ECONOMY

ECONOMIC OUTLOOK FOR 2022

ULRICH JOUBERT, an independent economist, unpacks the international and domestic trends in the economy over the next year. And the rand remains volatile…

INTERNATIONAL

Following the negative growth of 2020 due to the impact of the Covid-19 pandemic, it is estimated that the world economy will show real growth of just less than 6% in 2021. This growth is forecast to slow to just more than 4% in 2022. The strong 2021 recovery reflects the low base of 2020, but also the pentup demand that was released once the restrictions imposed by authorities in their effort to control the spread of the pandemic, were lifted. The strong demand was facilitated by central banks cutting interest rates to record low levels, as well as adding liquidity to financial markets while governments pumped massive liquidity into consumers’ hands by way of special grants in 2020. As growth improved from the second half of 2020 and during 2021, the financial support by governments and central banks waned. The focus was redirected to the rising inflation rate in countries around the globe.

However, authorities were very careful in cutting their support, as some important impediments to growth came to the fore in 2021. Supply bottlenecks appeared everywhere due to the strong demand while production and transportation were delayed in many sectors of the world economy as variants of the Covid virus once more affected communities in countries around the globe. Drought in parts of South and North America affected agricultural production, while a severe drought in Taiwan affected production of micro chips. The strong demand for micro chips in the vehicle industry due to the ongoing switch to electric vehicles as well as the strong demand for computers when people started working from home, could in many cases not be met in the course of 2021.

Inflation rose to above central banks’ target levels in many countries and resulted in cutting liquidity support to financial markets while interest rates were raised in many countries in an effort to limit inflation

from gaining momentum. The rising inflation rate reflects the strong rise in food and energy prices during 2021.

Food prices rose as demand escalated while drought or cold weather affected the supply of these products. Energy prices also rose due to the recovery of the world economy and demand for energy, while oil production was limited by OPEC countries plus Russia as well as the lack of investments in 2020 due to the very low energy prices.

It is assumed that central banks will continue cutting and reversing the liquidity support they provided to the financial system in 2022. This will result in rising interest rates in the rest of the year as well as in 2023. At the same time governments are forecast to cut their welfare support payments to communities as employment improves.

The Chinese economy is forecast to show real growth of just less than 8% in 2021 which is likely to slow to less than 5% in 2022. Although inflation remains well under control, Chinese authorities try to control cost increases in the economy either by direct intervention or by way of limiting credit creation which supports overall demand. China remains the largest importer of commodities. Slower Chinese growth indicates weaker demand for general mining commodities as well as lower prices. This will have an adverse impact on the overall performance of the South African economy in 2022.

DOMESTIC

The South African economy is forecast to show real growth of more than 5% in 2021, after the negative growth of 6.4% in 2020. Forecasts indicate a growth rate of just more than 2% in 2022.

The strong growth of 2021 reflected first of all the low 2020 base, the buoyant recovery of consumer demand as well as the very strong export performance. Exports benefitted from the strong recovery in demand and prices of mining commodities as well as the excellent performance of agricultural exports. Export growth far exceeded import growth and resulted in very healthy trade account and current account surpluses in 2021. It is assumed that imports will show stronger growth in 2022, while export growth could adversely be affected by the forecast weaker performance of mining exports due to the weaker performance of the Chinese economy as authorities try to limit inter alia commodity price increases and overall inflation.

The strong recovery of the mining sector provided government with a welcome improvement of tax revenues and the overall health of government finances in fiscal year 2021/22. It limited the risk of further credit downgrades for the immediate future. However, government finances remain vulnerable given the high cost of the salary and wage bill as well as the still high debt levels. All government levels — central, provincial and local authorities — and state-owned enterprises, must remain vigilant in controlling current, future and especially corruption and wasteful expenditures. Unfortunately, most state-owned enterprises remain in deep financial trouble and solving these problems remains a serious future challenge.

Notwithstanding a strong recovery in 2021, the economy still lost jobs and pushed unemployment to new record high levels. Unemployment and especially youth unemployment is at unacceptable levels and unlikely to be cut in any meaningful way in the foreseeable future. It calls for an urgent rethink of the labour dispensation as well as the total education and training system of the country. The fact that many, many children lost at least 18 months to two years of education, remains a serious headache and could have an adverse impact on the availability of an educated and trained future workforce.

Inflation rose in the second half of 2021 as food and energy prices rose sharply. It reflected the international trend of these prices as well as the generally poor performing rand against major currencies. Fortunately, the average inflation rate for 2021 was in line with the 4.5% inflation target of the authorities. It is assumed that international and local energy and food prices are unlikely to show the same sharp increase in 2022 as in 2021. Therefore, the forecast average inflation rate for 2022 could soften to a level of less than the target rate. Given the outlook for the economy in 2022, it is assumed that the Reserve Bank will be very careful in adjusting short-term interest rates. At the same time, they have to take into account international trends which indicate rising rates in many countries. It is therefore assumed that the Reserve Bank will raise local short-term interest rates cautiously in 2022 with the main focus on stabilising the financial markets while limiting any shock to the domestic economy which could derail the recovery.

