The contradiction between the economy and market - Kagiso Asset Management Head of Research: Abdul Davids
After an eventful year marked by widespread labour unrest, slower economic growth, rising domestic inflation and significant rand weakness, the South African economy finds itself in a precarious state.
GDP growth relative to other emerging market and African countries is anaemic, revenues from mineral exports and corporate taxes are under pressure and the growth rate in social grant spending exceeds that of fixed capital formation spending.
In addition, recent electricity price increases have been very negative for South African consumers and further hikes are on the horizon.
As a result, local consumers and businesses face major challenges and, as a country, South Africa is increasingly becoming less competitive. The local manufacturing sector is contracting as firms struggle to compete globally, partly due to cost pressures from increasing electricity and fuel prices and high real wage demands.