1. INTRODUCTION

May I begin by thanking you for the opportunity of addressing the Chamber today and
sharing some thoughts with you on the interlinked subjects of recession, recovery and reform
in the SA economy. As businesspeople interested in SA's economic outlook it remains essential
that you track and monitor the trends in the economy which influence your strategic business
decisions in this country. You are an important foreign business constituency within the
broader business community, and you have a significant stake in key sectors of this country's
economy.

About 600 German enterprises have started operations in SA and employ nearly
100,000 workers. You will therefore be aware of the extent to which the SA economy has
been increasingly under the spotlight in recent months, against the background of both short
and long term factors of significance to SA's economic performance. Regular, even daily,
assessments of economic trends in SA are available and what is important here today is to
stand back and try to form a balanced perspective about the welter of data that are currently
available on the economic and business outlook.

These trends are also unfolding in a year in which more broadly the convergence of the
20th anniversary of democracy in SA, the 2014 elections and the actioning of the National
Development Plan (NDP) underscore the need for key decisions to be taken and implemented
to change SA for the better. A combination of political circumstances and economic exigency
make reforms of one kind or another inevitable. Economic recovery and reform must now be
Prof Raymond Parsons Recession, Recovery And Reform In The SA Economy "2
dealt with in tandem, which together with recent talk of 'recession' in SA, are now
compressed into a single equation, as we prepare to unpack the 'big picture'.

2. UNPACKING A 2014 'RECESSION'/GROWTH PROSPECTS FOR SA !
To begin with, has SA recently experienced a recession? May I remind you that the
dreaded word 'recession' is technically defined as two successive quarters of negative growth.
At one stage a few weeks ago the question of whether a 'technical recession' would develop in
SA was a very close call, after a signicant shrinkage in growth in the first quarter of 2014 had
then raised the spectre of a possible limited recession. Many analysts nonetheless hoped that a
better second quarter economic performance would offset the economic damage resulting
from the prolonged platinum sector strike, which has indeed since ended.

The bad news is that unfortunately some preliminary statistics for the second quarter of
2014 show the scales again tipping towards confirmation of a 'technical recession' in the first
half of 2014, although until we eventually get more definite figures it still appears a 'touch
and go' economic experience. The most recent SARB statement of 17July also suggests that
the hopes of a better first six months of 2014 were not realized. The good news is that, if the
growth statistics later confirm that we have indeed gone through a 'recession' in the past few
months, by that time we will hopefully be on our way out of it!

These warning signals have nonetheless been steadily translated into recently revised
forecasts downward for overall economic growth in 2014, such as:

IMF 2.3% to 1.7%
SA Reserve Bank 2.1% to 1.7%
Fitch 2.8% to 1.7%
World Bank 2.7% to 2.0%
Investec 2.2% to 1.9%

Finance Minister Nene is expected to lower the Treasury's growth forecast in the 'mini-
Budget' in October and he is reported to have said recently that growth in 2014 may only
reach 2%, compared with the original Budget forecast of 2.7% earlier this year. This is a
realistic putative economic reassessment but probably will need to be reviewed again later
Prof Raymond Parsons Recession, Recovery And Reform In The SA Economy "
before the event. Although the SA economy will bounce back to some extent in the second
half of this year in response to any earlier 'technical recession' as lost ground is made up, it is
now unlikely to reach 2% growth for 2014 as a whole, given the economic factors that
currently carry weight.