South Africa is poised for a July rate hike as a result of some inflationary pressures, a report by Nomura Economics Insights.
According to Nomura, “South Africa ‘hub’ idea for investment into the rest of Africa was now very much dead for manufacturing.”
(READ MORE: S.African short-term rates jump as market sees domestic rate hike)
“Significant concerns remain with the public sector pay settlement eroding allocated reserves in the coming years, as well as mounting concerns on the effectiveness of SARS, which is in the midst of so many political scandals currently," read part of the report.
“SARS is important because a decent chunk of revenue increases pencilled in rely on efficiency gains that are basically the preserve of SARS – that had until now been one of the shining examples of a well-structured state entity.”
The report had some positives saying the country had a highly entrepreneurial millennial generation emerging from townships with SMEs and social enterprises to solve South Africa’s problems from the bottom up.
“However, they are struggling with scalability under the current business and labour regulatory regime and the lack of capacity (or in many cases willingness) of the state to partner with,” said the report.
“These millennials highlight the need for a truly developmental state, were such enterprises can properly partner with the state in driving growth. However, we see little change in attitude by the government soon.”
The report said impending elections had seen the ruling ANC pushing more radical transformation of the provincial institutions to drive efficiency and delivery.
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“The wakeup call from last year’s election’s close call in the province for the ANC has clearly been heard therefore. This means some real challenge may well face the opposition DA in Tshwane (Pretoria) and Johannesburg metros in the local elections next year, but actually it increases the chances also of seeing a fascinating ANC/DA coalition emerge,” said the report.
“Such a move risks reinforcing support for the KZN faction of the ANC; however, in the electoral conference in 2017. However, it shows that actually the DA Western Cape is not the only place to watch in terms of efficiency of the state.”