The formation of the government of national unity (GNU) has afforded SA a few months of positive market sentiment, a stronger rand and more positive interest in investment opportunities from international investors.
To quote SA Reserve Bank governor Lesetja Kganyago, “If you restore investor or consumer confidence, it’s like a free stimulus for you.”
Domestic business confidence is slowly ticking upward. Compared to the last 15 years the recent upswing in sentiment is nothing to sneer at. But politically difficult work lies ahead to add substance to the sentiment and lift the country’s GDP growth rate to the required level.
According to The Economist: “The average sub-Saharan’s inflation-adjusted income is only just above its level in 1970. Consumption remains depressed. Last year domestic savings on the continent fell to 5% of GDP, down from 18% in 2015.”
The GNU is not guaranteed a long life. Ultimately, the work it can do to reform network industries, lower administered prices (those prices and rates set by the government), and remove policy and legislative disincentives to job creation and growth, the better off SA will be over the long run.
Politically difficult decisions lie ahead; the country’s long-term prospects should be placed above the comfort of short-term expediency.
Chris Hattingh
Centre for Risk Analysis
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