Nedbank economist, Nicky Weimar,
delivered the key note address at the IRMSA Annual General Meeting held
recently in Johannesburg. Her focus was to give an analysis of the South African
economy, its outlook and prospects for 2013 and beyond.
Weimar’s analysis was that the
South African economy is somewhat stagnant and that structural constraints are the
main impediments to Gross Domestic Product (GDP) growth of over 3%. She observes that although South Africa is out
of recession, a key concern is a loss of growth momentum in the economy.
During the 1st quarter
of 2013, the SA economy grew by a meagre 0.9% and Weimar predicts that growth
will be in the (unimpressive) region of 2% for 2013. This level of economic
growth makes a little difference in dealing with challenges such as
unemployment, poverty and addressing inequalities in our society.
The slow rate of economic growth
is mainly due to some areas of the economy not being at optimal performance. Weimar
puts the spotlight on the mining, manufacturing and utilities (water and
electricity) sectors are key problem areas. "The instability seen in 2012, our
loss of competitiveness in manufacturing as well as delays with our new power
stations are causing major problems for our economy,” comments Weimer. She
believes that when new power stations are completed there will be a good
stimulus for the economy.
Weimar observes the following
structural economic factors:
unit labour costs - above inflation wage growth versus fading productivity.
relationship between business and labour (employers and employees) – strikes.
service delivery which raises the cost and risk of doing business – red tape
and corruption at local authority level and among provincial government(s).
and often unreliable transport and logistics Private sector’s ability to expand
policy uncertainty – although greater clarity is emerging through the National
Budget and NDP
"These problems are specific to
South Africa and they are issues that only we can resolve,” argues Weimar. She
points we are the worst performing developing country in terms of economic
growth and she believes this is mainly due to these structural factors. She
believes that the private sector will continue to remain hesitant to expand its
capacity if these issues are not addressed.
Another factor contributing to
the economic is poor world economic environment, however this is more cyclical
and affects many countries around the world including South Africa. In terms of
the global economic situation, one of the key problems for South Africa is that
it is heavily exposed to the Eurozone.
In excess of 20% of the SA
economy is with the countries in the Eurozone and most of them are experiencing
major economic problems. Another
constraint is South Africa’s weak exports and this is a further constrain to economic
However, she is encouraged by the
fact that government expenditure is still driving growth albeit at a predictably
modest pace. The key challenge for the government is to reduce the budget
deficit which is critical for the country to avoid any further credit rating
downgrade. In addition, the growing wage bill has to be contained to ensure
better management of our economy.
Weimar points out that the public
sector infrastructure drive planned for the next couple of years as good news
for our economy. Also, that South Africa continues to get the required capital
inflows it needs (also subject to credit rating). She indicates that the South
African Reserve Bank has very little scope around rates and Weimar does not
believe that there will be major changes at least for the remainder of this year.
Overall, the SA economy’s volatile
state will only be resolved when government and all players in the economy to
play their part in helping the economy recover.