http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 13.13Change: -0.02
R/$ = 12.07Change: -0.13
Au 1187.17 $/ozChange: -20.08
Pt 1125.50 $/ozChange: -23.50
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
 
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders Suppliers Directory Research Jobs Announcements Letters Contact Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
Oct 02, 2012

SA vulnerable to shifting sentiment as current account deficit widens

Back
Mangaung|Absa Capital|Africa|Export|Industrial|Projects|transport|Water|Africa|China|South Africa|Equipment|Gross Domestic Product|Machinery|Mechanical Equipment|Ilke Van Zyl|Infrastructure|Jeff Gable|Power|Water
|Africa|Export|Industrial|Projects|transport|Water|Africa||Equipment||Infrastructure|Power|Water
mangaung-city|absa-capital|africa-company|export|industrial|projects|transport|water-company|africa|china|south-africa|equipment|gross-domestic-product|machinery|mechanical-equipment|ilke-van-zyl|infrastructure|jeff-gable|power|water
© Reuse this



Fixed investment, driven by public sector projects, has been the fastest-growing domestic expenditure sector in South Africa for four consecutive quarters, Absa Capital noted in its latest quarterly economic report, while forecasting continued fixed-investment expenditure growth of 5.6% in 2012 and 2013.

However, in the context of weak business confidence, falling private investment and modest economic growth, “imbalances are appearing”, most notably on the trade account.

Imports of machinery and mechanical equipment rose strongly in the second quarter and economist Ilke van Zyl said that, given the relative price inelasticity of government demand, imports were likely to continue. South Africa intended pursuing a portfolio of transport, power and water projects collectively valued at around R860-billion between 2012/13 and 2014/15, the bulk of which would be funded through debt and revenues earned by State-owned companies.

But in the meantime, the country’s export performance was weakening in light of recessionary conditions in a number of European markets, as well as slowing growth in China and other emerging markets.

“Therefore, we expect the current account deficit to remain wide over the coming quarters, and we have revised our current account deficit as a percentage of gross domestic product (GDP) forecast to 5.5%, from 5%,” Van Zyl added.

In its September quarterly bulletin, the South African Reserve Bank reported that the deficit on the trade account rose to R75.7-billion in the second quarter, from R42-billion in the first. It also reported a rise in the current account deficit to 6.4% of GDP, from 4.9% in the prior quarter.

“This implies the country is in a vulnerable position as far as financing is concerned given that the bulk of the deficit is financed by fixed income portfolio flows,” she said.

But macro and fixed income research head Jeff Gable said it was difficult to offer a specific level at which the current account deficit would become unsustainable to the point where infrastructure spending had to be reigned in.

“The practical answer is that the current account deficit becomes unsustainable when you can’t finance it. In some countries current account deficits of 1% or 2% of GDP aren't financeable. In South Africa, currently we find that a current account deficit, [which] in the second quarter was more than 6% of GDP, was more that financeable.”

But the ability of South Africa to continue to finance the deficit would depend materially on whether global investors continue to believe there is a return for their assets in South Africa.

“For policymakers, all you know is that the larger your need for global finance, the more exposed you are to a turn in sentiment. Therefore, [policymakers] feel more comfortable when the deficit is lower because the pain that can be levied on you when sentiment turns is less,” Gable elaborated.

Investors and the credit rating agencies were increasingly focused on the country’s social and political tensions, particularly in light of ongoing industrial relations strife. Absa Capital, therefore, argued that more assurances might need to be offered beyond the National Treasury’s continued assertion that South Africa’s policies remain “stable and predictable”.

The Budget deficit forecast in the upcoming Medium-Term Budget Policy Statement of October 24 would also be heavily scrutinised, as would the African National Congress’s elective conference, taking place in Mangaung, in December.

“There is an awful lot to play for in 2013. It’s a question of policy, it's a question of stability, it’s a question of trying to find the right answers for South Africa . . . [and for dealing with] the core issues of poverty, inequality and unemployment,” Gable warned.
 

