South Africa trapped in low growth cycle hurt by inept politics

1. SOUTH AFRICA TRAPPED IN LOW GROWTH
CYCLE HURT BY INEPT POLITICS
K E V I N L I N G S
F E B R U A R Y 2 0 2 0

2. UNITED STATES MARKET

3. U S n o n - f a r m e m p l o y m e n t
Million
85
90
95
100
105
110
115
120
125
130
135
140
145
150
155
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
Source: US Bureau of Labour Statistics
3

4. 90
95
100
105
110
115
120
125
130
135
140
145
150
155
160
165
170
10
11
12
13
14
15
16
17
18
19
Age group 35 to 49
U S e m p l o y m e n t b y a g e
Index, 12-month moving average
Age group 55 and older
Age 70 and older
Source: US Bureau of Labour Statistics
4

5. Source: US Conference Board
U S c o n s u m e r c o n f i d e n c e
Index
20
40
60
80
100
120
140
04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

6. -20
-16
-12
-8
-4
0
4
8
12
16
20
24
28
32
36
40
44
48
52
56
60
11 12 13 14 15 16 17 18 19 20
Older people (55+) more confident
Young people (under 35) more confident
Source: US Conference Board
U S c o n s u m e r c o n f i d e n c e : y o u n g v s o l d e r
Index points (3-month average)

7. Source: US Federal Reserve
U S h o u s e h o l d s : n e t w o r t h
$ Billion
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
110000
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19

8. Source: S&P Case Shiller
U S h o u s e p r i c e s
US house price index, nominal, S&P Case Shiller
100
120
140
160
180
200
220
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

9. -0,5
0,0
0,5
1,0
1,5
2,0
2,5
3,0
2014
2015
2016
2017
2018
2019
Source: US Bureau of Labour Statistics
U S c o r e c o n s u m e r i n f l a t i o n
%y/y
Core inflation

10. W o r l d t r a d e v o l u m e s
%y/y
-3
-2
-1
0
1
2
3
4
5
6
7
2017
2018
2019
Source: Netherlands Statistical Bureau 10

11. -2
-1
0
1
2
3
4
5
6
7
2018
2019
Source: US Federal Reserve
U S i n d u s t r i a l p r o d u c t i o n
%y/y

12. Source: Johns Hopkins
C o r o n a v i r u s
Number of infections
0
3000
6000
9000
12000
15000
18000
21000
24000
27000
30000
33000
36000
39000
42000
45000
48000
51000
54000
57000
60000
63000
'20
Jan
'21
Jan
'22
Jan
'23
Jan
'24
Jan
'25
Jan
'26
Jan
'27
Jan
'28
Jan
'29
Jan
'30
Jan
'31
Jan
'1
Feb
'2
Feb
'3
Feb
'4
Feb
'5
Feb
'6
Feb
'7
Feb
'8
Feb
'9
Feb
'10
Feb
'11
Feb
'12
Feb
1 369 deaths
6 061 recovered

13. Source: Johns Hopkins
C o r o n a v i r u s v s S A R S
Number of infections
Coronavirus
SARS
0
3000
6000
9000
12000
15000
18000
21000
24000
27000
30000
33000
36000
39000
42000
45000
48000
51000
54000
57000
60000
63000
1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86

14. Source: Johns Hopkins
C h i n a t r a n s p o r t c o n g e s t i o n i n d e x

15. SOUTH AFRICAN MARKETS

16. Source: SA Reserve and STANLIB
S A G D P a n n u a l g r o w t h r a t e
%y/y
3,0
3,3
2,2
2,5
1,8
1,2
0,4
1,3
0,8
0,4
0,8
-1
0
1
2
3
4
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020

17. Weak export performance
Sustained deterioration in
government finances
Fragile SOE sector Slowing household income
Extremely low business
confidence
5
S o u t h A f r i c a
f a c i n g i m m e d i a t e
e c o n o m i c
c o n s t r a i n t s
17

18. -20
-15
-10
-5
0
5
10
15
20
25
30
35
40
45
17
18
19
Source: SA Revenue Services
S A g r o w t h i n e x p o r t s ( D o l l a r s )
%y/y

