Economist Johann Els on SA’s growth prospects

South Africa's economic growth prospects have been a topic of discussion and debate throughout the year, with various forecast revisions and adjustments taking place. As early as March this year, Old Mutual Investment Group made a bold prediction that South Africa's economy would rebound by 5 percent in 2021. Now, months later, it seems like many in the economic world are starting to coalesce around this view. The man behind this optimistic number is Johann Els, the Chief Economist at Old Mutual Investment Group. In a recent interview on CNBC Africa, Els elaborated on the factors that led to this forecast and the revisions that have been made since then. One of the key factors that gave Old Mutual the conviction to predict a 5 percent growth rate for South Africa's economy was the nature of the lockdown last year and the subsequent reopening of the economy. The team at Old Mutual believed that this would lead to a short and sharp cycle of growth, similar to what was observed during the global financial crisis of 2008-2009. Additionally, global growth trends and the impact of commodity prices on South Africa's exports also played a significant role in shaping this forecast. As the year progressed, local recovery efforts, consumer spending, and the agricultural sector's performance further bolstered the outlook for a strong rebound in economic activity. Despite initial doubts and skepticism from others in the economic community, Old Mutual's forecast has been increasingly validated by the economic data that has emerged throughout the year. In response to the July riots and other unforeseen events, Old Mutual has had to make a few revisions to their initial forecast. The post-July riot period saw some impacts on third-quarter GDP growth, but these were offset by better-than-expected second-quarter GDP numbers. As a result, Old Mutual is now projecting a potential 5.6 percent growth rate for the year, with other analysts also revising their forecasts upwards. The conversation also touched on the impact of commodity prices on South Africa's economy, with Els noting that while the benefit from commodities may be slightly lower than before, it is expected to continue supporting the economy well into the next year. Looking ahead to the upcoming mid-term budget statement, Els emphasized the importance of keeping government expenditure in check despite the positive revenue growth driven by the stronger economy. He warned of the risks associated with politicians potentially increasing spending in response to the surplus revenue, highlighting the need for continued pressure on policymakers to maintain fiscal discipline. While there are concerns about potential election-related spending and social welfare initiatives that the country may not be able to afford, overall, the outlook for South Africa's economic recovery appears to be on an improving trend. As the year progresses, further data will provide more clarity on whether the 5 percent growth projection will be achieved and how the government navigates its fiscal policy moving forward.