By Christie Viljoen, PwC Economist.
The Bureau for Economic Research (BER) reported on April 25th that South African consumer confidence rebounded during the first quarter of 2o18. In fact, sentiment jumped to the highest on record during the period. The improvement between 2017Q4 and 2018Q1 was also the largest on record, eclipsing the jump seen in 2004Q2 following the announcement that South Africa would host the 2010 FIFA World Cup.
The consumer survey was conducted between 26 February and 8 March 2018. This period followed a series of dramatic changes in South Africa’s politics and economics, including the swearing in of President Cyril Ramaphosa (15 February), the delivery of his encouraging State of the Nation Address (SONA) (16 February), and the release of the 2018/19 fiscal budget (21 February).
The BER reported that “most consumers are now optimistic about the outlook for the South African economy and their household finances.” This is not surprising. PwC’s report “Investment decisions: Why South Africa, and why now?” (released in February 2018) suggested that the appointment of President Ramaphosa could be a game changer for the South African economy.
PwC’s report narrated a baseline scenario for South Africa towards 2022, which includes consumer confidence returning to positive territory. This scenario – named #Ramaprogress – suggested that early changes made by the country’s new leader would “set in motion changes that lifted the spirits of South Africans and investors”. This is reflected in the BER’s consumer sentiment publication for 2018Q1.
Out of 26 key promises made in the SONA 2018, the new administration has so far delivered on 19 points. From a consumer perspective, these include the detailing in the 2018/19 budget on free higher education and progress on the introduction of the national minimum wage. South Africans are also encouraged by positive reports on, for example, a stabilisation in the sovereign rating.
Looking ahead, South African consumers will be looking for tangible progress on other fronts in order to sustain the rebound in sentiment. These include planned changes to the list of items that are zero-rated for value-added tax (VAT), implementation of the National Health Insurance (NHI) scheme, and job-creating dividends from the planned employment and investment summits.