South Africa Country Risk Report Q2 2015
Major Forecast Changes:
- ANC policy is likely to shift left over the course of the next 18 months as the party attempts to fend off a challenge from populist opponents, and to stem the loss of support owing the electorate's frustrations with public service delivery.
- The South African economy will benefit from lower oil prices, and we have upgraded our 2015 real GDP growth forecast to 2.5% from 2.1% due to oil price declines. Private consumption and, to a lesser extent, investment will be the main beneficiaries of lower oil prices.
- The South African Reserve Bank will keep the repo rate on hold at 5.75% through 2015, even while the US Federal Reserve hikes rates by 50 basis points. Benign inflationary trends and weak economic growth will prompt the Monetary Policy Committee to become dovish.
- The rand will continue to depreciate against a strong US dollar over the course of 2015. With much of the bad news about the economy priced in, and with oil prices heading lower, the pace of the declines will be less than that seen in 2013 and 2014.
Key Risks To Outlook:
- We have upgraded our 2015 real GDP growth forecast to 2.5% from 2.1% previously.
- We have changed our forecast for the 2015 current account deficit to 3.6% of GDP from 4.7% previously.
- We have revised down our 2015 average inflation forecast to 4.7% from 6.0% previously.
- A sustained bout of global risk aversion with an attendant sharp outflow of portfolio funds. This would threaten South Africa's balance of payments.
- A sudden uptick in domestic political risk, such as an escalation of the industrial unrest that blighted various sectors in 2013.
The South Africa Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in South Africa. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.
An influential new analysis of South Africa's economic, political and financial prospects through end-2019, just published by award-winning forecasters, Business Monitor International (BMI).
The South Africa Country Risk Report by Business Monitor International (BMI) includes four major sections:Economic Outlook,Political Outlook,Operational RiskandKey Sector Outlook.
- Forecast the pace and stability of South Africa's economic and industry growth through end-2019.
- Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
- Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
- Contextualise South Africa's country risks against regional peers using BMI's country comparative Risk Index system.
- Evaluate external threats to doing business in South Africa, including currency volatility, the commodity price boom and protectionist policies.
How will the South Africa' economic policy-making and performance impact on corporate profitability over 2015-2019?
BMI provides our fully independent 5-year forecasts for South Africa through end-2019 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.
Economic Outlook Contents
The South Africa Country Risk Report features BMI's forecasts with supporting analysis for 2015 through to end-2019, set against government views and BMI's evaluation of global and regional prospects.
Key Areas Covered:
- Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
- BMI's comprehensive Risk Index system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.
- Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
- Balance of Payments - trade and investment, current and capital account.
- Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
- Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
- Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
- Foreign Direct Investment - approvals, inflows and climate.
- External Debt - debt profile (short and long-term plus public and private sector obligations).
- Global Assumptions - forecasts for each year to end-2019 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.
- Rely upon BMI's 100% independent forecast scenarios for South Africa and underlying assumptions - we take no advertising and are privately-owned.
- Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on South Africa, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
- Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.
What are the political risks to doing business in South Africa over the next 5-years?
BMI's South Africa country Risk Index evaluates the short- and medium-term threats to political stability.
Political Outlook Contents
- SWOT Analysis for the South Africa Market - Political Strengths, Weaknesses, Opportunities and Threats facing South Africa.
- Political Stability and Risk Assessment - BMI's Risk Index assesses explicit short- and long-term risks to political stability; latest positioning and trends for South Africa's risk are compared with regional and global averages.
- Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
- Long-Term Political Outlook BMI examines the structural risks to the stability of South Africas political system and the dominant public policy issues likely to affect decision-makers, and outlines scenarios for how the state could evolve in the medium to long term.
- Benchmark South Africa's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
- Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
- Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.
What are the current operational risks and difficulties associated with doing business in South Africa?
The Operational Risk section gives an evaluation of current risks and difficulties associated with operating in the market. It also provides a brief overview of the regional Operational Risk Index which benchmarks South Africa against its neighbours.
Operational Risk Contents
The chapter provides a summary of the main threats in the country, within:
The report also drills down in greater depth to address key issues in one of the following segments most critical to the market:
- Labour Market Risk (Education; Availability of Labour; and Labour Costs)
- Logistics Risk (Market Size and Utilities; Quality and Extent of the Transport Governance)
- Trade and Investment Risk (Economic Openness; Government Intervention; and Legal Risks)
- Crime and Security Risk (Crime; Terrorism; and Interstate Conflict risks).
- Transport network, economic openness, cost and availability of labour, crime risks, bureaucratic environment, market size and utilities, and interstate conflict.
