South Africa’s economy is not growing at a speed experienced by other major emerging markets. The growth levels for 2020 projected by major financial institutions are disheartening. The World Bank has cut the country’s growth forecast. Moody’s also cut growth forecast this month to 0.7% - citing a stalling economy and widespread power outages.
In the midst of this dismal growth under Cyril Ramaphosa’s presidency – unemployment remains at alarming levels. And at this point, sadly, government’s actions indicate that this staggering unemployment will be with us for a long while.
All the economic fundamentals are bad in South Africa. Consumer and business confidence are at their worst levels in years. Consumers are not buying goods and services at a scale that bolsters growth. This is damaging in an economy that, amongst many things, needs stronger consumer spending and confidence in order to grow speedily.
Higher and sustained business confidence is a very crucial element of a healthy economy. For businesses to expand and create more jobs – improved confidence is a necessity.
One of the very important economic indicators is the Purchasing Manager’s Index (PMI). Economists use PMI to gauge the levels of productivity in manufacturing and service sectors. PMI tends to respond to consumer demand – and is a good indicator of the country’s economic health. This is one of the most watched statistic indicators by both local and international investors. A reading of above 50 of the PMI indicates an improvement in manufacturing and services; and a reading of below 50 indicates a deterioration.
According to Absa, South Africa’s PMI has slipped deeper into contraction. This shows weak consumer demand weighing on the already ailing economy. The contraction causes great harm to our efforts to bolster growth and job creation in manufacturing.