Group IT Macroeconomics Presentation
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Phumlani presented to his Corporate Services team at Sasfin in May 2020 - on South Africa's economy amidst COVID-19 pandemic.
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Group IT Macroeconomics Presentation
- 1. A look at South Africas economy amidst COVID-19 pandemic Phumlani M. Majozi
- 2. The state of South Africas economy before COVID-19 By the end of 2019 Ramaphoria had long dissipated Consumer and business confidence had gone back to record lows Dismal economic growth marked by two technical recessions Unemployment rising and now at staggering levels approaching 30% if you exclude those who have given up looking for work Private and public sector investments were in tatters Foreign sell-offs in JSE equities and government bonds Rising government debt and budget deficits a dire fiscal situation that had hurt South Africas sovereign credit ratings with S&P and Fitch State-owned enterprises a financial mess e.g. Eskom, SAA, Denel Power outages across the country
- 3. Phumlani M. Majozi South Africas economy underperformed the worlds
- 4. Change in gross government debt for various emerging market economies 20082019 Phumlani M. Majozi
- 5. Where we are right now Difficult to give exact numbers because of the lockdown, Stats SA says But in February, Finance Minister Tito Mboweni projected that the consolidated budget deficit would widen to 6.8 percent of GDP this year Amidst COVID-19, S&P says fiscal deficit could widen to an all-time high of 13.3 percent of GDP The South African Reserve Bank (SARB) has cut interest rates by about 42% this year with the intention to boost the economy Government announced R500 Billion stimulus package partly financed through debt S&P and Moodys have already downgraded our credit sovereign rating to junk status this year S&P on Friday said the economy would contract by 4.5% this year due to lockdown restrictions. This would be below the 7%GDP contraction forecast by the SA Reserve Bank last week Phumlani M. Majozi
- 6. Moving to Level 3 and reopening the economy The Bureau for Economic Research (BER) says that Level 3 provides for more economic productivity with more sectors reopening including schools The BER further projects that overall levels of activity will remain notably below what we saw before the pandemic - for the following reasons: The move to Level 3 is not like a flick of a switch. Companies will be asked to phase in the reopening and to put in place all the necessary health precautions Some industries will remain closed under Level 3 A number of COVID-19 hotspots in the major metropolitan areas have been identified The president warned that the pandemic in SA will get much worse from here before it gets better No timeline was provided for how long Level 3 could last so theres uncertainty in that aspect Phumlani M. Majozi
- 7. Looking ahead Mboweni will next month table an adjustment budget, which will account for the impact of COVID-19 on the fiscus. Expect high levels of projected deficits and government debt from the minister With the economy being reopened which will result in demand slowly coming back - and the benchmark interest rate already lowered by more than 40% this year to 3.75% - dont expect further cuts in rates in the second half of 2020 The ratings agencies will keep the country in junk status for the foreseeable future. Things will only change for the better when we see real, tangible reform The economic data for the second quarter will be horrible when released by Stats South Africa While the economy will contract this year, the general consensus is that it will bounce back next year. SARB projects 3.8% economic growth in 2021 and 2.9% in 2022 Phumlani M. Majozi
- 8. Mitigating risks in your life amidst dire economic outlook Stay calm Invest, invest, invest or save, save, save where possible Enhance your skills (do those online courses) to remain competitive in a tough labor market Expand your network Take opportunities as they come Try to multiply your sources of income You are lucky to work at Sasfin. Be grateful! Phumlani M. Majozi
- 9. Thank you! Contact: info@phumlanimajozi.com Twitter: @PhumlaniMMajozi Facebook: Phumlani M. Majozi Website: www.phumlanimajozi.com