{"id":773663,"date":"2024-05-25T08:30:00","date_gmt":"2024-05-25T06:30:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=773663"},"modified":"2024-05-24T15:15:19","modified_gmt":"2024-05-24T13:15:19","slug":"south-africa-is-in-deep-trouble-and-faces-five-tough-years","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/773663\/south-africa-is-in-deep-trouble-and-faces-five-tough-years\/","title":{"rendered":"South Africa is in deep trouble and faces five tough years"},"content":{"rendered":"\n<p>Renowned economist Dawie Roodt warned that South Africa is in deep financial trouble and faces many tough years trying to address its challenges.<\/p>\n\n\n\n<p>Roodt said South Africa faces three main challenges &#8211; dismal state finances, collapsing local authorities, and poor state-owned institutions.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Local authorities are collapsing<\/strong> and face serious financial problems. They are important because they give citizens electricity, water, and roads.<\/li>\n<\/ul>\n\n\n\n<p><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>State-owned enterprises are in a dismal state<\/strong>. Most of them have collapsed because of mismanagement and corruption. Many, like Eskom and Transnet, are crucially important to the economy.<\/li>\n<\/ul>\n\n\n\n<p><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>South Africa\u2019s national accounts are in serious trouble<\/strong> and have become unsustainable, with debt of between 75% and 90% of GDP.<\/li>\n<\/ul>\n\n\n\n<p>However, this is not where the problems end. South Africa faces numerous other challenges, including poor labour and trade policies and strained international relations.<\/p>\n\n\n\n<p>Over the past two years, South Africa has antagonised some of its biggest trading partners, including Europe, the United States, and the United Kingdom.<\/p>\n\n\n\n<p>Its pro-Russia stance regarding the Ukraine war and decision to take Israel to the International Court of Justice did not sit well with some United States leaders.<\/p>\n\n\n\n<p>Lawmakers in Washington are reviewing the bilateral relationship between South Africa and the United States amid geopolitical differences.<\/p>\n\n\n\n<p>The country is also plagued by high unemployment, an unstable electricity supply, collapsing infrastructure, and political instability.<\/p>\n\n\n\n<p>It has reached such concerning levels that some high-profile business leaders have warned that South Africa is heading towards becoming a failed state.<\/p>\n\n\n\n<p>Roodt said these challenges would eventually cause the ANC to lose enough support so that the country could get a new government.<\/p>\n\n\n\n<p>However, he warned that this transition period would be painful. He likened it to the early nineties when South Africa moved towards democracy.<\/p>\n\n\n\n<p>\u201cThe next five years are going to be very difficult because it is a transition period where we are getting rid of the ruling party,\u201d he said.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Not all doom and gloom<\/strong><\/h2>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-large\"><a  data-lightbox=\"post-image\" href=\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2023\/08\/Dawie-Roodt-1.jpg\"><img decoding=\"async\" src=\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2023\/08\/Dawie-Roodt-1-1024x683.jpg\" alt=\"\" class=\"wp-image-713052\"\/><\/a><figcaption class=\"wp-element-caption\">Efficient Group chief economist Dawie Roodt<\/figcaption><\/figure><\/div>\n\n\n<p>Despite South Africa\u2019s major economic, social, and financial challenges, there are many positive aspects to the country.<\/p>\n\n\n\n<p>Roodt highlighted that South Africa has an active civil society, an independent press, and a good judiciary that works.<\/p>\n\n\n\n<p>He added that the ruling party, for the most part, abide by rulings from the courts. That bodes well for the country.<\/p>\n\n\n\n<p>Although it will not prevent things from going horribly wrong, it lays the foundation for fixing the existing problems.<\/p>\n\n\n\n<p>South Africa had previously overcome tremendous challenges during the transition from Apartheid to a democracy.<\/p>\n\n\n\n<p>\u201cLet us trust democracy. Let\u2019s work together and see if we can, once again, facilitate a peaceful political transition.\u201d<\/p>\n\n\n\n<p>Another positive thing is that South Africa\u2019s financial markets can rally on a good election outcome.<\/p>\n\n\n\n<p>Roodt said the best scenario would be for the ANC to get between 45% and 50% and form a collation with right-leaning political parties.<\/p>\n\n\n\n<p>This scenario will benefit the economy, bolster the equity and bond markets, and strengthen the rand.<\/p>\n\n\n\n<p>Roodt said JSE is between 30% and 50% behind similar global markets. It did not benefit from the global bull market over the last eighteen months.<\/p>\n\n\n\n<p>A good news story can increase the JSE by 20% to 30%. \u201cThe JSE is a highly undervalued market. That means that equities are very cheap in South Africa,\u201d he said.<\/p>\n\n\n\n<p>South Africa\u2019s capital market is also cheap and gives yields of around 10%. \u201cA positive election outcome can bolster the capital market by 200 basis points,\u201d Roodt said.<\/p>\n\n\n\n<p>Another beneficiary of favourable election results is the rand\u2019s exchange rate. Although the rand has strengthened in recent weeks, it is still undervalued.<\/p>\n\n\n\n<p>\u201cThe rand has been under tremendous pressure. Although it is always undervalued, it is now more undervalued than previously,\u201d he said.<\/p>\n\n\n\n<p>\u201cA good outcome in the elections can see the rand strengthen to R17.50 or even R17.00 against the US dollar.\u201d<\/p>\n\n\n\n<p>These are the immediate impacts on the financial markets should South Africa\u2019s 2024 general elections yield a positive result.<\/p>\n\n\n\n<p>These impacts will spill over into lower inflation, lower interest rates, more investments, and stronger economic growth.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p><strong>Read: <\/strong><a href=\"https:\/\/businesstech.co.za\/news\/trending\/773660\/tax-changes-for-remote-workers-in-south-africa-what-you-should-know\/\">Tax changes for remote workers in South Africa \u2013 what you should know<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Renowned economist Dawie Roodt warned that South Africa is in deep financial trouble and faces many tough years. <\/p>\n","protected":false},"author":10,"featured_media":722990,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[1459],"class_list":["post-773663","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-dawie-roodt"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/773663","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=773663"}],"version-history":[{"count":2,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/773663\/revisions"}],"predecessor-version":[{"id":773764,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/773663\/revisions\/773764"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/722990"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=773663"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=773663"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=773663"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}