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We are pleased to present our 2021 Africa Private Equity Confidence Survey (PECS). This publication is centred around valuable insights into how fellow private equity (PE) practitioners view the African PE landscape, specifically their future expectations over the next 12 months.
The beginning of 2021 was all about 'reflation' – a belief that massive fiscal stimulus, historically low interest rates and the reopening of economies on the back of COVID-19 vaccinations will drive an economic boom placing upward pressure on inflation.
The GDP numbers are much better than expected. In fact, the 66% quarter-on-quarter, seasonally adjusted, annualised figure is better than even the best industry expectation. It has definitely been a positive surprise which has been well received by the market as we can see from the positive movements in the rand exchange rates as well as the bond market.
The captain of Ship SA, President Cyril Ramaphosa, can surely see the iceberg that we are heading for and one can almost hear the call go out for us to 'brace for impact'. The iceberg is an economy that is in crisis – an unemployment rate of 42% (using the expanded definition), GDP growth projections down by 7.8%, tax revenue projections at R304 billion less than originally budgeted for, a budget deficit of R709 billion for 2020/21, a current debt to GPD level of 81.8% and debt service costs (interest) currently amounting to 21c in every tax Rand collected.
Real GDP surprised the market consensus to the downside in the second quarter of 2020 as the effects of the pandemic and the associated lockdown measures ate into economic activity. Growth contracted by 51% q/q saar and printed lower than the August 2020 Reuters Econometer median growth forecast of 44.5% p/p saar.
The market expected the economy to shrink by 3.8% over the first quarter so the -2.0% print for Q1 2020 GDP (quarter-on-quarter, seasonally adjusted and annualised) might be slightly better than anticipated, but it almost means nothing. This performance takes us only up to the end of March so it includes less than five working days of the lockdown.
With low GDP growth, credit ratings downgrades and the COVID-19 pandemic, our economy has taken a knock, leaving many investors’ reluctant to save and invest.
With severely limited fiscal space, planned economic reforms need to be fast-tracked. South Africa is in a grip of panic over the impact of the coronavirus disease 2019 (COVID-19). The situation prompted an extraordinary address to the nation by President Cyril Ramaphosa on the evening of March 15. Apart from very real human health concerns, he commented that the outlook for the local economy – already on a weak footing heading into 2020 – is a big headache. Economic growth forecasts have been cut over the past few weeks as forecasters realise that the impact of the pandemic will be larger than previously thought. This begs the question: how will local authorities respond?
Fears around the coronavirus (COVID-19) outbreak has spilled into financial markets. The coronavirus outbreak has rapidly approached global pandemic levels, and given the knock-on effects of the virus on economic growth, the fireworks in markets were inevitable.
Budget statements have in recent years perennially made downward revisions in economic growth projections. Disappointing growth outcomes compared to official forecasts is partly attributed to the inability to implement planned structural reforms that would have delivered improved growth outcomes.
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