French international banking group BNP Paribas has published a research note analyzing South Africa’s outlook for 2021 and major events to watch.
After a record slowdown in growth and activity in 2020, the group said it expects the main focus in 2021 to be on the strength and sustainability of the recovery in South Africa. However, he doesn’t expect this to be an exceptional year for the country.
“We have long believed that South Africa’s recovery in 2021 would disappoint most expectations.
“A fundamental part of our thinking is that many of the structural weaknesses that pushed the economy into recession before the pandemic, particularly the lack of stable electricity supply, will slow the pace of the recovery.
“A successful rollout of the vaccine to the large population already appears to be hitting some hurdles as the country faces a severe second wave and a new strain of infections, risking reverting to stricter lockdown regulations at first. trimester”.
Below, the group has provided a calendar of events South Africans should watch out for.
Another hard lock
The country entered a “level 3” lockdown from December 29, and as widely expected, this was extended in an update released on January 11.
To keep the economy as open as possible, this level 3 is a watered-down version of the one introduced in March, BNP Paribas said.
However, regulations again ban the sale and public consumption of alcohol, and are stricter in terms of curfews (9:00 p.m. – 5:00 a.m.) and restrictions on international travel. “The activity therefore seems to have started well this year.”
“Our baseline forecast does not assume that a hard foreclosure will be implemented because we believe economics will carry more weight than in the initial wave.
“While infections seem to be getting out of hand, however, we cannot rule out stricter regulations with greater economic impact.” It said.
BNP Paribas said the biggest fiscal drag for the South African economy would likely come from another year of unstable electricity supply, with the load shedding seen as one of the main reasons for a lukewarm rebound.
Despite the slump in domestic demand and a drastic reduction in activity on the supply side, Eskom implemented a record load shedding in 2020, with more than 1,600 GWh of power generation taken offline.
CSIR’s energy supply estimates suggest that the supply gap could be more than 60% larger this year.
“Large areas of load shedding therefore seem inevitable this year, in the absence of a clear improvement in Eskom’s energy availability factor, which fell to only 55% in the first weeks of January,” BNP Paribas said.
Analysts estimate that the South African Reserve Bank will largely keep policy rates at 3.5% for the whole of 2021, with little reason to return to normalization again this year.
“We believe the SARB will prefer to keep a firm footing on the accommodation pedal, although we don’t rule out the possibility of further modest interest rate cuts early in this year, especially if a more severe second wave causes a new hard and prolonged lockout. measures. “
BNP Paribas says the government’s pay deal with the public sector will likely remain a major point of contention in 2021 and could lead to more strikes.
“We see a good chance of widespread strike action as early as February, perhaps tempered by Covid-19 restrictions and existing high levels of unemployment,” he said.
The agreement could also have an impact on the tripartite alliance between the ANC, Cosatu and the South African Communist Party.
BNP Paribas said the Cosatu trade federation has lost a large number of members in recent years, but said the wage deal is likely to dominate the agenda.
BNP Paribas said the ANC had historically performed worse in local elections than in national elections – and that its performance in local elections was declining.
However, it is safe to predict this as a continuing trend in 2021 – mainly due to the current turmoil within the Democratic Alliance, but also due to the apparent popularity of President Cyril Ramaphosa.
The group also expects little economic or political innovation from the Economic Freedom Fighters.
“We believe the ANC might see this year’s elections as a chance to reclaim or consolidate its position, especially in politically and economically important metropolitan municipalities.
“In areas where the ANC cannot obtain a majority in local elections, we believe that the ANC may be able to rule in alliance with smaller parties.
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