There are a number of factors dictating the economic climate of the country and that are impacting on Citi’s forecast of future economic growth.

This was a theme during a media roundtable held by Citi, in Johannesburg, on Thursday. The roundtable was presented by Citi chief economist for South Africa Gina Schoeman and Citi leading emerging markets economist David Lubin.

Citi started the year with an economic growth forecast for South Africa of just 1.1%, and has now downgraded this to 0.9%. Schoeman indicated that this relatively small downgrade is the result of the fact that the company had already accounted for load-shedding in its initial rating, as its likelihood thereof was announced in December 2018.

Schoeman added that one of the biggest concerns posed by load-shedding is the effect on confidence, both on investor confidence and consumer confidence. Further, she highlighted that this could lead to unprecedented political consequences by potentially changing the way people vote, especially if load-shedding occurs again before and leading into the elections.

She described this year’s elections as a “watershed moment”.

Therefore, she said the second half of the year would be a period of much risk, as it would contain much expectation as to what is expected to be delivered by government, and how much of this will be delivered.

This comes with a caveat of a forecast risk, because the political outcomes and decisions are not defined.

Further, there is the risk posed by Eskom, which has always been a background factor, but crops up with bigger than expected impacts, she said.  

The African National Congress (ANC) is expected to retain power, with the markets predicting a high 60% of votes. Issues that could affect the country are strategic votes, with the ANC more split that ever before and confidence lower than ever before.

Schoeman further emphasised that corporate profitability was key to unlocking growth in the country, and providing more jobs. 

If the demand for this does not exist, she indicates that the government can assist through creating more efficiency.  

Schoeman acclaimed President Cyril Ramaphosa for linking job creation to specific economic policies.

She highlighted that he has provided measurable accountably for his Presidency, such as yearly investment conferences where investments can be tallied up and compared against targets, and compared year-on-year.

She also noted the importance of ease of doing business. Although the country’s ease of doing business has declined over the past decade, it has set an achievable target to be in the top 50 over the next two years.

This is a measurable target, with the country’s progress or lack thereof able to be noted when the next Ease of Doing Business Index comes out next year. She highlighted the importance of a capable State before pursuing bigger reforms, which could the ease of doing business.

She also touched on the current size of the Cabinet and Ministries, which the government has also acknowledged needs to be reduced. While this is important, as a reduced Cabinet will engender better coordination, it poses the challenge of the fate of the political incumbents.

In terms of external factors affecting the country, Lubin indicated that, currently, the external environment for South Africa is one where China is once again in stimulus mode.

However, while he noted that the reintroduction of stimulus is a positive external factor for the country, it will not be “game changing”, and it is unlikely to bail the country out of its current economic state, owing to a number of factors.

Therefore, while the external environment is better for the country currently than in 2018, it is not as supportive as the government or citizens would like it to be.

There are also other factors such as the China-US trade war, uncertainties around US President Donald Trump’s automotive policies, and uncertainty in the Eurozone.