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Polity
Article by: Sapa
Published: 16 Oct 2012
SA prospects dim – economist
South Africa's economic prospects have become dimmer and could worsen due to widespread labour unrest, an economist said on Tuesday.

Old Mutual Investment Group South Africa economist Rian le Roux said in a speech prepared for delivery in Johannesburg that recent disruptions in the market and a weakening rand could result in a lower gross domestic product growth, higher inflation and wider current account deficits for the country.

He said the wider deficit would lead investors to see rising macro-economic risks in the country.

"Foreign investors have good reason to be concerned about the macro-economic risks – of 16 emerging markets... South Africa measures dead last in terms of its combined current account and budget deficits," he said.

The labour unrest had also highlighted South Africa's lack of competitiveness to the world.

"While our overall ranking in the World Economic Forum at 52 out of 144 countries in its 2012/2013 Global Competitiveness Index is not too bad, we rank awfully lowly in some key areas."

These included the quality of primary and higher education, the flexibility of wage setting, hiring and firing practices, and pay and productivity.

"South Africa was ranked absolute last for labour-employer co-operation," he said.

Le Roux said he was not optimistic that conditions to stimulate growth would improve significantly over the near-term.

"Although the weaker rand will help boost exports, rising cost structures may quickly erode the benefit," he said.

"At the same time, any hope of major direct foreign investment has likely been seriously dented by recent events and concerns over future political, economic, and policy stability."

He said the government should see the recent downturn as a sign to focus more on its economic policies.

"Hopefully, the recent labour unrest, downgrades by rating agencies and the rand's slump will dramatically elevate South Africa's economic challenges up the government's policy agenda."