‘Buckle up’ – Standard Bank warns of rocky 2024 for South Africa

Standard Bank’s chief economist, Goolam Ballim, advised South Africans to buckle up for a rocky 2024 with high levels of economic uncertainty created by the election, interest rate cuts, and global tensions. 

Ballim said that South Africa is a very open economy and is thus heavily affected by global economic movements. 

“The global temperature will not be too hot or cold but just right. We are almost in a Goldilocks situation,” he explained. 

With global growth expected to break 3% and interest rates to come down with inflation, the global economy is in a better place than it was last year at this time. 

However, there are significant risks ahead that threaten to push the global economy out of the Goldilocks band it is in now. 

Elections around the world, in particular, present risks to this outlook. Ballim expects administrations in several key economies to change, particularly in the US. 

“Elections inject uncertainty and hesitation from investors due to questions around policy, the prevailing regulatory environment, and foreign policy,” Ballim said. 

This spells trouble for South Africa, which has its own election to contend with. 

Uncertainty from global elections is expected to cost the South African economy between 0.2% and 0.3% of potential growth. 

Another significant factor at play is geopolitical tension between major powers over the Russia-Ukraine war and the conflict in the Middle East.

In particular, the conflict in the Middle East will impact South Africa as 35% of global oil exports travel via sea from the region, and 30% of global commerce goes through the Suez Canal. 

However, Ballim said this will have a negligible impact on inflation as ocean freight costs make up a tiny fraction of global inflation. 

South Africa’s domestic economic problems will compound the effect of these global factors, resulting in the economy growing a mere 1.2% in 2024. 

2024 will be a year of two halves, said Ballim. The first half will build up to the election and be characterised by high uncertainty, while the second half will be spent digesting the election’s outcome. 

The national elections later this year have the potential to be era-defining, with the ANC facing the prospect of losing its majority for the first time in the democratic era. 

Despite this prospect, Ballim expects the ANC to be able to cobble together a majority at the national level, and so, in policy terms, not much would change. 

“We do not expect the election to derail the reform agenda, but the issues of crime and local governance will remain binding.” 

The crises at Eskom and Transnet will also weigh on economic growth. Logistics bottlenecks are expected to cut potential growth by up to 1% of GDP, while electrical shortages will cut growth by up to 2%. 

However, Ballim expects the situations at Transnet and Eskom to improve through 2024 as the government’s reform agenda bears fruit and the private sector invests heavily in these sectors.

“If I had to summarise our view in one phrase, it would be: ‘Buckle up’.”