The Civil Engineering Contractor January 2018 | Page 3

COMMENT Annus horribilis – roll on 2018 W Kim Kemp - editor [email protected] hen all is considered, 2017 can definitely rate as annus horribilis (or a ‘horrible year’). Q1 2017 started with promise as the Rand Merchant Bank (RMB) business confidence index compiled by the Bureau for Economic Research rose to 40 points from 38 in the last quarter of last year, remaining however, below the neutral 50-mark. The index has only been above the 50-mark on four occasions since 2008, a pattern RMB said was consistent with an ‘economy treading water’. Despite this, according to BankservAfrica Economic Transaction Index (BETI), March was the third consecutive month of real gains after taking inflation into account. At the time, Mike Schüssler, chief economist at Economists dotcoza, told Fin24, “Ultimately, looking at the economy, it was looking better than in the fourth quarter of last year and brought a lot of hope for a better growth rate in 2017.” Hope it seems, springs eternal. Then the unthinkable happened. A cabinet reshuffle saw the sacking of nine ministers and six deputies, including the ignominious ejection of the finance minister, Pravin Gordhan, and the deputy finance minister, Mcebisi Jonas – along with throwing South Africa’s reputation in the dumpster. Still punch-drunk, on 7 April Fitch Ratings downgraded South Africa’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to ‘BB+’ from ‘BBB-‘, with a ‘stable’ outlook. The downgrade reflected Fitch’s view that the cabinet reshuffle, would likely result in a change in the direction of economic policy and they weren’t too far off with this assumption. Then the #GuptaLeaks happened and State Capture became an official buzzword. In this shadow, in June, South Africa avoided being downgraded to junk by Moody’s. Instead the ratings agency downgraded the country one notch with a negative outlook – one notch above sub-investment grade or junk status. The key drivers for the downgrade include: 1. the weakening of South Africa’s institutional framework; 2. reduced growth prospects reflecting policy uncertainty and slower progress with structural reforms; and 3. the continued erosion of fiscal strength due to rising public debt and contingent liabilities. Also in June, the stats agency said South Africa slipped into technical recession for the first time since 2009 after Africa's most developed economy contracted by 0.7% in the first quarter after shrinking by 0.3% in the fourth quarter of last year. Could it get any worse? All the while, against a backdrop of SOEs scrabbling for funding as corruption and graft continued unabated, while service delivery strikes paralysed business and the worst drought in 100 years shrivelled both landscape and sprit, the water infrastructure crumbled, with sewage increasingly reported to be present in our drinking water. Come September however, we limped out of the technical recession, after the economy expanded an annualised 2.5% in the second quarter of the year and in Q3 2017, the RMB/ BER Business Confidence Index increased by six points to 35, after reaching the lowest since 2009 in the previous period. Business activity in general did not deteriorate further as no major new unsettling political events occurred during the survey period – which was nothing short of miraculous. Then in October, the second cabinet reshuffle that year happened, further jeopardising our ailing reputation on the global stage, while disbelieving South Africans looked on in horror. In this cataclysmic environment, it is no small wonder that infrastructure and construction generally took a nose-dive, with the private sector hanging on to its purse strings, not venturing to invest, while the government continued to woo the sector, urging and pleading for it to at least involve itself in PPPs. At the time of writing, the ANC 54th National Conference was still due to take place and a numbed South Africa was waiting to hear its fate. Roll on 2018, it can only be better, can’t it? nn CEC January 2018 - 1