Homepage / Currency / Why South Africa’s economic outlook is looking bleak
Amazon says this Prime Day was its biggest shopping event ever Kudlow says President Trump is 'so dissatisfied' with China trade talks that he is keeping the pressure on As stocks regain their footing, an ominous warning looms Goldman Sachs downgrades Clorox to sell, says valuation is 'unsustainably high' How Satya Nadella has spurred a tripling of Microsoft's stock price in just over four years Kudlow says economic growth could top 4% for 'a quarter or two,' more tax cuts could be coming The one chart that explains Netflix’s stunning comeback US housing starts plunge 12% in June to a nine-month low Aerospace titans Boeing and Airbus top $110 billion in orders at Farnborough Target uses Prime Day to its advantage, logging its 'biggest online shopping day' so far this year Billionaire Marc Lasry sees bitcoin reaching up to $40,000 as it becomes more mainstream and easier to trade These are the 10 US airports where you're most likely to be hacked Amazon shares slightly higher as investors await Prime Day results Wreck of Russian warship found, believed to hold gold worth $130 billion A bullish ‘phenomenon’ in bond market is weeks away from fading, top credit strategist says Stocks making the biggest moves premarket: MS, GOOGL, TXN, UAL, NFLX & more Twitter shares up 50% since late April means most upside priced in, analyst says in downgrade EU fines Google $5 billion over Android antitrust abuse Mortgage applications fall 2.5% as buyers struggle to find affordable homes America may not have the tools to counter the next financial crisis, warn Bernanke, Geithner and Paulson Investors are getting spooked as the risk of a no-deal Brexit rises EU expected to fine Google $5 billion over Android antitrust abuse Ex-FBI chief James Comey urges Americans to vote for Democrats in midterm elections Elon Musk apologizes to British cave diver following baseless 'pedo guy' claim Disney, Comcast and Fox: All you need to know about one of the biggest media battles ever Xiaomi shares notch new high after Hong Kong, mainland China stock exchanges reach agreement The trade war is complicating China's efforts to fix its economy European markets set for a strong open amid earnings; Google in focus Hedge fund billionaire Einhorn places sixth in major poker tournament The biggest spender of political ads on Facebook? President Trump Asian stocks poised to gain after Fed's Powell gives upbeat comments; dollar firmer Stocks are setting up to break to new highs Not all FAANG stocks are created equal EU ruling may be too little, too late to stop Google's mobile dominance Cramer explains how Netflix's stock managed to taper its drop after disappointing on earnings Airbnb condemns New York City's 'bellhop politics,' threatens legal retaliation Amazon sellers say they were unfairly suspended right before Prime Day, and now have two bad choices Investor explains why 'duller' tech stocks can have better returns than 'high-flying' tech names Elon Musk is 'thin-skinned and short-tempered,' says tech VC Texas Instruments CEO Brian Crutcher resigns for violating code of conduct Google Cloud Platform fixes issues that took down Spotify, Snapchat and other popular sites Uber exec: We want to become the 'one stop' transportation app 'What a dumb hearing,' says Democrat as Congress grills tech companies on conservative bias Amazon shares rebound, report says Prime Day sales jumped 89 percent in first 12 hours of the event How to put your medical history on your iPhone in less than 5 minutes Investment chief: Watch these two big events in 2018 Even with Netflix slowing, the market rally is likely not over Cramer: Netflix subscriber weakness debunks the 'sky's the limit' theory on the stock Netflix is looking at watch time as a new area of growth, but the competition is stiff Why Nobel laureate Richard Thaler follows Warren Buffett's advice to avoid bitcoin Rolls-Royce is developing tiny 'cockroach' robots to crawl in and fix airplane engines After Netflix plunge, Wall Street analysts forecast just tame returns ahead for the once high-flying FANG group Roku shares rise after analyst raises streaming video company's price target due to customer growth China is investing 9 times more into Europe than into North America, report reveals Amazon says US Prime Day sales 'so far bigger than ever' as glitch is resolved Netflix is on pace for its worst day in two years US lumber producers see huge opportunity, rush to expand San Francisco to consider tax on companies to help homeless Homebuilder sentiment, still high, stalls as tariffs, labor and land drive up costs Powell backs more rate hikes as economy growing 'considerably stronger' Netflix history is filled with big stock declines – like today – followed by bigger rebounds Intel shares get downgraded by Evercore ISI due to rising competition from Nvidia, AMD Petco aims to reinvent the pet store with something you can't buy online Genetic testing is coming of age, but for consumers it's buyer beware Tech 'FAANG' was the most-crowded trade in the world heading into the Netflix implosion, survey shows Netflix weak subscriber growth may indicate a 'maturity wall' that could whack the stock even more: Analyst This chart may be predicting the bull market's demise Wall Street says Netflix's stock plunge is a ‘compelling’ buying opportunity because the streaming giant ‘never misses twice’ Tesla sinks after Musk tweets, again Boeing announces new division devoted to flying taxis Stocks making the biggest move premarket: NFLX, UNH, GS, AMZN, WMT & more Deutsche Bank downgrades Netflix, but says big subscriber miss is not 'thesis changing' IBM is experimenting with a cryptocurrency that’s pegged to the US dollar North Korea and Zimbabwe: A friendship explained Virgin Galactic spinoff Orbit to launch rockets from the UK with space deal Artificial intelligence will create more jobs than it destroys? That’s what PwC says ‘Treasonous’ Trump and ‘Putin’s poodle:' Scathing headlines follow the Trump-Putin summit China’s fintech companies offer ‘enormous’ opportunity, investment manager says Trump's performance at summit with Putin was 'unprecedented,' experts say Walmart and Microsoft link up on cloud technology as they both battle Amazon European stocks seen mixed amid earnings; Fed’s Powell to address Congress How I knew I should quit my day job and run my start-up full-time: Viral website founder China's stocks have been trounced, but the trade war may ultimately be good news for those shares Billionaire tech investor Peter Thiel bets on crypto start-up Block.one Asian shares subdued open after mixed close on Wall Street; energy stocks under pressure Amazon cloud hits snags after Amazon Prime Day downtime Netflix isn't doomed by one quarter unless people start questioning the long-term investor thesis Tech stocks set to sink on Tuesday after rough evening for ‘FANG’ Netflix plummets after missing big on subscriber growth This wristband lets humans control machines with their minds The U.S. has a rocky history convincing Russia to extradite computer criminals Amazon suffers glitches at the start of Prime Day Jeff Bezos is now the richest man in modern history 'The United States has been foolish': Read Trump and Putin's full exchange Goldman Sachs recommends these 5 highly profitable companies — including Nvidia — to combat rising inflation Goldman Sachs releases 'tactical' stock picks for this earnings season Three red flags for Netflix ahead of its earnings report The bond market may be raising recession fears, but don't expect one anytime soon Cramer: Banks are 'making fortunes' but are still as hated as they were during the financial crisis Putin told Trump at summit: Russia never meddled in US election

