Monday, May 16, 2016
Amid all the economic gloom emanating from South Africa, there is a bright spot: consumers remain surprisingly upbeat. Nearly eight in ten South Africans, according to research BCG conducted this March, say they are optimistic about the future—roughly the same number as in early 2015. And around half say they plan to spend more this year.
The question is how long this optimism will hold up. Judging from South Africa’s mounting economic challenges, companies should prepare for consumers to tighten their belts. A plunge in world prices for commodities such as gold and iron has put pressure on the rand. (See Exhibit 1.) Unemployment is at 25%. Policy missteps have complicated the situation. As a result, the country’s two-decade-long record of healthy economic growth has come to an end. Some economists have slashed their 2016 growth forecasts to only around 0.5%, and there are fears that lower public-debt ratings could push South Africa into recession. The country’s finance minister has conceded that “South Africa is in a crisis.”
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