- Assess your companys exposure to country specific operational and business risks, using BMIs insight on the current dangers of operating in the market.
- Evaluate South Africas risk profile against its regional peers, helping you understand the markets strengths and weaknesses in relation to other countries.
Key Sector Outlook*
Which industry sectors in South Africa will grow fastest, and where are the major investment opportunities in the market?
BMI identifies investment opportunities in South Africa's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.
Key Areas Covered:
- Market Overview - Size and value of each industry, including recent sector developments and major industry key performance indicators (KPIs) that have impacted company performance.
- 5-year Industry Forecasts - Forecasts for each year over 2015-2019, using BMI's proprietary industry modelling technique, which incorporates key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across and within each industry.
- Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.
- Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
- Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.
Key Forecast Changes
Key Risks To Forecast
Chapter 1: Political Outlook
BMI Political Risk Index
ANC Policy Being Pushed To The Left
ANC Policy Being Pushed To The LeftANC policy is likely to shift left over the course of the next 18 months as the party attempts to fend off a challenge from populist
ANC policy is likely to shift left over the course of the next 18 months as the party attempts to fend off a challenge from populistopponents, and to stem the loss of support owing to the electorate's frustrations with public service delivery
Table: Political Overview
Long-Term Political Outlook
Political Trials And Tribulations Over The Coming Decade
Political Trials And Tribulations Over The Coming DecadeMany issues threaten South Africa's political stability over the long term, not least the inequalities still stemming from the apartheid era
Although our core scenario envisages no major change to the political backdrop, we present a number of alternative scenarios
Chapter 2: Economic Outlook
BMI Economic Risk Index
Small Boost To Growth From Lower Oil Prices
Small Boost To Growth From Lower Oil PricesThe South African economy will benefit from lower oil prices, and we have upgraded our 2015 real GDP growth forecast to 2
Table: Economic Activity
ZAR: Depreciation To Continue In 2015
ZAR: Depreciation To Continue In 2015The rand will continue to depreciate against a strong US dollar over the course of 2015
With much of the bad news about the economypriced in, and with oil prices heading lower, the pace of the declines will be less than that seen in 2013 and 2014
Table: CURRENCY FORECAST
Rate Hold View Gaining Traction
The South African Reserve Bank will keep the repo rate on hold at 5
75% through 2015, even while the US Federal Reserve hikes ratesby 50 basis points
Table: Monetary Policy
Key Global Themes For 2015
We expect several global macroeconomic and market themes to play out in 2015, including the return of sovereign debt risk, the
We expect several global macroeconomic and market themes to play out in 2015, including the return of sovereign debt risk, thecontinuation of emerging market currency dilemmas, and the ramifications of a new era for oil prices coming to the fore
Emergingmarket reformers will be outperformers, the US will stand alone in macroeconomic terms, and China's reform drive may spell instability
market reformers will be outperformers, the US will stand alone in macroeconomic terms, and China's reform drive may spell instabilityfor the global economy
Chapter 3: 10-Year Forecast
The South African Economy To 2024
Underperformance Among EM Peers Ahead
The South African economy will grow at a slow pace of around 2
Power shortages, industrialaction and divestment in the mining sector will weigh on economic expansion, resulting in long-term economic underperformance versus
action and divestment in the mining sector will weigh on economic expansion, resulting in long-term economic underperformance versusemerging market peers
Table: Long-Term Macroeconomic Forecasts
Chapter 4: Operational Risk
Operational Risk Index
Table: Operational Risk
Availability of Labour
Table: Sub-Saharan Africa - Availability Of Labour Risks
Table of South Africa's Top 10 Source Countries For Migrant Workers, '000
Tab le: Lab our Force By Industr y, '000
Table: Sub Saharan Africa Crime Risks
Table: Crime Statistics
Chapter 5: Key Sectors
Table: Autos Total Market - Historical Data And Forecasts
Table: Motorcycle Market - Historical Data And Forecasts
Food & Drink
Table: Food Consumption Indicators - Historical Data & Forecasts
Table: Mas Grocery Retail Sales By Format - Historical Data & Forecasts
Other Key Sectors
Table: Oil and Gas Sector Key Indicators
Table: Pharma Sector Key Indicators
Table: Infrastructure Sector Key Indicators
Table: Telecoms Sector Key Indicators
Table: Defence and Security Sector Key Indicators
Table: Freight Key Indicators
Chapter 6: BMI Global Assumptions
New Era For Oil
Table: Global Assumptions
Table: Developed States, Real GDP GrowtH, %
Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
Table: Emerging Markets, Real GDP Growth, %
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