GEORGE BUSINESS NEWS - Stanlib's International Property Fund Portfolio Manager, Paul Hansen, has a fairly optimistic outlook for the global economy in 2017. His forecast for South Africa, too, is not just doom and gloom.

He spoke at a Standard Bank economic briefing for local attorneys and estate agents at Protea Hotel King George on Friday.

Starting off with the state of the international scene, he said the global stock market has been in a "fantastic trend" and is up by 30% in dollars since the lows on 11 February last year.

One of the major players, the US, has seen its economy growing steadily. Almost 16 million new jobs were added there since the great recession, business confidence is good, oil production is up and the house price growth is favourable at 5%.

"Trump economics", which includes tax cuts, deregulation and increased infrastructure spend, could boost the economy further. In Europe, the stock market is up by 13% in dollar terms so far this year and the Eurozone is possibly heading for a 2% growth rate. Emerging markets are up by 14,5% in dollars.

Turning to the local scene, Hansen weighed up the negatives against the positives. Economists' prediction of a growth rate of between 0,75% and 1% only is based on the negatives: very low GDP growth, poor consumer and business confidence levels, practically zero manufacturing and retail sales growth, and possible job cuts.

Government's constrained balance sheet and faltering tax receipts also mean it is struggling to boost activity.

On the positive side, he said, the All Share Index is up by over 8%, including dividends, so far this year after going sideways for two years, and it looks as if companies' earnings are going to improve.

"The JSE All Share Index Total Return Index, which includes the dividends, is in fact trading at an all-time record high, which could signify a crucial break upwards in the index. The same applies to the ALSI 40 Index, which is up over 9% in 2017, including dividends. Both indices are certainly heavily impacted by the big jump in Naspers' share price, up over 35% in 2017."

Trade balance positive

Increasing exports helped turn South Africa's trade balance positive for the first time in a long while. Maize production is going to be 87% higher than last year. Agricultural inflation is plummeting and is at -5% year on year (from 27% a year ago). Flood inflation is close to coming down to under 6% and chances are good that the Reserve Bank could cut the interest rate.

Foreign visitors' spend of R120-billion a year is also good news. Mining is looking better. Consumer spending on services like property, legal, investments, education, healthcare, and insurance is likely to have a cushioning effect. Emerging markets that are faring better is furthermore helping the rand to remain stronger.

All these positives, added to a global economy on the up, are giving Hansen hope that the growth forecast for South Africa's economy will turn out to be too low. "I'm an optimist, so my hope is that after the April shock, things will settle a bit," he said.

Western Cape and George

Eben Klopper, Standard Bank provincial head for retail and business banking, said the outlook in the Western Cape is better than in the rest of the country. Its property market is doing well. Due to the influx of people, there are more buyers than sellers. House price increases in the province averaged between 13% and 15% compared with 4% to 5% in Gauteng.

"We do not foresee the property market in the Western Cape slowing down. Even after junk status, many overseas investors are still willing to talk to role players in the Western Cape. This must be exploited."

He said Standard Bank, the biggest home loan provider in the country, has just gone through a major restructuring that will decentralise its management structure. "We are putting a strong management team together in the Western Cape and 95% of decisions will be made here."

ARTICLE: ALIDA DE BEER, GEORGE HERALD JOURNALIST 

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