We see the South African economy continuing its uneven recovery over the medium term, with real GDP growth expected to stand at a relatively tepid 3.9% in 2012. Although the consumer sector is showing signs of life, the supply side is lagging behind, and there are widespread concerns that the recovery is not sufficiently broad based. We expect that South Africa´s repo rate will be kept steady at 5.50% going into 2012. That said, we acknowledge risks of a rate cut, if the eurozone descends further into crisis.

Policy uncertainty is rising owing to question marks over whether President Jacob Zuma will secure another term in office, as well as the growing influence of Julius Malema. The latter´s calls for nationalisation of the mining sector are creating a sense of unease among investors, even though nationalisation is a highly unlikely scenario.

Major Forecast Changes
Given weak Q211 GDP data, as well as various concerns regarding the global economic recovery, we have revised down our forecasts for South African real GDP growth, to 3.2% in 2011 (from 3.5% previously) and 3.9% in 2012 (4.0% previously).

Key Risks To Outlook
A sustained bout of global risk aversion with an attendant sharp outflow of portfolio funds.
A sudden uptick in domestic political risk.
A sustained period of high oil prices.

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South Africa Business Forecast Report Q1 2012 – Market Report – a new country guide report on companiesandmarkets.com

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Mike King

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