Cape Town - South Africa indeed faces a difficult 2016, Rian le Roux, Old Mutual Investment Group Chief Economist, warned this week.
In addition to weak commodity prices, tighter monetary and fiscal policy and the impact of the drought, the recent rand rout following the financial ministers' drama, will likely trigger a stronger than expected inflation rise and may also force the South African Reserve Bank to raise rates more and/or earlier than expected up to now, he said.
At the same time Andries du Toit, CEO of The Wealth Corp warned that the political and economic effects of the country’s worsening drought are yet to be fully realised.
Tragedies already playing out on farms across the country, include:
• Farmers caving under debt as crops fail and livestock perishes;
• Thousands of farm workers facing unemployment;
• An estimated 300 000 black subsistence farmers facing losing everything; and
• 40 000 head of cattle dying in KZN alone.
These warnings come as consumer confidence tumbled amid an ailing economy and as political turmoil intensifies.
The Bureau of Economic Research (BER) warned last week that festive season sales, a measure of SA's economic health, could come under pressure as consumer confidence remains in the doldrums.
John Loos, Household and Property Sector Strategist at FNB, said that strong headwinds - in the form of higher personal income taxes, poor job creation, frequent power outages, drought conditions in large parts of the country, rising interest rates and an alarming depreciation in the rand exchange rate - have been battering household income growth and consumer confidence levels since the beginning of the year.
"To be sure, the drop in petrol and paraffin prices and the respite in load shedding bolstered consumer confidence in the third quarter of 2015.
"However, the nationwide student protests over tuition fees and chaos that erupted inside and outside parliament during the Finance Minister's interim budget speech, coupled with the intensification of drought conditions and the implementation of water restrictions in some of the worst affected areas, probably weighed heavily on consumer sentiment in 4Q2015," said Loos.
Media24 backs Drought Disaster Fund
Amid these warnings Media24, one of Africa's leading media outlets, launched an impassioned plea to its loyal readers, advertisers and partners to support the Drought Disaster Fund.
Media24 warned that the result of the worst drought in South Africa's history will be sky-rocketing food prices, a surge in unemployment, bankruptcies among farmers, a flood of urbanisation and possible food and water shortages.
To mitigate the affects of the drought it announced its backing of the fund, administered by the country’s largest farmer’s union AgriSA.
Through its publications Landbouweekblad, YOU, Huisgenoot, DRUM, Kuier, Move! and several of the group’s leading newspapers Media24 hopes to rally all of South Africa behind the drought relief effort.
"This drought affects all food sectors including livestock farming, as well as eggs and dairy, where the cost of feed makes up 60% of total cost. With feed prices already up 40% to 70% in the past year, the intensifying
drought will only drive costs higher as animal feed becomes scarcer," the media outlet said.
Here’s how you can help:
• SMS 42030 to donate R30
• Visit http://www.droogterampfonds.co.za/ to make a bigger contribution
• Follow the campaign in Landbouweekblad, YOU, Huisgenoot, DRUM, Kuier, Move! and several
leading newspapers for further details.
* Fin24 is part of 24.com, a division of Media24.