“With renewed lockdown measures, the return of load shedding, mounting debt and shattered confidence, the outlook for 2021, with a few exceptions, is bleak,” according to Ed Stoddard of Business Maverick. He recently identified five key factors to look out for in 2021 that will not only have an impact on the economy, but also on an individual’s bank account as well as on his or hers best-laid plans.
- The pandemic
According to London-based consultancy Capital Economics, the renewed lockdown measures imposed late in December shut down about 20% of the economy, shaving 0.5% of potential growth off 2021. “If these get renewed or if more stringent regulations are brought back, the throttling of the economy could herald a Q1 contraction.”
The resulting increase in unemployment and a delayed vaccine roll-out could further slash the economic growth.
- The SARB and interest rates
In 2020 the South African Reserve Bank (SARB) cut its repo rate by 300 basis points to 3.5%, bringing the prime lending rate for consumers to 7%. When the Monetary Policy Committee (MPC) meets later this month an additional cut of 25 basis points could be considered.
- Commodity prices
“South Africa is deeply exposed to commodity prices on two fronts: oil, which is imported, and metals and minerals, which are crucial exports,” Stoddard emphasises. The price of oil at the pumps is a key cost for consumers and business alike, so this is definitely a space to watch.
Mining companies also outshone other sectors on the JSE last year and could have another bumper year in 2021. Beyond the JSE, the mining sector’s performance is important for SA’s wider economy.
- The debt monster
Rising debt levels could make or break this economy. Stoddard points out that the challenges are many and massive. It includes the public sector wage bill, the downgrades of SA’s credit rating and the rise of the debt-to-GDP ratio, while anticipated revenues will fall short.
Load shedding is back, and the bottom line is that so long as load shedding persists, the economy has little prospect of decent growth.
Click here to read the full article published in Business Maverick.