive to domestic political developments over the past few years \u2013 welcomed the election of and forthright words from the country\u2019s new leader. The South African currency appreciated from R13.70\/$ in mid-December 2017 to around R11.60\/$ by mid-February.<\/p>\n
“A firmer rand improves the outlook for South African consumers through lowering the cost of imports and associated inflation. Indeed, the SARB was able to lower its inflation forecasts during January in part due to a stronger rand,” the report said.<\/p>\n
The actual pace of economic growth over the next two to five years \u2013 a key factor in solving South Africa\u2019s triple challenges \u2013 will be very dependent on the reforms that the new ANC leadership can implement, the report said.<\/p>\n
Five scenarios<\/strong><\/p>\n Within this context, PwC considered the possible future scenarios for South Africa over a five-year horizon (towards 2022). The five scenarios are pathways to different potential future states by 2020 under the guidance of president Ramaphosa as ANC and national president, as well as a significantly revamped cabinet.<\/p>\n \u201cThe scenarios enable the reader to look backwards from 2022 at the potential pathways that South Africa followed in the preceding five years,\u201d Viljoen said.<\/p>\n From a quantitative perspective, the scenarios provide projections for economic growth and the rand exchange rate. The outlook for GDP growth in 2018 is still quite opaque due to the uncertainties about how quickly President Ramaphosa can implement his reforms, Viljoen said.<\/p>\n The \u2018downside\u2019 and \u2018worst-case\u2019 scenarios see little to no improvement in job creation and economic growth, respectively, in South Africa\u2019s economic growth rate due to limited further reforms after the new administration\u2019s initial successes.<\/p>\n The \u2018baseline\u2019 scenario \u2013 entitled #Ramaprogress \u2013 sees more success in job-creating growth based on notable reforms under the president\u2019s New Deal agenda.<\/p>\n This translates into real economic growth rising to 2% in 2020 and 3% by 2022. As fiscal dynamics improve, no further downgrades are seen in the sovereign\u2019s credit ratings. Meanwhile, the ANC improves its performance in the 2019 national elections and ends a recent decline in support.<\/p>\n The \u2018upside\u2019 and \u2018best-case\u2019 scenarios see even greater reform success that accelerates economic growth even further.<\/p>\n At present, PwC sees a 25% probability of the next five years delivering economic growth of less than 1.5%. This indicates a one-in-four chance that the election of President Ramaphosa will have no significant impact on the local economy.<\/p>\n Overall, PwC sees a 75% probability of improved economic and political outcomes over the next five years, compared to the preceding several years.<\/p>\n These scenarios include different projections for economic growth and the exchange rate, and will have varying implications for different industries and investment decisions.<\/p>\n