Local long-term interest rates are more likely to be influenced by international trends as well as local inflation trends. Towards the end of 2021 the international rates rose and pushed local long-term rates higher. It is assumed that the international long-term interest rates are likely to move mostly sideways in 2022 which indicates that local long-term interest rates are likely to move sideways as well. Local rates could also be influenced by inflation rate trends, any outflow of local or international capital, any fear of credit downgrades as well as a sharp weakening of the rand.

The rand remains volatile. Given local political uncertainties, the risk of future credit downgrades, a higher inflation rate than in our trade partners’ economies, the rand weakens against all major currencies in the longer term.

OUR VISION AND COMMITMENT

AKAF ARTISAN CENTRE is dedicated to the South African economic development and educational system. Our institution aims to collaborate with government and training institutions to reform training procedures, policies, and skills development so that we provide competent artisans to Businesses and the South African blue-collar market.

OUR GOALS

Through our well-equipped Centre, we aim to elevate trades in the country by ensuring welltrained and qualifi ed tradesmen and women are working in the various industries. We are committed to the people in South Africa and truly believe that if we all work together it is possible to make a diff erence. We aim to rise above all training institutions, that are off ering the same services as us. We are determined to ensure that in the next decade, we provide excellent, eff ective, economic and aff ordable training and skills. CONTACT US: 0145923338 I 0717734408 EMAIL: info@akaf.co.za | training@akaf.co.za ADDRESS: 89A Leyds street Rustenburg

akafartisancentre.co.za

WE OFFER THE FOLLOWING COURSES

• Electrician • Bricklaying • Plumbing • Carpentry • Plastering • Painting • Tilling • National Certifi cate: Building and Civil Construction • National Certifi cate: Construction • National Certifi cate: Construction Contracting

WE ARE REGISTERED WITH THE DEPARTMENT OF HIGHER EDUCATION AND TRAINING: QCTO & NAMB ACCREDITATION NUMBER: 06-QCTO/SDP210521-1802 CETA ACCREDITATION NUMBER: ACC/20/06/00003 SASSETA ACCREDITATION NUMBER: 081970577607

OFFERED PROGRAMS

• Trade Test Preparation • Apprenticeships • Technical and Artisanal Skills Development – Short Courses • Learnerships • Artisan Recognition of Prior Learning - ARPL • Vocational Training

WE WILL ALWAYS SERVE YOU – TRY US FOR A DRIVE

Some of the Luxury Buses in the Parking Area

Office staff from left to right: Teddy Ngonyama, Lavhelesani Muguru, Patrick Mahlaula, Khuliso Mukhuba, Klaas Mapadimeng and Tsakani Chauke

MISSION

Do Light Transport (PTY) Ltd offers top-class transport services to its passengers within the parameters of required standards of the industry and in strict observance of the safety requirements of the sector.

ABOUT DO LIGHT TRANSPORT (PTY) LTD

Do Light Transport (PTY) Ltd was established 16 years ago by two entrepreneurs as a takeover from the defunct Swangi’s Bus Services. In the evolutionary development of the company to where it is today, the company is currently both male- and female-owned, together offering much experience, from business to financial management expertise, chartering a new vision for a new company that has become a household name in the transport industry within the SADC countries.

Most significantly in the strategic positioning of the company is the acquisition of new fleet, introduction of new management strategies, sound investment in human resources, comprehensive plans on preventative and corrective fleet maintenance for optimal performance utilization. Central to this is our respect for and special treatment of our customers.

The company has since grown and broadened its horizons beyond daily commuters transport to operating 24 hours and providing mine workers and scholar transportation, and special hire across SADC countries. Based on its growth, the company has established depots in various areas, i.e. Malamulele, Thohoyandou, Tshitereke, Maila, Makhado Town.

CORPORATE SOCIAL INVESTMENT

Do Light Transport (PTY) Ltd is fully involved in social investment by value adding to society within the environment it operates. For this reason it has created the Managing Director Discretionary Fund (MDDF) which contributes by funding a variety of community needs, inter alia:-

• Education and training, like - Early childhood development; - Tertiary scholarship; - Computer donations • Disaster affected areas • Sports and recreational creation • Housing for destitute families

OUR SERVICES

• Corporate travel • Cross-border touring • Group travel / touring • Daily commuting of workers and ordinary passengers • Scholar transportation • Mine workers transportation • Community social events transportation

The fleet of the company is diversified to cater for the various needs, i.e. semi-luxury and luxury buses as well as commuter buses.

MANAGING DIRECTOR: MR MUKWEVHO MMBULAHENI RECKSON

374 Block A, Malamulele Industrial, Malamulele, 0982 P.O. Box 1571, Malamulele, 0982

mmbulaheni.mukwevho@gmail.com Contact: Mukwevho Reckson