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South Africa: Power Crisis is Main Short-Term Threat to Economy -- Business Heads
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Business Day (Johannesburg)
30 April 2008
Posted to the web 30 April 2008
Michael Bleby
Johannesburg
DURING the next six months, the single biggest threat to the economy on the domestic front is the power crisis and Eskom's inability to meet the country's electricity needs, said five out of the 10 CEOs surveyed.
"The difficulty with electricity supply strikes me as the most pressing concern in the next half year with regard to economic growth," said Absa's Steve Booysen.
"If we were looking beyond the next six months, I would probably suggest that interest rates are the single biggest threat to the South African economy," he said.
And if commodities continue to rise, that will further stoke inflation. "Far more dangerously, if commodity prices for oil and goods continue to skyrocket, inflation may rise. This may see the Reserve Bank hike interest rates further," FNB's Michael Jordaan said.
Massmart's Grant Pattison is concerned about commodities, but is wary of them for a different reason. "It's not likely, but if prices were to fall sharply, that would be the thing that would wake us up," he said.
When it came to external threats, the CEOs polled were split evenly on what was the greatest. Group Five's Mike Upton spoke for three of his colleagues when he singled out the flight of capital investment from SA that resulted from the subprime crisis in the US.
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Pick n Pay's Nick Badminton listed global commodity prices as another concern. The performance of the US and effect of any slowdown in the world's biggest economy was also a concern, as AngloGold's Mark Cutifani pointed out.
"Without doubt recession or stagflation in the US economy would have a big effect here and inflationary pressures are a concern. And investors will look at the wider Southern African Development Community region when they take decisions on investment in SA, so a positive outcome from the situation in Zimbabwe is needed."
CEOs polled: Group Five's Upton, Barloworld's Clive Thomson, Pick n Pay's Badminton, Jusco's Martin Lots, Bell Equipment's Gary Bell, First Rand Group's Jordaan, Massmart's Pattison, AngloGold Ashanti's Cutifani, Absa's Booysen and Implat's David Brown. With additional reporting by Regis Nyamakanga, Mathabo le Roux, Thabang Mokopanele and Nicola Mawson.
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