After the election, the South African government will have to fix 3 Depletions that hurt growth in the past: power, jobs and financing. Early deindustrialization and a painful “demining” of the economy are pervasive. The manufacturing sector lost -3pp of its share in GDP (from 16.5% to 13.5%) and the mining output lost about half (to 8% of GDP) in the last 25 years, despite high subsidies. Power shortages were painful for these energy-intensive sectors. Among the possibilities to improve that situation, it seems that the government may allow more coal use and increase the emission limit allowed in coal-fired power plants. Output losses also had an impact on jobs and inclusion, since the unemployment rate remains at 27%, an issue that will have to be solved as well. Additionally, it seems that South African companies felt short of cash in 2018. Their working capital requirement increased to 70 days of turnover (58 days in 2017) and evidence of rising debt for key corporates was pervasive. Such reforms will take time and GDP growth is likely to stall at +1% in 2019 (+0.8% in 2018).
