BizNis Africa
Latest News
SANRAL empowers local SMMEs road maintenance providers
The present upgrading of the Moloto Road north of...
Nthwese Developments gets 2018 SAPOA Property Development Award
Nthwese Developments Bambanani Shopping Centre in Diepsloot won the...
Shopping malls remain more profitable for big brands
Shopping centres are being expanded, renovated and some newly...
Tech hubs in East Africa spur next generation of disruptors
Ongoing improvement in East Africa’s economic prospects is forecast...
Climate Investor One becomes major renewable energy development funders
Climate Fund Managers (CFM), the fund manager of the...
GRIT and Hodari officially launch Mozambican Property and Asset Management Company
Grit, the only listed Africa-focused income distribution group to...
VC4A calls for African start-up entrepreneurs to apply for investment
VC4A (  is calling for disruptive African scale-ups looking...
Sasfin Wealth appoints new Senior Portfolio Manager
Sasfin Wealth is pleased to announce the appointment of...
Cyber and digital skills top growth threats to private business
Growth confidence is high amongst private business owners, for...
SAICA charges former Eskom CFO Anoj Singh with misconduct
The South African Institute of Chartered Accountants (SAICA) announced...

Dineo Kekana, Novare Investments Analyst

According to the World Bank, global GDP growth is expected to advance to 2.7% in 2017 and a further 2.9% in 2018, compared to the 2.4% reported in 2016. The growth of developed markets was revised up by 0.1% to 1.7% in 2016 and this is expected to strengthen by a further 1.9% in 2017.

Meanwhile, growth in emerging markets and developing economies are expected to increase from an upwardly revised 3.5% in 2016 to 4.1% in 2017.

The pickup in growth expectations was largely based on the expected improvement in manufacturing and trade, rising market confidence and stabilising commodity prices. According to the World Bank, protectionism, high policy uncertainty and the possibility of financial markets disruption are some of the cited key risks to the global growth outlook.

The ManpowerGroup Employment Outlook Survey (MEOS) for Q3 of 2017 corresponds with the expectations of a strengthening global economic backdrop, with the majority of the respondents content to retain current staff and grow payrolls marginally.

According to the MEOS, the strongest third quarter hiring plans are being reported in Japan, Taiwan, Hungary and the United States. In contrast, the weakest outlooks are reported in Italy, the Czech Republic and Finland.

South African Economic Outlook

South Africa continues to be plagued by policy uncertainty, deteriorating investor and business confidence and heightened political uncertainty. Political uncertainty was further heightened by the downgrades of South Africa’s sovereign credit rating to sub-investment grade.

Meanwhile, food inflation is expected to be reduced due to favourable weather conditions.

According to the World Bank, South Africa’s downwardly revised growth forecast of 0.6% was largely due to the weaker than previously forecasted growth in private consumption and investment, resulting from higher borrowing costs following the downgrades. South Africa is expected to benefit from the net exports of commodities as importers’ activity remains robust but this is not expected to offset the downward pressures.

South Africa’s GDP declined an annualised 0.3% quarter-on-quarter in the last quarter of 2016, compared to the upwardly revised 0.4% in the previous quarter.

The annual GDP growth rate was sitting at 0.3% for 2016 and the World Bank has since downwardly revised the 2017 growth rate to 0.6%, while the South African Reserve Bank revised the figure down to 1.0%. According to the International Monetary Fund (IMF), South Africa is expected to recover modestly, with a growth outlook of 0.8 % in 2017 as commodity prices rebound, drought conditions ease and electricity capacity expands.

Over the last quarter of 2016, the largest negative contributors included mining and quarrying which detracted by 11.5%, shaving off 0.9% from the quarterly GDP. Manufacturing also declined by 3.1%. The two sectors pared expansions in transport, storage and communication as well as finance, real estate and business services which advanced 2.6% and 1.6%, respectively.

The percentage of employers looking to increase employment declined from 12% in the previous quarter to 9% in the third quarter of 2017, while the percentage expecting to cut jobs increased from 5% to 7% in the last quarter. On a seasonally-adjusted basis, the respondents planning to hire more staff increased by 4%, down from 7% recorded in the previous quarter.

The MEOS results correspond with the expected deterioration of South Africa’s economic and labour market landscape. The borrowing costs following the sovereign rating downgrades are expected to negatively impact the small businesses. In particular, large employment increases were expected from large companies (with a net seasonally adjusted outlook of 20%) while 2% (unadjusted for seasonality) of small companies reported expected declines. This indicates that large companies are in a better shape to absorb economic headwinds.  

The business confidence index in South Africa remains below the 50 mark, indicating a gloomy sentiment.

This was measured by the RMB/BER Business Confidence Index which saw an improvement from 38 in the last quarter of 2016, to 40 in the first quarter of 2017.  According to Trading Economics, confidence rose in retail, motor and wholesale trade sectors. In contrast, confidence fell in the building sector and among manufacturers. The FNB/BER Consumer Confidence Index (CCI) in South Africa dropped to -10 in the last quarter of 2016 from -3 in the previous quarter, highlighting households’ concerns about the weak outlook for the economy.

Regionally, notable optimism for the third quarter of 2017 came from employers in the coastal and recreational tourist provinces of KwaZulu-Natal and the Western Cape with a 7% and 6% outlook respectively. When compared on a quarter-on-quarter basis, none of the provinces recorded increases in expected employment, further highlighting a challenging outlook.


