South Africa risks economic short circuit.
August 28, 2009 by Muhammad Haidar
Filed under Banking, Business, Countries, Current Events, Economics, Finance, Investing, Liquidity, Loans, Muhammad Haidar
The economy that had recorded steady growth for the last decade and a more, is under threat of a short circuit, literally.
The serious shortage of power supply is considered to be the most potent threat to the country’s economic progress, by bringing down production and output. Literally, it could mean shutting down the economy.
The economy has already registered a slump of around 3% for quarter ended June 2009, and more hard knocks seem to be in store, by the look of things.
Apart from the energy problems, unemployment has become a major source or worry, prompting the Government to initiate special programs to generate jobs.
For the record, South Africa has excellent infrastructure and a world class legal system in place with business-friendly laws relating to labor, commerce, trade, etc. In spite of the plus points, the country is presently in a recessionary mode which is undoing the good done in the last decade and a half.
The country’s economic mainstay, namely, mining is stagnant, and not contributing to the national production, and domestic product to the desired level. However, the construction industry has picked up smartly, mainly because of the World Cup 2010.
One account of the shortage in power supply, several mega and minor projects are on hold, adding to the lines of the unemployed with all its attendant consequences. If things to do not improve fast, there is a risk of South Africa slipping into a severe recession, which could take a long time in coming out of. As it is, the country is in the danger zone, with a severe fall in production and consumption, and increasing unemployment.
Who will buy all the property?
Around the world massive amounts of properties have been built over the past 10 years some are finished and some are not. It seems like everyone wanted a piece of the real estate market. I’ve seen some news stories about developments in Southern Spain going unsold. The US and UK markets are lacking buyers. There are so many other places that are looking for buyers too. A lot of the property available was directed by foreign buyers. In the gulf area there are enormous developments looking for investors and buyers. I just can see how people are going to be able to invest in all these projects around the world with a ginat slowdown worldwide. I kind of think this is going to compound as things worsen. I guess I just think the money isn’t there in general. I mean are you planning to buy a condo in Dubai or South Africa? How about Spain or Portugal? Are the buyers really there for all these projects that are directed at foreign buyers.
What do you think of property markets that rely on foreign investors. Are the investors drying up? Will this add to the overall bankruptcy/Banking issues?