There has been so much happening in the last few weeks, both locally and abroad, it has been difficult keeping up with it all!
The local economic news has not been good – to put it mildly. Firstly the official unemployment figure of 27.7% is the worst since 2004. The average over the period 2000 – 2017 has been 25.41 with a high 31.20% in the first quarter of 2003. Taking the expanded definition of unemployment , which includes those no longer seeking work, the figure has worsened to 36.4% in the latest statistics. Youth unemployment is now at 65% which is alarming enough on its own
Then came the news that South Africa is technically in recession which, by definition, means two successive quarters of negative GDP growth. This took us up to the end of March and does not include the highly disruptive April period with so many public holidays. Despite a more favourable outlook for the economy at the beginning of 2017, with a small but positive growth outlook, this news did not surprise many commentators who have felt for some time that the country has been in recession.
All this came at a bad time just as ratings agency Moody’s was about to deliver its verdict on SA’s creditworthiness. The inevitable further downgrade with a negative outlook was not surprising when it was announced late on Friday.
However, because the country’s local debt has not been downgraded to junk status – at least not yet by S&P and Moody’s – South African bonds remain part of the important world bond indices. Should this change and many commentators think it will by the end of the year, unless something is done to restore confidence, then we will see a flow of money out of SA with a resultant drop in the value of the Rand. The cost of borrowing will increase further with the negative knock on effects this will bring
Once again it is over to all the stakeholders in South Africa to look beyond the current almost overwhelming political noise and to work together to restore confidence. In particular the government must commit firmly to growth policy reforms and to actually apply them. The country, which is richly endowed with natural resources and not just the mineral kind, is being given every opportunity to finally show it can restore an upward path as far as the economy is concerned.