ZANDILE MAKHOBA: Cautious optimism for growth in 2024

The past couple of months have been a wildly interesting time in our country and the world over; a period marked by global and local turbulence. Locally, we have just come out of an intense but important time — elections. Times such as these tend to create uncertainty amid a flurry of conflicting perspectives and reports, sometimes making it difficult to get a real sense of the outlook ahead.

As we turn to the second half of the year — past the hump — it’s important to review some major economic data points that might help clarify what some may view as chaos. A political puzzle comes together. On the fiscal front, the country continues to watch with bated breath the developments of the government of national unity (GNU), as negotiations continue on the political way forward. Despite the difficulties that came with the post-election flicker, members of the GNU have collectively displayed a dedication to creating stability in the political environment.

Aside from recent developments in Gauteng, the sentiment seems to be trickling down to provincial levels and newly appointed leaders are eager to get to work. Still, there remains a sense of fragility in these structures of the GNU which may create a hindrance to fiscal progress. Be that as it may, the establishment of the GNU has raised social consciousness and curiosity around the political system.

One hopes that this inspires active citizenry in the country which is essential for holding political leaders accountable. With this in mind, leaders are likely to remain on their toes, eager to prove their worth through improved public sector delivery. While the political puzzles come into place, the monetary environment has been much more stable and predictable. The monetary policy committee has not made any changes to the repo rate this year. Despite some stubbornness in consumer inflation, it is showing signs of easing, creating room for an interest-rate cut.

The Reserve Bank expects inflation to hit the midpoint of 4.5% by early 2025. The room for the first rate cut to be introduced in the second half of 2024 is further bolstered by recent strengthening in the local currency. Nevertheless, the economy continues to have its challenges, with employment being a key concern for consumers.

Formal sector employment declined 0.7% year on year in quarter one 2024 (Stats SA data shows, in line with the contraction in GDP during the quarter. Fortunately, there were industries that recorded employment growth, namely, manufacturing, transport/logistics and utilities (electricity, gas and water).

With regard to the informal sector, employment in agriculture grew 6% in Q1. If employment is read as a leading indicator to activity in the sector, we could see improved GDP growth in these sectors in the second half of the year. Consumers are continuing to feel the pinch. The Bureau for Economic Research’s consumer confidence index remained in negative territory in the second quarter 2024 at -12, etching up from -15 in the first quarter.

In the high interest rate environment, consumers are still reluctant to purchase large ticket items which require debt financing. This is having a negative effect on the residential property market, with growth in property values remaining well below inflation at an aggregated 2%. Overall, the retail sector is likely to remain flat at best, which is reflected in the retail sales figures.

However, despite tight balance sheets, demand for domestic helpers has increased: employment in the household sector (domestic workers) grew by 11.5% year on year in the first quarter of 2024. Prioritising this service highlights how much of a necessity it is, particularly for working parents, and may be an anecdotal sign of growing economic activity in the formal sectors.

While external factors and the global economy have been a major challenge in recent times, more recent developments seem more supportive to the local outlook. The Economist’s Intelligence Unit revised GDP growth upwards for the US and Europe, two key export regions for South Africa.

While political tensions in Ukraine and Gaza remain, reduced intensity should ease supply side shocks that have interrupted local efficiency.

In short, we can remain cautiously optimistic for the remainder of the year. While business confidence remains shaky it is making gradual improvements, with reduced load-shedding and improvements to the energy crisis providing some hope. Encouragingly, the JSE all share index has trended upwards for the first half of 2024, beating inflation and growth in house prices, promising gains for those who are invested.

As we enter the second half of 2024, a lesson can be taken from those who ran the Comrades Marathon in the past month: a long steep hill is climbed one sturdy step at a time. 

• Makhoba is an economist, and the lead specialist of research and analytics at Liberty, the insurance and asset management arm of Standard Bank