Vol. 1

This report analyses the risks and opportunities in the global and domestic economic, political and socio-economic environment.

On the global scale, the key risk is that global GDP growth has peaked, with G7/Eurozone/Chinese growth expected to dip into 2020. Chinese PMI still sits below 50. US growth faces downside risks from a slowing housing market, rising rates, fading stimulus, and repeated 2018 equity market peaks. If majority of US downsides play out then the R-word is not out of the question.

On the political scale, key risk is that no significant structural reform materialises post-election, with downside risk of Ramaphosa being isolated/pushed out. This would open the way to a rapid assault on property rights, fiscal prudence, civil rights, and rule of law amidst a steep escalation in social and political instability. Be geared to risk of further rating agency downgrades before year-end and resultant capital outflows and currency weakness.

On the economic scale, key risk is that GDP growth underperforms SARB/bank forecasts as downside risks (stalled reform, electricity shortages, and assaults on property rights, social instability, and global slowdown) come into play. Add further downside surprises and it becomes easy to trigger significant currency weakening and upward pressure on inflation despite dampening effect of weak consumer spending and rising interest rates.

On policy, key risk is the Expropriation Bill which opens the way to regulatory and custodial takings across all sectors with considerable downside risks to healthcare, financial services, agriculture, mining, and oil and gas. Deeper downside policy risk is that property rights precedents are exploited to weaken civil rights and the rule of law.

This report closes with possible scenarios for South Africa over the next twelve months.

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