Ongoing Economic Problems in South Africa Pose Great Risks for Agrofood, Automotive Sectors

As Coface expressed concerns about South Africa’s economic performance going into 2017, the credit insurer believes the agrofood and automotive sectors pose major risks.

South Africa’s agrofood sector is among the most developed in Sub-Saharan Africa, is one of the country’s largest manufacturing segments and provides jobs for about 30% of the country’s workforce, analysts with Coface noted. Despite relatively stable demand, “…the deteriorating macroeconomic outlook and uncertainties surrounding economic policies, which are increasingly damaging consumer and business confidence,” place agrofood as a “very high risk.” Reduced investments, poor infrastructure and a weakening of local currency against the U.S. dollar present more added risks to the troubled sector.

Meanwhile, South Africa’s automotive sector is facing a poor economic outlook, high inflation and increasing interest rates, Coface said. “These factors are negatively impacting purchasing power and dragging down domestic sales,” analysts wrote. “New vehicle sales could also suffer from fears over the stability of the labor market and the constant threat of strikes.” A falling rand may also affect production costs that producers are likely to add on to final prices.

– Nicholas Stern, editorial associate

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