Economist Dawie Roodt warned that South Africans should brace for a rough ride with high inflation, a weak currency, high interest rates, and political and financial uncertainty.
Roodt, the chief economist at Efficient Group, is an award-winning economist and a foremost expert in South African financial matters.
He explained that the country has a substantial fiscal deficit, and the day will come when the private sector refuses to fund the state further.
“The private sector will withdraw its funding to plug the fiscal deficit gap. They are already doing that,” he said.
“Within the next two to three years, the private sector will say, ‘enough is enough’ and stop funding the state. Many bad things will then happen.”
If the private sector takes its money out of the country, long-term interest rates will shoot up, and the rand will come under pressure.
The rand has already weakened, and long-term interest rates are already high, but Roodt warned it could worsen.
“I can easily see the rand going to R25 or R30 to the US dollar in the next two to three years. Long bonds can go to 25% to 20%,” Roodt said.
He added that inflation could rise from the current 5% to well above 10% amidst the state’s poor financial situation.
“The next five years in South Africa is going to be a rough ride,” Roodt said.
Apart from economic and financial challenges, the country is also facing the collapse of state-owned enterprises and local authorities.
“The ANC government has run local governments, state-owned enterprises, and the national accounts into the ground,” Roodt said.
“Most of the local authorities are a complete mess. The state-owned enterprises are coming to an end. They are just dying,” he said.
With the ruling ANC expected to remain in power for the next five years, it is unlikely that anything will change. In fact, will likely get worse.
Roodt previously warned that the combination of rising unemployment and poverty and increasing food and energy prices creates a toxic mix which can cause social unrest.
“The economy is not growing. We have high levels of unemployment and poverty, and I am concerned about public violence seen two years ago,” he said.