Economy: ‘ANC won’t swing left’

2009-04-24 00:00

Port Elizabeth — Prospects for the SA economy depend not on the presidency of Jacob Zuma but rather on the global economy, according to Econometrix director and chief economist Azar Jammine.

He expects no dramatic shift in economic policy by the new government, a tactic that would upset the business community.

There is a view that Zuma will identify with the unlettered and the poor, but respected businesspeople like Tokyo Sexwale and Mathews Phosa support Zuma and would not wish to see a major swing to the left.

Jammine reckons the ANC recognises Finance Minister Trevor Manuel’s importance in terms of stability, and as long as Manuel is there, there will be no dramatic economic changes.

SA is feeling the effects of the international downturn largely in the metal-processing and motor industries.

But there are sectors of the economy that are still doing well and, for various reasons, SA has not been impacted as seriously as have other parts of the globe.

According to Jammine, many unions have demanded double-digit raises at a time when inflation and interest rates are coming down. This is unlikely to improve the unemployment situation, but can give individuals a breather.

Slowing growth has brought relief in terms of capacity restraints. The electricity crisis has been temporarily warded off by reduced demand and the skills shortage has become less critical.

He says South Africa is better off than many other countries because over the past decade the government has decreased its overall participation in the economy and has trimmed public indebtedness.

This places the government in the advantageous position of now theoretically being able to spend more on stimulating the economy.

He believes there is a definite distinction between the successful disbursement of these funds and ineffective expenditure.

Although South African banks are healthier than those in the rest of the world, a red flag is waving in the market for heavy trucks.

The dramatic downturn in heavy-vehicle sales since last September has been not because of sliding demand, but the consequence of banks’ strict lending criteria. “Banks are at risk of themselves causing a recession.”

Jammine is also concerned about South Africa’s ability to hold inflation in check with prices rising into 2010, as well as this year’s anticipated 30% hike in electricity tariffs.

He is less positive than other economists about an interest rate decline. A one percentage point cut may be on the cards next week, and a 0,5 point cut thereafter, but he does not expect the prime rate to fall below 11,5%.

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