Phumlani presented to his Corporate Services team at Sasfin in May 2020 - on South Africa's economy amidst COVID-19 pandemic.

1. A look at South Africa’s economy
amidst COVID-19 pandemic
Phumlani M. Majozi

2. The state of South Africa’s
economy before COVID-19
• By the end of 2019 Ramaphoria had long dissipated
• Consumer and business confidence had gone back to record lows
• Dismal economic growth – marked by two technical recessions
• Unemployment rising and now at staggering levels – approaching
30% if you exclude those who have given up looking for work
• Private and public sector investments were in tatters
• Foreign sell-offs in JSE equities and government bonds
• Rising government debt and budget deficits – a dire fiscal situation
that had hurt South Africa’s sovereign credit ratings with S&P and
Fitch
• State-owned enterprises a financial mess e.g. Eskom, SAA, Denel
• Power outages across the country

3. Phumlani M. Majozi
South Africa’s economy underperformed the world’s

4. Change in gross government debt for various emerging
market economies 2008–2019
Phumlani M. Majozi

5. Where we are right
now
• Difficult to give exact numbers because of the lockdown, Stats SA
says
• But in February, Finance Minister Tito Mboweni projected that the
consolidated budget deficit would widen to 6.8 percent of GDP this
year
• Amidst COVID-19, S&P says fiscal deficit could widen to an all-time
high of 13.3 percent of GDP
• The South African Reserve Bank (SARB) has cut interest rates by
about 42% this year with the intention to boost the economy
• Government announced R500 Billion stimulus package – partly
financed through debt
• S&P and Moody’s have already downgraded our credit sovereign
rating to junk status this year
• S&P on Friday said the economy would contract by 4.5% this year
due to lockdown restrictions. This would be below the 7%GDP
contraction forecast by the SA Reserve Bank last week
Phumlani M. Majozi

6. Moving to Level 3 and
reopening the economy
• The Bureau for Economic Research (BER) says that Level 3 provides for
more economic productivity with more sectors reopening – including
schools
• The BER further projects that overall levels of activity will remain
notably below what we saw before the pandemic - for the following
reasons:
• The move to Level 3 is not like a flick of a switch. Companies will be
asked to phase in the reopening and to put in place all the necessary
health precautions
• Some industries will remain closed under Level 3
• A number of COVID-19 hotspots in the major metropolitan areas have
been identified
• The president warned that the pandemic in SA will get much worse
from here before it gets better
• No timeline was provided for how long Level 3 could last – so there’s
uncertainty in that aspect
Phumlani M. Majozi

7. Looking ahead
• Mboweni will next month table an adjustment budget, which will
account for the impact of COVID-19 on the fiscus. Expect high
levels of projected deficits and government debt from the
minister
• With the economy being reopened – which will result in demand
slowly coming back - and the benchmark interest rate already
lowered by more than 40% this year to 3.75% - don’t expect
further cuts in rates in the second half of 2020
• The ratings agencies will keep the country in junk status for the
foreseeable future. Things will only change for the better when we
see real, tangible reform
• The economic data for the second quarter will be horrible when
released by Stats South Africa
• While the economy will contract this year, the general consensus is
that it will bounce back next year. SARB projects 3.8% economic
growth in 2021 – and 2.9% in 2022
Phumlani M. Majozi

8. Mitigating risks in your life
amidst dire economic
outlook
• Stay calm
• Invest, invest, invest or save, save, save where possible
• Enhance your skills (do those online courses) to remain
competitive in a tough labor market
• Expand your network
• Take opportunities as they come
• Try to multiply your sources of income
• You are lucky to work at Sasfin. Be grateful!
Phumlani M. Majozi

9. Thank you!
Contact: info@phumlanimajozi.com
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Website: www.phumlanimajozi.com