These negative comments comes from the Institute for Race Relations (IRR) who says despite Gordhan, saying in his budget speech that South Africa is “imaginative and resilient enough” to turn the economy around and that “we need action and not just words”, the steps announced in his speech did not go nearly far enough to halt and reverse the economic decline.
In his analysis IRR Chief Economist, Ian Cruickshanks, says South Africans need a sobering reality check of what to expect from the economy in 2016.
He says the collapse of global investor confidence in South Africa’s political leadership has translated into plunging domestic and business confidence, leading to a sharp decline in all areas of domestic economic activity. This is likely to remain the case throughout 2016.
Global economic activity has declined as China, previously seen as the world’s primary growth engine, attempts to switch from an industrial export-based economy to a growing domestic consumer demand model.
This has contributed to lower demand for energy and base industrial commodities, severely limiting South Africa’s export prospects. Plunging commodity prices have added downside momentum as producers battle to maintain revenue to offset hefty long-term infrastructural developments, through holding production levels at record highs. This is most dramatically confirmed by the current spot price of Brent Crude oil at $31/barrel after peaking at $130/barrel in 2012. For South Africa low commodity prices have been exacerbated by falling risk appetites amongst global asset managers.
Declining momentum in recovery from the 2008/2009 global financial markets recession has also negatively impacted growth in the European Union and the United States, further limiting South Africa’s export potential.
