BofA: SA’s economic outlook less gloomy

South Africa's economic landscape has been under the microscope recently, with key indicators such as the GDP print and the current account numbers being closely watched. Bank of America Global Research has provided insights on the investment climate in the country to shed some light on the situation. Tatonga Rusike, Sub-Saharan African Economist at Bank of America, shared his thoughts on various aspects of the economy in a recent interview with CNBC Africa. Rusike started by addressing the recent second quarter GDP print, which came in at 0.6%. He mentioned that the initial projections for South Africa's economic growth in 2023 were exceedingly low, largely due to the impacts of power cuts experienced through ESCOM. However, there has been a surprising positive growth in the first and second quarters, with the economy showing resilience despite challenges. Sectors such as mining and manufacturing saw improvements, contributing to the overall growth. Although there were positive aspects, Rusike noted concerns about the pace of growth going forward, particularly in consumer spending. One of the major obstacles highlighted by Rusike was the issue of load shedding and infrastructure investment delays, with a specific mention of the Transnet freight rail system. The extended periods of load shedding in 2023 have significantly affected the economy, hindering the transportation of bulk commodities like coal and iron ore. Furthermore, the decline in commodity prices this year has added pressure on the current account, leading to deficits. To address these challenges, Rusike suggested fast-tracking investments in the road sector and reforming Transnet to enhance its efficiency in handling bulk commodities. The conversation shifted towards China's impact on the South African economy, given its status as a major trading partner. Rusike emphasized the importance of China's role in influencing commodity prices, particularly affecting South Africa's exports and imports. With China facing its own economic challenges, the ripple effects on commodity prices have been felt in South Africa. However, the presence of other high-value commodities like precious metals has provided some support amidst the downturn in bulk commodity prices. Looking ahead, Rusike presented a more optimistic view of South Africa's economic outlook, forecasting a full-year economic growth of around 0.7%. While acknowledging the weak consumer sentiment and potential inflation risks, he highlighted the need for fiscal reforms to stabilize the economy. He emphasized the importance of maintaining stable public finances, suggesting measures such as fiscal consolidation and revenue enhancement to navigate the current economic environment. In conclusion, while challenges persist, there is a glimmer of hope on the horizon for South Africa's economy. By addressing key issues like infrastructure investment, commodity price fluctuations, and fiscal reforms, the country can work towards a brighter economic future. As the nation braces for the upcoming mini-budget speech, there is a sense of cautious optimism tempered with the recognition of the hurdles that lie ahead.