Country Report South Africa October 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 an estimated R8.54: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 than previously projected.
• 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 6.1% of GDP in 2011, as economic recovery gathers pace.

Monthly review

• Mr Zuma launch a new battle against crime in September, a week after crime statistics for 2008/09 showed a sharp rise in armed robberies. The murder rate fell a little but remains among the highest in the world.
• The IMF's latest Article IV consultation endorsed the government's fiscal and monetary loosening in response to recession but warns that spending will have to be tightened in future.
• South Africa's potential growth rate has fallen from 5% to 4% a year because of weaker private investment, according to the IMF. The Fund recommends action to promote private investment in infrastructure development.
• Green papers before parliament provide some detail about the likely structure and function of the new planning and performance ministries, which aim to strengthen long-term strategy and boost service delivery.
• The JSE has improved steadily since February, and the all-share index closed higher year on year at the end of September for the first time in more than a year. Robust foreign demand for local shares continues to buoy the market.
• Negotiations between MTN and India's Bharti about a US$24bn cash and share swap deal, and an eventual merger, have been called off because of regulatory and political barriers in both countries.
• Inward FDI jumped to US$9bn in 2008, according to UNCTAD, buoyed by Chinese investment in banking, but is likely to subside in 2009.

Source: Country Report