SA economy rebounds

Economic reform is hot on the agenda for South Africa after its economy contracted 7% in 2020 with deteriorations in the construction, transport, mining, services, metals, consumer durables and retail sectors.

Economists at trade credit insurer Atradius (www.atradius.co.uk) forecasts the South African economy will grow by 2.5% in 2021 and about 3% in 2022 due to a rebound of both domestic and external demand.  Whilst private consumption is set to increase by almost 4% this year due to improving consumer confidence; supporting a rebound of consumer durables and retail.  Meanwhile, increased demand for South African goods, with rising prices for raw materials supporting export revenues, is aiding the recovery of the mining sector.

Commenting on the report’s findings Damien Dawson, Southern Regional Manager for Atradius UK says, “The pandemic has accelerated the need for economic reform in South Africa which is now more firmly on the agenda.  In order to spur economic rebound, the government intends to combine a private-sector led infrastructure investment plan with a major public works programme centred on job creation. The main target areas include increasing energy supply, mainly solar and wind, from independent power producers and additional housing.”

“While economic recovery is on the horizon, the pandemic poses a real downside risk which is heightened by a slow vaccination rollout due to supply shortages and logistical challenges,” continues Dawson.  “With widespread immunisation not expected before the end of the year, there is an increased risk of a third wave of infections and subsequent brake on economic rebound.”

Additionally, the Atradius report states that South African imports and exports fell by around 16% and 10% respectively in 2020, but forecasts that imports will rise 10% in 2021 and around 8% in 2022, while exports are forecast to rise 2% in 2021 and around 7% in 2022.