The SMME Council's Business Environment

South Africa is one of the leading economies in the world (currently ranked 32nd) and the most diversified economy in Africa. However, 2017 growth in South Africa was below 1%, with it expected to remain low in 2018. While South Africa held off a sovereign credit rating downgrade in 2016, it failed to do so in 2017 with foreign currency being downgraded to sub investment grade. The risk of a further sovereign downgrade on local currency continues to pose a significant risk for the country. Stagnant economic performance, combined with unemployment levels on the narrow definition of 27.7%, youth unemployment of 55%, skills shortages particularly in maths and science, persistent poverty and high levels of inequality, the South African economy is not growing fast enough to create jobs and address developmental and social objectives. There are 17 million people receiving social grants. The informal economy is estimated to represent between 7% and 13% of the economy.

Internationally, while growth is subdued and investment confidence low, there are signs of economic recovery. Worldwide there is rising inequality between the elites and the poor. Trump’s Presidency and BREXIT have rendered the global trading environment less predictable.

Locally, we can expect another politically turbulent year in 2020 with the leadership of the ANC falling between the old and new President. This, together with the division within the ruling party, between alliance partners, and opposition parties and trade unions encroaching into new areas of influence, as well as uncertainty in relation to cabinet positions is likely and results in considerable political uncertainty.

Environmentally, the 2016 drought that persisted in the Cape in 2017 has resulted in increased food costs and has threatened South Africa’s status as the only food secure country on the continent. Dire water shortages, particularly in the Western Cape pose a significant social and economic risk. Energy and water planning is a necessity to ensure adequate resources for future needs.

Current conditions politically, economically, socially and environmentally appear to continue to be volatile, uncertain, complex and ambiguous.

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