Groundhog Day for Growth and Confidence
In the 1993 movie, Groundhog Day, Bill Murray plays a TV weatherman who gets stuck in a time loop and relives 2nd February over and over. Apparently it takes 34 years of living the same day before he breaks free. Not quite that dramatic, but it feels a little bit to me that we are stuck in a loop of our own. South Africa’s news headlines seem to rotate through a cycle of growth downgrades, Pravin Gordhan’s battle with the Hawks and ANC in fighting. In the background are the on-going student protests, calls for Jacob Zuma to resign and the reality TV disaster that is the SABC.
This week the IMF downgraded its growth projects for South Africa to +0.1% (same as July forecast) in 2016 and +0.8% in 2017 (down from 1%). The organisation flagged low commodity prices and market perceptions of a slowdown in growth in China as factors weighing on sub-Saharan Africa’s economies. According to the IMF, the world economy has moved sideways and the organisation is concerned that persistent stagnation, especially in advanced economies, could “further fuel populist calls for restrictions on trade and immigration” These restrictions could hamper productivity, growth, and innovation.
In other news, business confidence in SA fell to its lowest level since July 1985. Just in case you need to be reminded, in early 1985, PW Botha was president of South Africa, police killed 17 people who were commemorating the Sharpeville massacre, Anglo American’s head offices were bombed, Alan Boesak and Beyers Naude were arrested and the SADF killed 12 MK activists in Gaborone. Oh, and PW was just about to make his Rubicon speech. This time round the South African Chamber of Commerce and Industry blamed “the general overview of the demand side of the economy” which suggests “a tight economic situation for all subjects of the economy, including consumers, investors and the public sector. The most pressing of the present situation is the lack of confidence by notably investors.” Seriously, are things really worse than 1985?
As one of our readers, an economist, points out there isn’t really a difference between 0.1% and 0.8% growth… its basically means no growth! Compare this with India, which has a population of 1.2bn people and is expected to grow 7.6%. That means that India’s economy will more than double in size over the next 10 years. Wow! India is achieving this growth thanks to a number of factors, but bold leadership and sensible policies are playing a crucial part.
In Groundhog day, Bill Murray’s character eventually breaks out of the time loop when he learns to be less self-absorbed and starts focusing the on improving the lives of others. Will someone please arrange to have this movie screened at South Africa’s next cabinet meeting.
Dr Andrew R Louw CFA
(Sources: Wikipedia, IMF, IOL, South Africa Chamber of Commerce and Industry, Google, Business Day)