SA professionals lose confidence in economy

By on February 24, 2014

South Africa’s graduate professionals believe that the value of the Rand is likely to depreciate even further in 2014. As a result, the general consensus is one of increasing concern about the local economy, according to a survey conducted by PPS.

The fourth quarter PPS Graduate Professionals Confidence Index (PCI) – which tracks the confidence levels of nearly 4 000 of South Africa’s graduate professionals – showed that 85 percent of respondents believe the Rand is going to weaken further during the course of 2014.

Mahlasedi Mojapelo, Research Specialist at PPS, says this is not surprising given the recent fluctuations in the value of the rand, especially since it breached the R11:US$1 level in January. “Continued strike action in the mining sector, coupled with the withdrawal of investment into emerging markets globally, may have contributed to professionals becoming concerned that the value of the rand could decline further.”

According to David Crosoer, Executive: Research and Investments at PPS Investments, the Rand is significantly undervalued if trading above R11/USD compared to where it should trade on fundamental grounds. “While currencies can always overshoot, a weaker currency (making our exports more competitive) and improving global economy (increasing demand for our exports) could ultimately be positive for South Africa and help support the level of the Rand.”

“The Reserve Bank’s decision in January to increase short-term rates by 0.5% was significant, as it demonstrated the Bank’s willingness to take a deteriorating inflation outlook seriously. Unfortunately, the on-going unrest in the mining sector makes it difficult for the economy to benefit fully from a depreciated currency and could impact negatively on the currency in the short-term,” adds Crosoer.

The survey also revealed a confidence level of 50 percent for the economic outlook for South Africa over the next 12 months – the lowest confidence level ever recorded for this question since the survey’s inception. Mojapelo says this result is in line with the World Bank revising South Africa’s economic growth outlook from 3.5 percent to 2.7 percent in early February.

Recent statistics released by Adcorp revealed the return of nearly 360 000 expatriate professionals to the country who have found work relatively easily, says Mojapelo. “This indicates that there still remains a great need for skilled professionals in the country, with the data specifically pointing to approximately 829 000 unfilled job vacancies. This need is mirrored in unemployment statistics with the unemployment rate for highly-skilled workers being 0.4 percent which is remarkably low, especially when compared to an unemployment rate of 37 percent for the entire workforce.”

“The fourth quarter PCI survey for 2013 revealed graduate professionals have some major concerns about the local economy; however, it is encouraging that this has not impacted significantly on their perception of the future of their profession in the country,” concludes Mojapelo.

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