2024 – harder than expected, but feeling better

2024 was meant to herald better times. While the first half of the year was always going to remain tough with interest rates hovering at more than 20-year highs globally, July to December promised relief with declining inflation followed by at least six rate cuts seemingly ‘baked into’ US, UK and European cycles.

Geopolitical issues, including a higher oil price on the back of the war in the Middle East, have seen the descent in US inflation pause, stubbornly close to the finish line. This has pushed out US interest rate cuts (and therefore ours in SA as well) to September at least.

President Joe Biden, who probably deserves more credit for the current better-than-expected economic strength, will no doubt be disappointed, as earlier rate cuts could have cemented his second term. However, perceived cognitive decline might weigh too heavily on his campaign, making US elections at this stage too close to call.

Across the pond, the inflation decline in the UK and Europe has been more ‘compliant’, which should allow both to lead the US, with their first cuts expected next month. Having just emerged from a mild recession, the UK economy is starting to show signs of life. Any signs of growth, or early rate cuts, however, are unlikely at this stage to save Rishi Sunak or the Conservative Party in their elections later this year.

Improved economic health in these economies is important from an SA perspective, as they are all significant trading partners of ours. The better they feel, the more of our stuff they’ll buy, and the more tourists will come.

Also, adding to this improved outlook, is the fact that China, our biggest trade ‘client’, is also finally starting to look a bit better. After a rough post-pandemic period in China, any improvement in the country will significantly improve our prospects.

Back home, despite loud (and often scary) pre-election rhetoric flying around, the mood in SA is certainly better than the depths of depression we as a country found ourselves in this time last year.

Let me remind you that this time last year we’d just been through nearly 3 weeks of Stage 6 load-shedding, and going into winter, there were rumours that we may even face a complete grid collapse. On top of that, we were acting bizarrely ‘unneutral’ in the Russia-Ukraine conflict, and the Americans had just accused us of supplying weapons to Russia. Foreign investors gave up on us – they dumped our bonds, the currency collapsed, which pushed both inflation and interest rates up. The national mood reached the lowest level I’ve experienced in my professional career, with more talk of emigration than ever before.

But most importantly, and very simply, this year the lights have been staying on a lot longer than last year, and certainly more than expected. And we are assured by both government and big business that this is as a result of improved maintenance, less sabotage and massive investment in renewables, and not, as we would be quite entitled to believe, a brief pre-election respite.

Apparently, we can expect to average Stage 2 throughout winter, and be at Stage 1 by year-end. Next year, after 16 long, dark years of load-shedding, courtesy of government incompetence, mismanagement and corruption, we should be largely free of load-shedding.

That is enormously significant. There is nothing more confidence destroying, both for foreign investors as well as for us as South African citizens, than the lights going out. Suddenly, the vicious cycle that we’ve been labouring under – declining growth, jobs lost, fewer taxpayers, lower tax revenues and less investment, turns around and becomes virtuous – higher growth, more jobs, more taxpayers, increased taxpayer revenues and investment.

Happy days.

Add to that an improvement in ports and railways, which is expected to gradually improve into next year, and we may actually have some reasons for optimism.

There is of course the looming election hurdle, which we still have to clear. Fortunately, most analysts and surveys seem to be pointing to a mildly positive result (ANC coalition with a few smaller parties). The much-vaunted ANC-EFF coalition at a national level seems statistically unlikely, but then so was Brexit, so remain vigilant.

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