2010: Better, Not Brillant in South Africa

South African President Jacob Zuma speaking at his inauguration on May 11, 2009 in Pretoria. He announced members of his cabinet as well as structural changes in the government.
Originally uploaded by Pan-African News Wire File Photos

2010: Better, not brilliant

Evan Pickworth
Mon, 22 Jun 2009 08:35

While South Africa is likely to have experienced the deepest decline since 1966 when the current down cycle is finished, the worst may have passed, said a leading economist on Friday.

Chief economist of Economists.co.za, Mike Schussler, told the National Consumer Forum in Midrand on Friday that "the economy does move in cycles and I think we are on our way back". But he added: "2010 will be better, but it won't be brilliant – it will be slow but better, but 2011 should be much closer to a normal year."

"Certainly in my mind the worst was April and May and it may last to September, but we are probably over the biggest decline and will see smaller declines and then slowly start seeing some increases," said Schussler.

He foresees an average prime rate of 12 percent in SA over the next five years, "as long as the inflation rate is below that".

He sees nominal wage increases of around eight percent and prime declining to around 10.5 percent from 11 percent now in the current cycle.

But he feels house prices in SA will become cheaper. "Those with houses be prepared – SA house prices are still high."

Schussler told the audience that global GDP had been growing strongly prior to the recession thanks in large part to productivity improvements. "The world is getting cleverer quickly," he said, noting that tertiary education is growing closer to six percent now from one percent before.

Not in our lifetimes

But he says the current recession is something "we have not seen in our lifetimes".

But he pointed to some tentative signs of global recovery.

He said the Baltic dry index has started turning up – a commodity index that is also a service and measures the price for renting ships.

He said housing starts in the US have picked up for first time in 18 months, while US consumer confidence has gone to 54 from 40 in April.

"We have probably now got through the worst, but this does not mean it is over. We can expect to see some signs of growth, especially if Asian growth picks up," concluded Schussler.

Government, via Justice Minister Jeff Radebe and the Department of Trade and Industry, had just spoken at the Forum, which zoned in on placing consumer issues on the national agenda.