The violence that gripped South Africa in early July is just one example of political and security threats facing Sub-Saharan African economies over the coming year. The lingering effects of the unrest will undermine already-weak customer sentiment and aggravate economic malaise. However, while this trend could result in moderately slower GDP growth over the coming year, particularly in Gauteng and KwaZulu-Natal, South Africa’s economy as a whole does not face severe risk of disruption through the end of this year.
To help inform your 2022 strategic planning efforts, we did a deep dive into South Africa’s market updates, key developments, and forward-looking trends. Read the full SSA Market Monitor for a full country-specific breakdown of SSA’s economic performance.
- Widespread violence erupted on July 9 across large swaths of eastern and northern South Africa. It was triggered by outraged supporters of former President Jacob Zuma, who was jailed on July 8 on contempt-of-court charges. Many businesses reported severe supply chain disruption and the destruction of their warehouses, so businesses should prepare for recurring disruptive protests in pro-Zuma heartlands. The disruption will cause a further slump consumer spending and domestic and foreign investor sentiment.
- The economy is expected to expand by 2.8% YOY in 2021, representing a stabilization rather than a healthy rebound in activity. An uptick in exports throughout H1 2021 and the government’s reluctance to introduce extremely tight COVID-19 commercial restrictions will support growth. However, electricity shortages, sharp cuts to government spending, a depressed tourism industry, and the recent political violence that undermines foreign investor sentiment will contribute to the economy’s lackluster outlook. In this environment, businesses should focus on resilient industries, including mining and agriculture.
- The rand will continue to exhibit improved stability compared to 2020 despite recent unrest. Strong export growth, weak import demand, and improving global sentiment toward emerging markets will buoy the rand, which will average 15 per dollar in 2021 and 15.9 in 2022.
- Businesses should work with local partners—for example, through joint scenario planning or contingency building—to ensure their local partners are prepared for acute but short-lived periods of operational disruption during flashpoints of unrest.
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