This is a country of mood swings, anxiety attacks and febrile excitement, and we ride the big, crude indicators — sports scores, the rand, emigration statistics — like kids at a funfair, alternately terrified, exhilarated and petulant.
At the moment we are in a manic phase, and as our sporting avatars bog down in a muddy English field, or flatter to deceive on the low, slow subcontinent, economic news is doing the cheerleading. The Sunday Times managed to work up a consumer confidence survey along with some moderately stale gross domestic product (GDP) and inflation data into a banner headline, “Good times roll for SA”.
Not to be outdone, Business Day paused from lamenting the impact of the strong rand to celebrate major new investments by South African Breweries and vehicle manufacturers, saying domestic fixed investment — the portion of economic activity that goes into new productive capacity — was at long last set to start growing.
And all across the land quotable private sector economists pointed out that gross domestic product is in its longest period of sustained expansion since World War II.
What is more, there are signs that that expansion will for the first time make a break past the 3% corral where it has been pacing for a frustrating decade. A recent Reuter’s poll puts the consensus estimate for next year at just more than 4%, in rare harmony with National Treasury projections that are usually mocked gently for their optimism.
And that is before wholesale changes to the figures that econometricians use to reach their conclusions.
Statistics South Africa will this week announce substantial revisions in the basic assumptions that underpin its GDP calculation — and some are suggesting that it may have under-estimated the size of some sectors of the economy by as much as 20%. Even conservative analysts expect estimates of the growth rate to get an 0,5% fillip.
That will not be enough to carry the overall rate to 6% — the target stipulated in the government’s growth, employment and redistributions strategy, and the generally accepted minimum threshold for significant reductions in unemployment. But it will set off celebrations in the National Treasury , and a new round of headlines.
Even inflation continues to play along, with the CPIX number — which measures growth in prices excluding mortage costs — ticking up to 4,2% year on year (the consensus forecast was 4,1%). Most of the growth came from higher oil prices and housing costs, but it is low enough to give the Reserve Bank scope for yet another interest rate cut. Even if Governor Tito Mboweni is wary about stoking up consumer spending ahead of the Christmas shopping spree, he will find it harder to resist at the February meeting next year.
So, has a long year of rate cuts, all of them shrugged off by the tumescent rand, brought the cost of money down to a level that will pacify Mboweni’s critics in business, labour and NGOs?
Don’t bet on it.
For starters, the steady sequence of rate cuts has barely kept pace with falling inflation, so while consumers, fattened up on the money illusion of lower bond payments, loosen their belts, industrialists still find themselves struggling to get real rates of return that will justify new investment.
The fact that major expansion is coming at breweries and car plants points very precisely to the consumer-led nature of current growth.
We are buying new cars at a rate last seen during the gold bubble of the early 1980s, and we are drinking beer as if we had something to celebrate — to the chagrin of rand-hit wine farmers.
Serious-minded people are talking about a golden age, but a more broad-based industrial recovery will require a convergence of factors that stubbornly refuse to line up: even lower interest rates, a steady rebound in global demand, and a lasting adjustment to the strong rand/weak dollar environment.
This isn’t to say the current good times are mere froth on the stormy deep: on the contrary, there is every sign that the restructuring of the economy is starting to show real benefits, with millions of local shoppers helping manufacturing, retail and services to pick up the slack left by a declining resources sector.
But this is not a boom. More like a recovery from the long, grim years of apartheid industrial policy.
And it comes at a cost. The strong rand may have bought price stability, but the battle between Harmony and Goldfields over how best to rescue some value from declining assets is a graphic illustration of the future of South African gold mining — even at $450 an ounce. And the rest of the resources sector continues to bounce along with the currency, with only a collapsing rail network to show for the surge in Chinese demand.
There are other worries, too.
Local economists have all reacted blithely to a series of warnings from the International Monetary Fund about threats to global growth. We are insulated, they say, by our fat happy consumers, and our government’s R165-billion home improvement programme. And they are probably right: beer, cars and deep-water ports will no doubt keep growth above 4% next year.
But the fragile economies of the eurozone — where most of our manufactured exports go — are looking ever more ropey and the weak dollar nixes any hope of expansion into US markets. We all dream of a scenario in which domestic demand and a healthy export sector generate a balanced recovery across the economy. In a durable recovery falling unemployment boosts demand for goods and services for years and years, well beyond the temporary stimulus of monetary and fiscal relaxation.
And in a durable boom, there will be real job creation. After eight years of tough macro-economic adjustment the locomotive may be starting up, but until we see steam coming out of the chimney it will be too soon for the passengers to throw away their prozac.