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12 Things Expected To Improve Investor Outlook In South Africa In 2017
The year 2016 was not an easy one for South Africa, but investor outlook for the year 2017 certainly looks more positive.
The gateway to Africa’s market of a around billion people remains an investment hub that holds great potential, allowing investors access to other parts of Sub-Saharan Africa.
Having survived a tough year, investors are now looking at South Africa to gauge whether or not to invest their funds in the emerging market, but there are a flurry of reasons to give the country a second glance in 2017.
We take a look 12 things that are expected to improve investor outlook in South Africa during 2017.
Survival of potential downgrades
For many economists 2016 was supposed to be the year of a downgrade to junk status for South Africa’s economy, but the country defied the odds and managed to avoid a downgrade by each of the major ratings agencies on two occasions last year.
South Africa avoided a recession
While 2016 was a difficult year for the South African economy, one important positive was the fact that the country avoided a recession, while many other economies could not. This means that there was still growth in the economy, even if it was meagre.
Growth projected for 2017
While the economy is not growing at a decent pace at the moment, real GDP growth is expected to accelerate over the next three years, with economic growth projected to reach 2.2% in 2019. This is not major growth, but it is growth nonetheless, compared to current levels below 1%.
South Africa’s institutions remain strong
Despite political uncertainty and other varied challenges, South African institutions remain strong. This refers to institutions such as the independent judiciary, the Reserve Bank, the auditor general and National Treasury, which all operate effectively without government interference.
Track record on South Africa’s side
Investors love certainty and track records, as they use data to predict future growth and potential. South Africa enjoys a positive track record of bouncing back from difficult times, and negotiating volatility successfully, and 2017 will likely see history repeating itself.
Easing pressure from drought conditions
South Africa has endured one of the worst droughts on record in recent years, with 2015 being the driest year on record according to records dating back to 1904. The drought has eased off in recent months, reducing pressure on inflation, food costs and government spending.
South Africa’s energy crisis is under control
South Africa struggled for some years with the energy demands of the country as a whole, but during 2016 this crisis was managed and kept under control. This means that the power issue should not impact investor sentiment in 2017.
Gordhan still at the helm
The well respected veteran of South African finance, Pravin Gordhan remains at the helm of the country’s treasury, and this bodes well. Investors like and trust Gordhan, and he has done well in trying times.
Promises of additional tax revenue
The National Treasury has committed to cutting the expenditure ceiling by R26 billion and increasing tax collection by R43 billion over the coming two years, in order to stabilise South Africa’s total debt to GDP ratio at 47.9% by 2019/20. These are the kinds of promises that investors like, if they inacted successfully.
Better commodity cycle
In recent years major global commodities have been in a severe bear market, with minerals such as gold topping out in 2011 before bottoming out in 2015. Last year saw this begin to change, with gold among the strongest performing asset classes in 2016. This is great for South Africa, as the country is a major gold miner and producer.
Healthy legal environment for business
South Africa has a sound framework for matters relating to commerce and business, which is an attractive quality for both investors and entrepreneurs wanting to make money in South Africa. The country has international standards when it comes to patents, trademarks, and copyrights.
Increased pressure on Zuma
The unpopular president of South Africa is facing increasing calls for his resignation, even from within his own party, and international markets seem to react favourably to news of his potential departure from government. Increasing pressure and Zuma’s potential departure is positive news for investors.
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