The South African unemployment rate increase to 27.7% in the first quarter of 2017 compared to 26.5% reported previously, registering the highest rate since 2004.  This number was largely attributed to more people joining the labour force while unemployment exceeded employment. Job gains were observed in the non-agricultural sector while the informal sector and agriculture experienced notable job cuts.

The MEOS highlighted the uncertain labour market environment within the agricultural, forestry and fishing, as well as mining and quarrying sectors. The agricultural and mining sectors slumped 7.8% and 4.7% respectively year-on-year in 2016.

The survey results indicate that an improvement in weather conditions and stable commodity prices may not necessarily translate into favourable labour market environment in these sectors.

The ABSA Manufacturing PMI rose to 51.1 in May indicating that the manufacturing sector is on an expansionary path, up from 44.7% in April. The April survey followed the controversial cabinet reshuffle in late March, with subsequent credit rating downgrades. Key drivers of the latest figure include a sharp increase in new orders and a strengthening business activity. The MEOS indicated that the most notable hiring prospects for the third quarter were observed in the manufacturing sector which would be expected based on the improved PMI numbers.

China and India 

China’s latest GDP number showed that the economy expanded by 6.9% year-on-year in the first quarter of 2017, improving from the 6.8% reported previously and registering the strongest performance since the third quarter of 2015. Key contributors include faster increases in industrial output, retail sales and fixed asset investments. The IMF expects China’s growth for 2017 to settle at 6.6% and to slow to 6.2% in 2018.  The IMF upwardly revised the growth for China in 2017 by 0.4% in anticipation of continued policy support in the form of strong credit growth and reliance on public investment to achieve growth targets. China’s Caixin services PMI number expanded at the fastest pace in May, rising to 52.8 points, up from 51.5 points and indicating an expansionary services sector. China ranked 31st out of 43 countries with a net seasonally adjusted employment outlook of 4% over the quarter.

The IMF downwardly revised India’s growth forecast for 2017 to 7.2%. This was largely driven by the expected temporary negative consumption shock, prompted by cash shortages and payment disruptions caused by the recent currency exchange initiative. Medium-term growth prospects are favourable, with a forecast of about 8% over the medium term due to the expected implementation of key reforms, loosening of supply-side bottlenecks and appropriate fiscal and monetary policies. The MEOS highlighted India as most likely to experience an ongoing decline in employer hiring sentiment that could largely be driven by the continuing consolidation of India’s telecom and IT industries.

US Outlook

The latest non-farm payrolls disappointed with the U.S. adding 138 000 jobs in May, down from the downwardly revised 174 000 in April. Health care and mining experienced the most employment gains of 24 000 and 7 000 respectively. Meanwhile, the unemployment rate dropped to 4.3% in May 2017, down from 4.4% in the previous month. This was largely due to the falling labour participation rate rather than a significant increase in employment.

U.S. GDP growth stood at 1.2% in the first quarter of 2017, largely driven by larger-than-expected consumer spending and international fixed investment. In contrast, private inventories growth shaved off 1.07%. Over the longer-term, the U.S. growth outlook is likely to be more subdued with potential growth estimated at only 1.8% – with an ageing population and weaker total factor productivity weighing down growth. The MEOS, however, scored the U.S. at 4th out of 43 countries with an anticipated 17% in net employment over the third quarter of 2017 pointing to improved business confidence. According to the IMF, the U.S. is expected to grow at 2.3% in 2017 compared to 1.6% in 2016. Moreover, U.S. employers in the leisure and hospitality sector remain optimistic – with more than a third of employers looking to add to their employment numbers.

UK Outlook 

In the aftermath of the June 2016 referendum being in favour of a Brexit, the IMF expects the U.K. GDP growth rate to be 2.0% in 2017 before declining to 1.5% in 2018.

The 2017 figure was upwardly revised by 0.9% while the 2018 forecast was cut by 0.2%. According to the IMF, this suggests a stronger-than-expected U.K. growth (since the June Brexit vote), pointing to a more gradual materialisation of the previously anticipated negative effects of Brexit on consumer purchasing power as well as the impact of uncertainty on private investment. According to the MEOS, hiring plans in the U.K. are expected to improve slightly from the prior quarter and to remain more stable compared to last year, corresponding to the short-term stable outlook on the economy.

European Outlook

The Eurozone is expected to grow at the same pace in 2017-2018 as 2016, with modest recovery stemming from a mildly expansionary fiscal stance, accommodative financial conditions, a weaker euro and beneficial spillovers from the likely U.S. fiscal stimulus.

In contrast, as elections approach in several countries the resulting political uncertainty, coupled with uncertainty about the European Union’s future relationship with the U.K., is expected to weigh on activity.

The Euro area GDP growth outlook stood at 1.7% in 2017 and 1.6 % in 2018. Growth in 2017 is expected to soften in Germany, Italy and Spain at 1.7%, 0.8% and 2.6% respectively. France is, however, expecting modest growth at 1.4% in 2017.

According to the World Bank, the medium-term outlook for the euro area as a whole remains dim as projected potential growth is held back by weak productivity, adverse demographics and, in some countries, unresolved legacy problems of public and private debt overhang with a high level of nonperforming loans.

Within the Euro area, employers in Hungary and Slovenia reported the strongest first-quarter hiring forecasts with the figures being the most upbeat since the surveys were launched in the regions.

Against this backdrop and based on the net seasonally adjusted employment outlook, Italy was the most pessimistic globally and in the Euro Area.

Dineo Kekana, Novare Investments Analyst 

Leave a Reply

%d bloggers like this: