Unrivalled understanding of the Sector’s
Economics…. Interview with
Chief Economist Dr Michael Ade
Q
A
: What is the current state of the South African economy compared
to where we were five years ago?
: The evolution of economic fundamentals from five years ago provides a mixed result
of the economic status of the country and the conclusion can generally be made that
the domestic economic performance has deteriorated over the period.
On the bright side, inflation is now within the target range, interest rates have been fairly
stable – increasing by just over 1 percentage point from five years ago – enabling forward
planning by businesses, export competitiveness is commendable and the trade surplus has
been consistently improving. Despite running a consecutive deficit on the current account
of our balance of payments with the rest of the world for more than a decade, the balance
has been improving in the years leading to 2017, thanks to the trade surplus.
However, over the same period economic growth has slowed down, trending to a level
below 2%, business and investor sentiments have plummeted, foreign reserves growth
and the level of foreign investment have tapered off, the soundness of the Government’s
finance is questionable (with increasing public debt), households are over-indebted and the
unemployment level – including youth unemployment (by means of a narrow or expanded
definition) – has worsened.
Based on a consideration of these fundamentals, it can be said that the country is slightly
worse-off compared to five years ago. However, there is a number of socio-politico-
economic changes taking place which gives reason to hope for the best in the short term.
Hopefully, the existing optimism can further improve on existing signs of domestic green
shoots or positive economic data and statistics.
Q
: What is the current state and challenges of the metals and
engineering sector compared to where we were five years ago?
A
: The challenges of the metals and engineering cluster are still prevalent. Domestic
demand is low when compared to five years ago, input costs have been increasing,
the exchange rate movement is still unpredictable, investment levels are low, collaboration
amongst various stakeholders and the return on investment are still poor.
Michael Ade
Contemporaneously, the level of de-industrialisation has increased as companies struggled
to claw back losses from the 2014 production crises. This is also evidenced by the number
of steel mills, steel plants and factories (including smelters and foundries) that have closed
down, the high levels of jobs losses, low operating surpluses, capacity under-utilisation and
Chief Economist
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