Country Report South Africa August 2017

Country Report South Africa August 2017

  • August 2017 •
  • Report ID: 1698131

Outlook for 2017-21

  • The African National Congress (ANC) will remain in power but internal divisions will intensify after the president, Jacob Zuma, sacked his respected finance minister as part of a major and controversial cabinet reshuffle.
  • The ANC's five-yearly electoral summit in December 2017, when it will select a new leader to replace Mr Zuma, will dominate this year's political scene. Mr Zuma will stay on as president until 2019, barring his early retirement.
  • Real GDP growth will recover slightly to 0.8% in 2017, as agriculture rebounds from drought. Growth will remain subdued in 2018-21.
  • The Economist Intelligence Unit forecasts that inflation will ease to 5.6% in 2017, as food prices stabilise, despite higher oil costs. We expect inflation to stay close to this level in 2018-21.
  • We forecast that the rand will average R13.67:US$1 this year, the first year of appreciation since 2011. We expect the currency to slide to an average of R16.12:US$1 in 2018, before weakening more gradually to R20.5:US$1 in 2021.
  • The current-account deficit will widen to 3.8% of GDP in 2017 and 4.4% of GDP in 2018, before fluctuating between 4.3% and 4.6% of GDP in 2019-21, with the annual variation attributable to shifts in growth trends.


  • The South African Communist Party, at a five-yearly electoral summit, reaffirmed its intention to contest elections separately from the ANC, although this will not necessarily happen at the next general election in mid-2019.
  • The South African Reserve Bank (the central bank) trimmed the benchmark interest rate by 25 basis points to 6.75% at its latest rate-setting meeting on July 20th, marking the first reduction for five years.
  • The government has temporarily halted the implementation of a new mining charter, after reaching an interim legal deal with the Chamber of Mines that could see the courts rule on the charter in September.
  • The Chamber of Mines, in a separate case, has launched urgent legal action to block the mining minister's proposals to restrict the award of new mining and exploration rights, as well as the transfer of existing rights.
  • Mining grew by 3.6% year on year in May, while manufacturing contracted by 0.8%, thereby repeating the pattern seen during most of 2017 to date.
  • Preliminary trade data show that exports grew slowly (by 4.7%) in the first half of 2017, compared with the same period of 2016, while imports declined (by 1.4%), thereby producing a merchandise trade surplus. Sluggish trade flows reflect subdued GDP growth.


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