Dark clouds for South Africa  

Asset management firm Futuregrowth has warned that South Africa’s growth prospects for the remainder of 2023 are a cause for concern, as investors are worried about the impact of ongoing blackouts on the country’s economy.  

The declining foreign shareholding of South African government bonds reflects a reduced risk appetite among foreign investors. The fear of a grid collapse and geopolitical missteps, such as allegations of South Africa aiding Russia with arms, have contributed to these concerns. However, analysts believe a grid collapse is highly unlikely and that the structure of the grid and contingency plans in place would mitigate the impact if it were to occur.  

Additionally, factors such as the weakening local currency, alleged supply of weapons to Russia, and potential impact on international trade have further dampened investor sentiment. Although reduced load shedding intensity and disinflation have improved market conditions, the overall economic outlook for the second quarter and the start of the 2023/24 financial year remains bleak, with uncertainties surrounding capital markets, interest rates, and consumer and business confidence.  

Nedbank predicts that while inflation is expected to decrease, global weather conditions may impact food inflation rates. The country narrowly avoided a technical recession in the first quarter, but annual GDP growth is expected to remain muted. 

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