Director and chief economist of Econometrix Dr Azar Jammine said on Monday that he was becoming a little nervous about the implications of the political environment — particularly views that economic policy will not be changed — on the ability of South Africa to keep attracting capital flows.
He notes that a fall-off in inflows would have repercussions for growth and the rand.
“Support for Jacob Zuma is more an anti-Mbeki protest,” he points out.
“He has identified more with the plight of the poor, while Thabo Mbeki is seen on the side of the upper middle-class elite and the fact that black economic empowerment has only helped the few. There is a groundswell of antagonism against this,” explains Jammine.
Jammine says that while Zuma has denied there will be any change in economic policy, he is not so sure about this.
“The very reason he gained support was because people chose him to change policy in favour of the poor. I am very suspicious of statements that say there will be no change to economic policy,” notes Jammine.
He adds, however, that no dramatic shifts would probably be seen over the next 15 months, “but thereafter there is little doubt in my mind there will be a leftward shift in economic policy”.
Jammine notes that the non-delivery of services will probably continue under Zuma for the simple reason that the public-sector skills base is being depleted by skilled workers being lured into the private sector — which has to lure them as they have employment equity scorecards to fill.
He concludes that the end result could be Zuma defending himself by acting more strongly against the business sector.
Jammine says that his other concern is the two centres of power within the ANC.
“I get the impression there is more focus on conniving than solving the actual issues. For example, why does disbanding the Scorpions receive such priority in relation to the energy crisis?”
“My biggest fear is that these domestic issues might play a role in affecting the attraction of capital, and influence the currency as well,” concludes Jammine.
Lower than expected
Meanwhile, Jammine also said on Monday that he sees growth in South Africa slowing to 3,4% in 2008 from 5% in 2007, but that he may need to push this forecast down even further in light of the energy crisis.
“You can forget about growth rates of 4,5%,” he says.
Jammine points out, in particular, that a big factor behind this poor performance was slower fixed investment growth. He sees this crucial sector for the economy dipping to 5,7% growth in 2008 from 15,2% in 2007.
“As a result of the energy crisis, it is much lower than expected,” he notes.
However, Jammine says that he hopes some of the alternative plans to halt the crisis come through and that this helps the economy to regain some momentum in 2009 to 2010.
“Let’s not completely forget about 2010, as there will be a boost,” he says.
However, Jammine says it will be very difficult to improve the economy beyond 4% growth in coming years, and what this means is the country will struggle to reduce inequalities.
He says under such circumstances he is concerned about the political impact.
Jammine adds, though, that there could be a nice upswing again in 2015 to 2020 if enough is done on the skills crisis.
“However, 2010 to 2015 should be quite a tough time,” he points out.
“It all depends on what role the political landscape plays, and that the negative aspects do not play out,” he concludes.
he also said that a potential concern going forward is that South Africa’s energy crisis is not an isolated event, and that China suffers from similar problems.
“Just watch it — China is increasingly facing an electricity shortage,” noted Jammine.
“If anything holds back the world economy, it’s if China slows down,” he concludes. — I-Net Bridge