Country Report South Africa November 2009

Outlook for 2010-11

• South Africa's new president, Jacob Zuma, will try to strengthen the ruling party and deliver socio-economic development, but popular impatience and a slow rebound from recession will make this a formidable challenge.
• The battle for influence between the African National Congress (ANC) centre and left wing will test Mr Zuma's skills as a conciliator, forcing him to make some tough choices, although the moderate viewpoint is likely to prevail.
• Real GDP growth, after declining by 2.2% in 2009, is expected to rebound to 3.1% in 2010, helped by the recovery in external demand and looser fiscal policy, before accelerating to 3.7% in 2011, in line with faster global growth.
• The rand is forecast to depreciate from R8.50:US$1 in 2009 to R9.34:US$1 in 2010 and R9.75:US$1 in 2011, but will weaken at a slower pace.
• The current-account deficit is expected to rise gradually throughout the period, from 5.4% of GDP in 2009 to 5.8% of GDP in 2010 and 6.2% of GDP in 2011 as economic recovery gathers pace.

Monthly review

• Mr Zuma has named Sandile Ngcobo as the new chief justice, which signals continuity. He also appointed four new members to the Constitutional Court, although a controversial judge, John Hlophe, was not among them.
• The reorganisation of the government's policy clusters has failed to clarify where primary responsibility for policymaking lies. The authority of the new planning minister, Trevor Manuel, appears to have been downgraded.
• Eskom has applied for annual increases of 45% in electricity tariffs over the next three years, which, if granted in full, will put pressure on household and business costs. Funding for new projects will, nevertheless, remain tight.
• Rio Tinto, in October, ditched plans for a new aluminium smelter at the Coega industrial zone because of rapidly rising electricity prices and supply uncertainties, signalling a challenging outlook for energy-intensive industries.
• The manufacturing, retailing and mining sectors continued shrinking at a rapid pace in July and August, heralding another quarter of recession, although the purchasing managers index recorded a steep rise in September.
• Automobile sales remain very weak, although there are signs that the market is starting to recover. In a boost to the embattled sector, BMW plans to invest R2.2bn (US$300m) in upgrading technology and increasing capacity.
• Recent data for 2009 indicate that China has emerged as South Africa's most important single-country trade partner, both for exports and imports, surpassing the US and Germany.

This report covers the following industry codes:
SIC Code: 1;49;39;37
NAICS Code: 11;22;31;336