We attended the Stanlib Roadshow, Decoding 2019.
Their Economist, Kevin Lings gave in-depth feedback on the world economy, the good and the bad.
Our takeaways from his presentation are the following:
While there are positives in the World Economy there are still a lot of uncertainties.
The World economy is slowing;
South Africa can improve in world weakness but will be more difficult.
There is a lot of policy uncertainty in the world and it is at the highest level of uncertainty of all time.
This uncertainty let the world economy lose momentum towards the end of last year.
If the following 2 areas improve, the confidence in the economy will return and can recreate momentum in markets:
1. Global trade
Trump initiated the Trade war because he was feeling that the US got a bad deal.
He went on the attack against Mexico, Europe and now China.
China is not going to sit back without a fight.
If China and the US can create a deal it will calm the world economies.
There is a clear positive correlation between globalization and global growth.
The new trend of nationalism dampers global growth.
South Africa is an open economy and trade a lot. We need less regulation in world markets for us to thrive.
2. Chinese growth
China economy has done very well in a short period of time.
This growth did come at a cost as they sit with a lot of debt. Almost 300% dept of Gross national product.
Most of the debt sits at the government and SOEs
The government wants to step back and want the private sector to be more active.
Citizens need to go shopping more.
Have to transition from government spending to consumer spending.
If get transition correct they will become worlds biggest economy otherwise they are just another emerging market.
The Rand is the best performing currency in 2019.
What did we do right? Nothing
Money is flowing to emerging currencies and South Africa have good interest rates. The Rand strength is driven by global factors not South African factors.
South Africa Economy
1 % growth average over the last 4 years.
The only solution for the economy to grow faster is to instill Business confidence. If Businesses are confident in South Africa, they will invest in the country and that will lift employment.
State of the nation was positive but only a speech, we now need activity.
What needs to improve to instill business confidence?
• Better Managed State-owned enterprises
• Fiscal discipline. Tito Mboweni will do a good job.
• Land expropriation issue needs to be resolved.
• Private/ public partnerships.
• Prosecution of key officials.
To summarise Kevin Lings is feeling cautiously optimistic about the World and South African Economy