State needs to take urgent steps to unlock growth and boost SA’s economy rather than look to a sugar rush of lower interest rates
In the end, the performance of SA’s economy was even worse than the most pessimistic analysts had predicted.
After winning the leadership of the ANC in December 2017, he took over as president of the country in February 2018. That quarter he was greeted by a contraction of 3.2% in GDP, which has since averaged minus 0.2%. Among 12 economists polled by Bloomberg, the most pessimistic expected a 0.6% drop in GDP for the last quarter of 2019. Curiously, there were two analysts who predicted a positive number, with one looking for a rather optimistic 2% rise.
Expecting a cut from SA's central bank is not an illogical response, though it’s hard to see what lasting difference a rate cut will make to a growth crisis that’s caused by supply-side constraints such as the lack of reliable electricity supply and policies that restrain competition in key sectors of the economy.
It’s not hard to think of the reasons why the GDP number is a disaster for SA. The lack of growth means companies will continue to shy away from investing and the numbers of unemployed will keep growing. The 10% drop in gross fixed capital formation is a reflection of other data that has shown a lack of business confidence, and that won’t be fixed by a cut in the repo rate of 25 or 50 basis points.
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