From a lower infection rate to an unprecedented rise in South Africa’s GDP for the second quarter of 2021, the start of September has brought some welcome surprises. Almost 18 months after President Cyril Ramaphosa announced our country would be entering a hard level 5 lockdown, there’s at last an end in sight to South Africa’s lockdown period. In the early weeks of September, the country’s infection rate decreased significantly in all major provinces, and the vaccination rate increased, compelling the South African government to move to a level 2 lockdown. The new lockdown regulations are in an effort to alleviate pressure on struggling sectors and put South Africa on a positive growth trajectory. The level 2 regulations are as follows: curfew will now be between 2300hrs to 0400hrs, with one additional hour for businesses to remain open, offsite alcohol sales will now be permitted on Fridays, and the number of persons allowed for indoor events is now 250. The country will remain in level 2 lockdown for two weeks and if infection rates are still low, Ramaphosa may consider moving South Africa to a lower lockdown level.
On the data front, GDP data recently released showed our economy grew by 1.2% in Q2, and recovered by 19% since hard lockdown commenced in 2020. This is a positive sign for South Africa’s economy, but this estimate does not take the civil unrest of July or the third wave of the virus into account, therefore there are expectations that GDP estimates for Q3 will be lower than Q2. Furthermore, recent unemployment data shows the number of jobless people in South Africa has increased since Q1, and is the highest recorded unemployment rate our country has seen to date. In light of this, there’s uncertainty around how well our economy is performing, but with our government making a concerted effort to help private businesses, we may still be able to conclude this year on a more positive note.
FNB and RMB also released confidence indices this week, and while the RMB/BER Business Confidence Index (BCI) decreased to 43 in Q3, the FNB/BER Consumer Confidence Index (CCI) was somewhat more optimistic, reporting confidence increased to -10 (from -13) in Q3, which is where South African consumerism was prior to the COVID-19 pandemic and lockdown. However, both the BCI and the CCI estimates are cause for concern as business and consumer confidence are primary investment indicators for global investors.
In other news, South Africa’s financial markets have been the talk of the country in recent weeks as Naspers and Prosus stock prices have continued to decline on the JSE market. This comes as China starts to implement more stringent regulations in their IT sector. To worsen matters, South Africa’s key metal commodities suffered a decline in prices, with iron ore and palladium taking the hardest hits. Irrespective of these setbacks, the Rand exchange rate remains resilient, closing at R14.15/$ last week, but the Bureau of Economic Research (BER) still has expectations of a weaker Rand in 2022 if the current commodity prices persist.
There’s a lot of uncertainty surrounding us, but don’t give up hope and keep pushing, and if you find you need a helping hand, please reach out to the COBRA Initiative for financial and Business Support.
