Vol. 6

Post-Brexit Europe and UK offer upside trade opportunities for SA. Diplomats and ratings agencies across the spectrum express concerns over SA policy trajectory, stalled reform. Watch SA appetite for Sino-centric alternative. SA is very vulnerable to rating downgrades in 2019. CEO confidence has fallen steeply through the year. It may bounce post the 2019 polls, but will then dip again if hard reforms do not materialise. Mr Ramaphosa is safe in the ANC for now, but expect determined challenges to his authority post the 2019 polls – undermining any reformist efforts. Minimum wage policy demonstrates the detachment of the Presidency from on-the-ground economic reality.

The mining charter remains hostile to long-term fixed investment in greenfield projects. Policy makers remain invested in the draconian enforcement of racial edicts. Growth rates should come in at around 0.5% for the year in line with electricity consumption data. Forecasts of near 2% for 2019 overstate the reformist inclinations of the government.  Watch the net outflow from bonds and equities in line with weak CEO and other confidence indicators. The deficit and debt level will remain under pressure. Disposable income is essentially stagnant. Tax receipts should disappoint as growth undershoots and there is little revenue-raising room. Interest rates must continue to rise in conjunction with global rates, putting pressure on household spending.

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