Improved electricity supply and optimism about increased investment on the back of the GNU are boosting sentiment-sensitive indicators.
‘GNU-phoria’ may yet deliver economic prosperity, but in small doses. South Africa’s economic prospects undoubtedly improved since the formation of the government of national unity , supported by the stable electricity supply, an improved inflation outlook and increased investor confidence.
“After some initial wobbles, the GNU completed its first 100 days in late September. There is still uncertainty about the efficacy of the GNU. Many are wondering whether the optimism is warranted and whether things will be different this time around.” “Reduced short-term policy uncertainty means local bonds look attractive within the emerging market universe. Furthermore, while South Africa’s stock market has been on a tear, recent data shows that foreigners were not buyers of South African bonds during July and August, after the formation of the GNU, but sellers of local equities.
Fitch Ratings also recently noted that, while the implementation of structural reforms under the Operation Vulindlela initiative has continued at a steady pace, the impact on growth will likely be moderate. However, Van der Linde points out that momentum on these wins would need to be sustained over the medium term to have a lasting economic impact.“If history has taught us anything it is that sentiment is fickle and the Ramaphoria era proved that. Nevertheless, ‘GNU-phoria’ may yet deliver economic prosperity, but we believe it will come in measured doses. We expect the economy to expand by 1.0% in 2024 and forecast real GDP growth to average around 1.7% per year over the next five years.
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