A healthy economic recovery in South Africa requires more than the consumer, and business investment will be needed to create some symmetry, Absa Capital head of research Jeff Gable said on Wednesday.

Speaking at Absa Capital’s economic forum, Gable pointed out that household consumers were the driving force behind the 2,8% gross domestic product (GDP) growth achieved in 2010, and added that the recovery would remain consumer-led for much of 2011.

“Consumers have been boosted by wage growth, while lower interest rates have also eased the burden of past debt. Now we are searching for some kind of symmetry, as consumers and businesses are currently pulling in different directions,” he noted.

Corporate South Africa has been saving in near-record amounts in the early phases of the economic recovery, but it was not necessarily a virtue, as it led to decreased investment.

Household borrowing was not as heavily impacted on in recent years as was corporate borrowing, as can be seen in the recovery in passenger vehicle sales, rather than commercial vehicle sales.

Gable noted that business confidence was key to the economic recovery, as it leads investment, inventory rebuild and employment. Although business confidence was returning on average, diverse experiences were recorded across different sectors.

“We expect some improvement in fixed investment spending through 2011, but the real boost to GDP from investment only comes in early-2012 to generate more broadly-spread GDP growth,” he said.

Meanwhile, Gable noted that the local economic environment is not as ripe for inflation-targeting rate hikes as it was in the 2006, prerecession period, although high fuel and food prices are a cause for concern. However, a lack of fresh credit may be particularly important for the Monetary Policy Committee’s rates policy.

“The path for credit and investment is key to interest rate decisions through 2011, we believe, and a major reason why we expect the repo rate to remain on hold through the year,” he explained.

He added that headline consumer price index (CPI) was expected to rise to 5,6% year-on-year by year-end and above 6% in 2012, but noted that the CPI was to be driven mostly by higher food and oil prices, while core inflation lagged behind.

“For this reason we think the Reserve Bank tolerates rising supply-side price pressure and only hikes the repo rate in January 2012. We expect 250 basis points in rate hikes between January and September 2011,” Gable said.

Electricity constraints were set to define economic growth in the next several years, with the energy gap expected to remain until 2016. However, the country’s inclusion in the BRICS group (Brazil, Russia, India and China and South Africa) as representative of sub-Saharan Africa could be beneficial in coming years.