Currency, United States Finance

Why South Africa’s economic outlook is looking bleak

With the mounting problems facing South Africa, CNBC looks at the investment case for the country and whether its economic outlook is starting to look bleak.

Last Thursday, the South African Reserve Bank cut its benchmark interest rate for the first time in five years, dropping the rate by 25 basis points to 6.75 percent in an effort to avoid a recession.

“Domestic growth prospects have deteriorated further following the surprise GDP contraction in the first quarter of 2017. The economy has now recorded two successive quarters of negative growth, and although a near-term improvement is expected, the outlook remains challenging,” said the central bank’s Governor Lesetja Kganyago, according to a Reuters report.

The central bank revised down its growth forecasts for country; it estimates 2017 full year GDP growth of 0.5 percent, down from 1 percent. Kganyago warned that underlying demand in South Africa’s economy is extremely weak, adding that it is unclear whether any drivers of economic growth will emerge in the absence of structural initiatives that would reduce uncertainty and boost confidence.

“Policy uncertainty, a recent example being in the mining sector, is likely to constrain investment,” he added.

Meanwhile, the OECD reported on Monday that South African needs structural reforms to revive economic growth.

“Building stronger and more inclusive growth will require bold action from policymakers,” OECD Secretary-General Angel Gurría said in a press release.

“Ensuring a better future for all South Africans will require increased access to higher education, a stronger and fairer labour market, deeper participation in regional markets and a regulatory framework that fosters entrepreneurship and allows small businesses to thrive

The credit agency Fitch Ratings also weighed in on South Africa last Wednesday, criticizing the new economic growth plan unveiled by the government’s minister of finance, Malusi Gigaba, earlier in July.

“The South African government’s newly announced Inclusive Growth Action Plan is unlikely to significantly boost economic growth prospects,” the agency said in a press release.

“Most initiatives focus on state-owned enterprises governance, containing pressure on public finances, and boosting black economic empowerment and addressing inequality, which would only have an indirect impact on growth prospects.”

Fitch Ratings reduced its outlook for South Africa’s 2017 GDP growth to 0.6 percent from 1.2 percent in June. That was after cutting South Africa’s credit rating to junk in April following President Jacob Zuma’s surprise decision to fire the respected finance minister Pravin Gordhan.

However, some investors are still choosing to invest in the region. Renaissance Capital’s weekly report in equity fund flows found the South African MSCI index to be the top performer among global emerging markets. Assets under management grew by 5.9 percent in the week to July 19, compared to 2.9 percent from emerging markets as a whole. In fact, South African shares are doing very well; the iShares MSCI South Africa exchange traded fund has returned 9.74 percent over 1 year and closed on Friday with a net asset value of $60.70, not far off its 52-week high of $62.09. The broad recovery in commodities this year has boosted South African miners.

Despite this performance, risk analysis company Verisk Maplecroft warns the region is becoming less attractive as an investment destination and says the economic outlook for the next ten years is looking bleak, according to their core drivers report published earlier this month.

“Economic growth will remain sluggish, causing unemployment to rise and compounding problems associated with inequality. Meanwhile, pressure from unions to protect jobs will fuel strikes, reducing the productivity of key sectors,” the Verisk Maplecroft report said.

The key risk for investors, according to the report, is political instability. The ruling African National Congress will appoint its next leader in December this year. The choice of leader, who will likely take over as president once Zuma steps down, will determine whether the ANC continues to move towards the left or adopt a pro-business stance.

“Zuma’s administration has progressively reduced investors’ confidence in the government’s ability to manage the country’s structural problems and investment’s contribution to GDP will fall.”

Verisk Maplecroft warns the economy will continue to underperform and be stuck with a bad credit rating until a pro-business administration takes over.

Follow CNBC International on Twitter and Facebook.

Source: cnbc
Why South Africa’s economic outlook is looking bleak

Comments are closed.