2016 economy looks bleak

The South African economy is a hot topic at the moment, with several local and international events in 2015 leaving rippling effects on the market. Should residents look at 2016 with optimism, or resolve to be more prudent about their spending? Some local financial experts were asked what to expect next year.

“With 2015 being a very challenging year for many businesses, we estimate a challenging outlook for 2016 as well,” said Randburg Chamber of Commerce and Industry CEO Linda Blackbeard. Third Circle Asset Management economist Christo Luüs and Roodepoort Chamber of Commerce and Industry president Marietjie Esterhuizen agreed.

“The SA Economy will probably grow at a rate of less than 1.5 per cent in 2016. This on the back of the effect of the drought, as well as the slow growth in local spending,” Esterhuizen said, adding that the high level of government debt will not help the economy, and low commodity prices will affect exports negatively. She predicted that there will be an increase in interest rates of 50 basis points next year. “Unemployment will once again rise in 2016 and remain one of the most concerning issues for Government and business as this leads to various economic issues as a result,” Esterhuizen added.

For Blackbeard, power outages, postal strikes, and fuel increases caused a huge loss in productivity and revenue, and two interest rate hikes this year made it difficult for people to pay bonds and loans. “According to the national revenue agency, South Africa’s trade deficit widened more than expected to R21.39 billion in October from a revised R1.26 billion shortfall in September,” she said. Furthermore, salaries are not increasing much due to high expenses and low profits.

According to Luüs, the “biggest obstacle” to achieving economic growth next year is that “the ANC/South African Communist Party alliance will most likely remain in full control of the government”. This is because rather than implementing the National Development Plan, the government will merely discuss it. In response, the EFF “can be expected to disrupt” the financial and banking sectors in the run-up to next year’s local government elections. But the ultimate aim of this ‘radical economic transformation’ is to effect state control over all factors of production in the economy – so expect more strikes, violence and protests instigated by unions and SACP and EFF flag bearers.” He added that production in the mining, agriculture and manufacturing sectors will also likely drop.

All three experts encouraged residents to cut unnecessary spending next year, or the effect will be worse.