Economy may grow at 3,5%

2011-02-04 00:00

UNSPECTACULAR yet solid economic growth could be on the cards for South Africa in 2011 on the back of a revival in the fortunes of consumers who have managed to keep their jobs during and after the recession.

This is according to Investec Asset Management director Jeremy Gardiner, who said the economy is expected to grow by 3,5% this year.

Although the lack of job opportunities remains the “ticking time bomb”, Gardiner told guests at an Investec Asset Management presentation in Durban this week that local consumers who still have jobs have improved their financial standing.

However, other consumers — particularly those who have become unemployed — are drowning in debt with more than 7 500 people per month undergoing debt counselling.

Gardiner added that South Africa’s social spending plans continue to place a heavy burden on the economy, given that the country does not boast a wide tax base.

He said that at 6,1% of Gross Domestic Product, spending on education does not deliver a good return.

Gardiner noted the country’s rating has been upgraded to A, enabling South Africa to borrow at a less costly rate.

He said China’s involvement in Africa has increasingly become associated with infrastructure development.

“China is rebuilding Africa’s infrastructure and that is very important for getting the continent’s economy growing as it allows other sectors to grow.”

He warned that austerity measures in Europe threaten to cause further social unrest, adding that political instability in Egypt and the Middle East represents concerns for investors.

“Confidence in Europe is very low,” he added.

Gardiner expressed extreme concern over the United States’ ballooning debt, which has risen from $13 trillion (about R93 trillion) seven months ago to about $14,3 trillion.

“U.S. foreclosures [on houses] are still rising. They also have an ageing population which can be very expensive to maintain.”

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