Dawie Roodt, chief economist of the Efficient Group, has published his analysis of what to expect from South Africa’s economy in 2019.<\/p>\n
Roodt said that the country is currently facing a number of negative pressures – most notably poorly run state-owned enterprises and a highly politicised environment.<\/p>\n
“The state-owned enterprises (SOE) have been run into the ground by the cadres and gutted financially in recent years,” he said.<\/p>\n
“The same goes for the state\u2019s finances. Debt has become unsustainable and I can\u2019t see how we are going to avoid a further downgrade.”<\/p>\n
Roodt added that he expected politicians to turn up the populist rhetoric due to it being an election year.<\/p>\n
Because of this, he said, it is unlikely that South Africa will see strong investment commitments until after the elections.<\/p>\n
“I know that the popular theory is that we must wait until after the elections for the ‘good’ guys to strengthen their power base, then all will be well. I am afraid I do not ascribe to this theory,” he said.<\/p>\n
“The ‘good’ guys were mostly part of the previous regime that caused immense damage to the South Africa economy.<\/p>\n
“I did not hear them speaking out then. Also, during the past year, the ‘good’ guys have mostly been in charge anyway and I am not particularly impressed with their performance so far. Will this suddenly change after the elections?”<\/p>\n
Credit where it is due<\/strong><\/p>\n However, Roodt said it was important to give credit where it was due, and that there had been some noticeable changes in the country over the last year.<\/p>\n “Boards have been changed, inquiries have been instituted and a few (not all) of the compromised ‘leaders’ have been removed one way or the other. At least it seems, we are still in a hole but we are digging slower”.<\/p>\n A few other positives remain, he said.<\/p>\n “An independent judiciary, press and hopefully the new leadership at the National Prosecuting Authority (NPA) will prove to be competent.<\/p>\n “But the reality is that a destructive government has caused immense damage to the SA economy and that the same political force is likely to prevail after the election.<\/p>\n “If the ‘good’ guys really want to prove that they do want the best for the country, they will risk a confrontation with their political allies, and a break with Cosatu must be at the top of the agenda. Anyway, I foresee a momentous labour confrontation looming.”<\/p>\n Weak growth<\/strong><\/p>\n These factors combined with the planned confiscation of private property will not be good for the economy, said Roodt.<\/p>\n “Expect another year of weak growth, a volatile currency and frail confidence.<\/p>\n “The really good news, from the perspective of a saver\/investor, is that the valuations of our companies are at present so attractive that the JSE must be on the shopping list of local and international investors.”<\/p>\n “So, in a nutshell, internationally there are a few potential risks but at the same time there are some exciting things happening that may propel future global growth to unprecedented levels. Watch out for the world\u2019s big central banks overdoing monetary tightening.<\/p>\n “Locally, expect more of the same \u2014 destructive policies, weak service delivery and ideological foolishness, and weak economic growth. At the same time, however, look around for promising investment opportunities and a good asset manager to run your portfolio.”<\/p>\n However, Roodt acknowledged that it was\u00a0impossible to know exactly what the future holds,<\/p>\n “We cannot, and we do not, change the composition of portfolios because of the length of the bull market, or because of a looming recession, or because it is time for a correction,” he said.<\/p>\n “Nevertheless, rest assured that we continue to manage our clients\u2019 portfolios according to our proven investment processes and have used recent volatility to appropriately position our portfolios for a more dangerous world.”<\/p>\n
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