South Africa could experience a slump in fixed capital formation growth after the 2010 Soccer World Cup, which could hamper economic growth, Absa corporate and merchant bank transport and construction industry analyst John Loos has warned.
Loos says in a report released on Wednesday that although the period leading up to the World Cup is certain to promote economic growth, especially in the transport and construction sectors, South Africa must continue looking for future growth opportunities.
“We need to guard against seeing the 2010 World Cup as some sort of ‘end goal’ and be on the lookout for key drivers of economic and fixed investment growth thereafter,” Loos writes.
Loos says in his report that “strong net capital inflows, resulting in a strongly performing rand and low interest rates, have unleashed spectacular consumer and housing booms”.
However, there is concern that consumption-driven growth may not be sustainable.
The 2010-led bout of gross fixed capital formation is beginning, according to Loos, with the construction of the Gautrain, stadiums and other transport and tourism infrastructure.
Loos says “making the event a success from a longer-term economic point of view is more challenging”, and that South Africa must find new drivers of growth post-2010.
“Going even bigger by bringing the Olympics to the African continent for the first time” will “help to sustain the momentum”, he suggests.
“Whatever the next milestone is, it is important to keep 2010 in perspective and to regard it as work in progress,” Loos says. — I-Net Bridge