Edited by: Creamer Media Reporter
© Reuse this Comment Guidelines (150 word limit)
 
 
 
 
 
 
 
 
Other Construction News
JSE-listed Tower Property Fund has acquired the Link Hills Shopping Centre, in Waterfall, KwaZulu-Natal for R160.9-million from The Sabre Trust and Matlu Family Trust. The shopping centre, on Inanda Road, was situated in an upper-high-growth residential area, next to...
While a healthy appetite for investment in government’s infrastructure development programme existed among international and domestic providers of capital, policy coherence, a clear roll-out strategy and a champion in government were critical to triggering this...
Under the auspices of the World Economic Forum (WEF) on Africa, being held in Cape Town from June 3 to 5, South Africa will reiterate its stance that it is open for business, showcasing what it has to offer other countries and global business. The event, which would...
More
 
 
Latest News
All grades of petrol will increase by 47c/ℓ on Wednesday, the Department of Energy announced on Friday. The reef price for unleaded 93 and LRP petrol was currently standing at R12.61/ℓ, while unleaded 95 cost R12.89/ℓ.
JSE-listed Tower Property Fund has acquired the Link Hills Shopping Centre, in Waterfall, KwaZulu-Natal for R160.9-million from The Sabre Trust and Matlu Family Trust. The shopping centre, on Inanda Road, was situated in an upper-high-growth residential area, next to...
South Africa recorded a trade deficit of R2.51-billion ($207-million) in April from a revised shortfall of R9-million in March, data from the revenue agency showed on Friday. Exports fell by 7.5% to R84-billion, while imports were down 4.8% to R86.5-billion on a...
More
 
 
Recent Research Reports
Steel 2015: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2015 report provides an overview of the key developments in the global steel industry and particularly of South Africa’s steel sector over the past year, including details of production and consumption, as well as the country's primary carbon...
Projects in Progress 2015 - First Edition (PDF Report)
In fact, this edition of Creamer Media’s Projects in Progress 2015 supplement tracks developments taking place under the Renewable Energy Independent Power Producer Procurement Programme, which has had four bidding rounds. It appears to remain a shining light on the...
Electricity 2015: A review of South Africa's electricity sector (PDF Report)
Creamer Media’s Electricity 2015 report provides an overview of State-owned power utility Eskom and independent power producers, as well as electricity planning, transmission, distribution and the theft thereof, besides other issues.
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
 
 
 
 
 
This Week's Magazine
While strongly welcoming the promulgation of the new Part 101 of South Africa’s civil aviation regulations, governing the commercial operation of civil remotely piloted aircraft (RPAs) in South Africa, the Commercial Unmanned Aircraft Association of Southern Africa...
LSM Distributors has contracted engineering consultancy WSP | Parsons Brinckerhoff Africa to undertake the R100-million restoration of the 54-year-old Kyalami racetrack, situated in Midrand. The restoration will assist in re-establishing it as a venue for...
South African Defence Minister Nosiviwe Mapisa-Nqakula has expressed the hope that the defence budget will be significantly increased over the next five years. She did so while addressing the media in her recent budget vote media briefing. The 2015/2016 defence...
The African Development Bank (AfDB) has been an implementing agency for the Global Environment Facility (GEF) since 2008. The relatively young portfolio has 28 projects over 30 countries on the continent according to the 2014 AfDB and GEF annual report released...
PAUL SPEAR Training and development should be an integral and proportionate part of the long-term strategy of all companies, regardless of their size
Investment in South African youth through apprenticeships and learnerships will not only create direct benefits for businesses but will also contribute significantly to job creation and socioeconomic transformation in the country.
 
 
 
 
 
 
 
 
 
Alert Close
Embed Code Close
content
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
 
 
Close
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks
Subscribe Now for $96 Close
Subscribe Now for $96