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Pay attention to microeconomic policy shifts, economist advises business

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Pay attention to microeconomic policy shifts, economist advises business

Econometrix economist Tony Twine on the likely macro- and microeconomic scenarios for South Africa after its April 22 election. (25/3/2009)

1st April 2009

By: Terence Creamer
Creamer Media Editor

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South Africa’s macroeconomic policies, which some observers have flagged as being potentially vulnerable to a “shift to the left” after the April 22 elections, are unlikely to change materially, Econometrix senior economist Tony Twine has averred. But he has counselled business to be on the lookout for what could be some significant changes on the microeconomic-policy front, as these could have major implications for certain companies and industrial sectors.

Addressing members of SwissCham Southern Africa, Twine said that, while the ousting by the African National Congress (ANC) of President Thabo Mbeki at Polokwane was “ostensibly” a shift leftwards, its impact was likely to the “modest” at a macroeconomic level.

This had also been borne out, he asserted, by recent economic statements by the new ANC leadership that seemingly indicated fiscal and monetary policy “business as usual”, as well as by the 2009 Budget and its associated medium-term expenditure framework.

“However, I am not quite as confident about the good health of microeconomic policy after the election,” Twine cautioned.

The new government and Cabinet, which should be assembled in early May, was setting out its “developmental interventionist” stall. This could see it pursuing bids to influence market structures, making pricing interventions and even seeking to influence the structure of enterprises.

Such moves could have implications for sectors as diverse as pharmaceuticals on the on hand, through to transport and automotive on the other.

“We might just find the rules of our industry, the rules of our sector regulated to an increasing extent,” Twine outlined.

The new government was also likely to be far more interventionist at a municipal and provincial level, which could have positive spin-offs for business, particularly in the event that it encouraged improved delivery.

Twine did not anticipate an overly critical backlash to such interventions, particularly given that international governments were resorting to their own forms of unorthodox monetary and fiscal interventions to stimulate their economies.

“Where there are impacts, I would say, ‘watch the exchange rate!’.

“The exchange rate will tell you very, very quickly whether we are doing something exceptionally well, and liked by foreign investors, or if we are doing something that they suspect will be to the detriment of their interests here in South Africa,” he said.

But Twine stressed that the rand would remain volatile regardless, given that it remained a gateway currency, owing to its liquidity, for the capital markets of the developed world into the emerging markets.

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