ILLEGAL and violent strikes that held South Africa’s economy hostage during the past year has dampened the glow of the country’s economic prospects for 2013, and a degree of uncertainty prevails.
Most forecasts estimate that South Africa’s economy could grow by 3% in 2013, following a difficult 2012 where growth estimates fell from about 4% to 2.4%, as world economies continued to struggle. South Africa also battled with increased socioeconomic unrest which led to the butchery at Lonmin’s Marikana platinum mine.
Following the Marikana tragedy, scenario planner Clem Sunter said the probability of South Africa turning into a failed state had risen from 10% to 25%, and warned that industrial turmoil, aggravated by the lack of service delivery, could escalate into a full-blown local version of the Arab Spring.
"South Africa shares the same characteristics existing in all Arab countries that have experienced a popular uprising: an abnormally high youth unemployment rate, combined with active social networks, combined with a growing feeling of alienation from the state by young people," Mr Sunter said.
"All these uprisings were triggered by a random event and maybe in our case it was Marikana. One senses a change in mood among workers in this country. They no longer trust authority, whether that authority is exercised by employers, the unions or government. If that deep distrust and anger continues and merges with the total desperation felt by the unemployed, then we have a recipe for a revolution which nobody in authority will be able to control," he said.
The violent strikes, rising spend on social welfare, a lack of policy clarity and increased tensions resulted in downgrades from all ratings agencies during 2012.
In Investec’s report "South Africa’s macroeconomic outlook 2013-2017," the bank warned that the government needed to listen to the rating agencies’ concerns to prevent further downgrades, which it felt were likely, as all the rating agencies had South Africa on negative watch.
Standard & Poor’s said the "medium-term political, economic and fiscal ramifications of South Africa’s social tensions could deteriorate beyond current expectations".
"The sooner government switches to policies promoting increased economic freedom and creates an environment where households can become self-supporting, the sooner it will be on a path to avoid further rating downgrades," said Investec.
At the recent ANC elective conference in Mangaung, discussions on critical economic policies were given minimal time, owing to bad weather and the leadership elections, where businessman Cyril Ramaphosa was voted in as the party’s deputy president.
Apparently positive economic decisions that did come out of the conference included a no-go on nationalisation as a policy option — but additional taxes and export restrictions on certain "strategic minerals" remained on the table.
The new rhetoric backed the implementation of the National Development Plan to create jobs and eradicate poverty.
Independent political analyst Daniel Silke said 2013 would be a critical year for the ANC to try and turn around its lacklustre performance ahead of the 2014 polls.
"I don’t expect any dramatic tax increases. The government will try to improve aspects of service delivery and try its best to remedy some of the ill effects of the downgrades. And Mr Ramaphosa will be used to present a more globally fine-tuned image of South Africa, affected by lost confidence and Marikana," said Mr Silke.
He predicted sluggish economic growth as the government tried to balance social spending with remaining competitive and appealing to international investors.
"For most of the year, government will walk a tightrope in balancing its domestic expenditure in terms of its global message. This is a tough tightrope to walk, especially as South Africans are becoming more restless and demanding in terms of job creation and service delivery."
Mr Silke expected continued troubled labour relations, particularly in mining.
"This will be a globally erratic year where South Africa will continue to feel competition, with developing nations, particularly in Africa, fighting for every last foreign direct investment dollar. South Africa must become more investor-friendly.
"Given the continued eurozone malaise, South Africa will increasingly be drawn to major developing powers such as China, India and Brazil in an attempt to build on the Brics alliance and encourage foreign direct investment from these economies," he said.
Kokkie Kooyman, head of Sanlam Investment Management Global, said the wild card for South Africa growth would be consumer spending in 2013. "Higher wage settlements mean more spending but, on the other hand, consumer confidence is generally low and inflationary pressures brought about by a weaker rand could quickly eat away the wage increases," he said.
Investec said the household sector in South Africa continued to be negatively impacted by high unemployment, low savings and high debt levels, resulting in low consumer confidence. It expected household expenditure growth to remain moderate in 2013 at 3.2%, compared with 3.3% in 2012.
* This article was first published in Sunday Times: Business
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