S&P Global Ratings has said that the outlook for the country remains positive, during its South Africa Capital Markets Conference in Johannesburg on Wednesday.
S&P global experts and industry leaders, engaged in dynamic panel discussions during the conference.
Yann Le Pallec, President of S&P Global Ratings, highlighted Africa’s potential for growth, particularly in sub-Saharan regions.
He projected that the region’s real GDP is expected to increase by 4% over the next two years, outperforming advanced economies that are anticipated to grow by a mere 1.5%.
“Despite issues faced in African economies, there is potential to attract investment from all regions,” Le Pallec said, emphasising the continent’s pivotal role in the global energy transition.
Le Pallec addressed the pressing need for enhanced electricity access across Africa, noting that approximately 600 million people in sub-Saharan Africa currently lack reliable power.
He mentioned the plans from both the World Bank and the African Development Bank to provide electricity access to 300 million individuals, demonstrating a commitment to improving infrastructure.
G20 and the economy
As experts convened on a panel to deliberate on the geopolitical climate and the implications of tariff policies, Danelee Masia, a senior economist at Deutsche Bank, underscored the need for South Africa to navigate the evolving global order.
She stated that South Africa’s strategic alliances with Middle Eastern countries could potentially bring in foreign direct investment, which is crucial for the nation’s economic landscape.
Jeff Gable, the head of Macro and Fixed Income Research at Absa, echoed the importance of US participation in the upcoming G20 conference.
He warned that a lack of US engagement could overshadow the efforts made in preparing for the conference and detract from the discussions on pressing global issues.
Growth in South Africa
In terms of South Africa’s growth, Annabel Bishop, the chief economist at Investec Bank, pointed out that the South African Reserve Bank has forecasted a mere 1% economic growth.
Bishop attributed recent instability in the global financial markets to uncertainty surrounding tariffs and the Government of National Unity (GNU). She expressed cautious optimism that diplomatic negotiations could potentially lead to lower tariffs later in the year.
“While we saw a pause and lot of negotiations on tariffs made from around the world, including South Africa’s one where Ramaphosa and SA’s team went to the White House and spoke about trade and other issues, it is key to understand that this process could allow for much lower tariffs later in the year,” Bishop added.
Bishop further said, “We have our forecast at 1.3% it could possibly drop to 1.2 or 1.1%,but we are optimistic that this year will see almost double of what economic growth came out of last year.”
Ravi Bhatia, a director and lead analyst at S&P Global Ratings, reiterated a positive outlook for South Africa, noting the nation’s structural strengths and the ability to maintain a low inflation environment.
Bhatia said, “That facilitates from a government point of view that it is relatively is easy to fund the deficit through domestic funding making for less exposure to foreign exchange risk and still have room on raising external financing. SA is fairly new on raising money from multilaterals, and they are working on that so what we seeing is they are able to finance. The GNU is good in that it survived despite many disagreements. Having other parties there alongside the ANC, it is putting reformist pressure on the ANC to push reforms at a faster rate. It has been impressive that despite the disagreements over the Budget, the GNU held together.”
“What we have not seen that it is delivering higher growth and that is where there is a bit of a disconnect. We still have around 1.5% in the forecast period we are looking at, it is not great because it means incomes in SA are flat. Efforts have been made in the fiscal space and a push towards fiscal consolidation. To unlock finance, the IMF (International Monetary Fund) will push the SA government to push their structural reforms and getting the SOEs (state-owned enterprises) in order. The macro story is quite good; the checks and balances between the Treasury and SARB are sound and not something the IMF will focus on. It will be more on structural reforms, SOEs and labour market reforms as well as higher growth, Bhatia said.
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