We have held a balanced view on South Africa for some time, but have become more positive over the last few months. Cyclically, South Africa is well-positioned to benefit from significant global tailwinds and increased local economic activity as the lockdown eases. Structurally, South Africa’s growth outlook remains weak and burdened with high levels of government debt. However, we are encouraged by the government’s Economic Restructuring & Recovery Plan and progress on the anti-corruption front. Should reform and anti-corruption momentum continue, South Africa may achieve a new growth trajectory, one that could open up opportunity and surprise investors given, the current low level of confidence.
South Africa has been stuck in a confidence crisis largely due to policy uncertainty, fiscal concerns and corruption being deeply rooted within the ruling party. Growth has remained below par and below many of our emerging market peers, and any prospects of future growth rebound appears to be constrained due to:
1. an unstable energy supply;
2. damage done by the national lockdown; and 3. lack of structural reforms.
3. lack of structural reforms.
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