19. -1,0 -0,5 0,0 0,5 1,0 1,5 2,0 2,5 3,0 3,5 4,0
Latvia
Poland
Korea
Estonia
Slovenia
Czech…
Iceland
Hungary
France
Mexico
Denmark
Sweden
Australia
Switzerland
Canada
Norway
Israel
Germany
Austria
United States
Japan
Netherlands
United…
Spain
Italy
Russia
Greece
South Africa
Source: OECD (organisation for economic co-operation and development)
G r o w t h i n G D P p e r h o u r w o r k e d
%y/y, average past five years

20. Source: SA National Treasury
S A t a x r e v e n u e g r o w t h
% year-on-year, 12 month running total
-5
0
5
10
15
20
25
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Budget 2019/2020

21. Source: SA National Treasury
S A g o v e r n m e n t d e b t o u t l o o k
Rbn Fiscal years
41,1
43,7
46,5
48,9
50,6
52,7
55,6 56,2
57,8
58,9 59,7 60,2 60,1 59,9 59,3
40
42
44
46
48
50
52
54
56
58
60
62
64
66
68
70
72
74
76
78
80
82
84
12/13
13/14
14/15
15/16
16/17
17/18
18/19
19/20
20/21
21/22
22/23
23/24
24/25
25/26
26/27
27/28
MTBPS Oct 2019
2019/2020 Budget
February 2019

22. -0,5
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
4,0
4,5
2017
2018
2019
Source: South African Reserve Bank
S A c o n s u m e r r e a l d i s p o s a b l e i n c o m e
%, y/y, 4-quarter moving average, real

23. -6,0
-5,0
-4,0
-3,0
-2,0
-1,0
0,0
1,0
2,0
3,0
4,0
5,0
6,0
7,0
8,0
9,0
10,0
11,0
12,0
13,0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Source: Stats SA
S A r e t a i l s a l e s g r o w t h ( a n n u a l )
%y/y

24. 15
25
35
45
55
65
75
85
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Source: SA Bureau for Economic Research
S A b u s i n e s s c o n f i d e n c e ( B E R )
Index

25. Source: SA Reserve Bank
S o u t h A f r i c a c o r p o r a t e d e p o s i t s
R billion
250
290
330
370
410
450
490
530
570
610
650
690
730
770
810
850
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

26. Source: Stats SA
S o u t h A f r i c a h e a d l i n e C P I
%y/y
0
2
4
6
8
10
12
14
16
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

27. Source: SA Reserve Bank
S A o f f i c i a l i n t e r e s t r a t e s
%
4,5
5,5
6,5
7,5
8,5
9,5
10,5
11,5
12,5
13,5
14,5
15,5
16,5
17,5
18,5
19,5
20,5
21,5
22,5
23,5
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020

28. Consumer inflation
well under control
Modest improvement in private
sector maintenance capex
Government intention to restructure
SAA and revitalise Eskom.
Rand exchange supported
Increase in the number of people
prosecuted
South Afr ica:
Some positives
28

29. C o n c l u s i o n
SA credit rating likely to be revised
US Fed likely to keep rates steady,
but with additional liquidity
SA inflation well contained
US growth heavily supported by
consumer spending
SA economic growth
facing constraints
World growth negatively impacted
by US/China trade war

30. Source: Johns Hopkins
C o r o n a v i r u s
Number of infections
0
3000
6000
9000
12000
15000
18000
21000
24000
27000
30000
33000
36000
39000
42000
45000
48000
51000
54000
57000
60000
63000
'20
Jan
'21
Jan
'22
Jan
'23
Jan
'24
Jan
'25
Jan
'26
Jan
'27
Jan
'28
Jan
'29
Jan
'30
Jan
'31
Jan
'1
Feb
'2
Feb
'3
Feb
'4
Feb
'5
Feb
'6
Feb
'7
Feb
'8
Feb
'9
Feb
'10
Feb
'11
Feb
'12
Feb
1 369 deaths
6 061 recovered

31. D i s c l a i m e r
31
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All performance returns and ranking figures quoted are shown in ZAR and are based on data sourced from Morningstar as at 31 December 2019 and January 2020.
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return figures are the compound annualised growth rate (CAGR) calculated from the cumulative return for the period being measured. These annualised returns provide an indication of the annual return achieved
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