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The economic power of good news

The economic power of good news
ANC supporters celebrate during victory celebrations at Nasrec in Johannesburg, April 24, 2009. South Africa's ruling African National Congress claimed victory on Friday in a general election that will make party leader Jacob Zuma president. REUTERS/Siphiwe Sibeko (SOUTH AFRICA POLITICS ELECTIONS)

South Africans are clearly hungry for good news as a Facebook community, #ImStaying, experiences exponential growth in its membership base. It’s a keen reminder of how important consumer confidence – buoyed by hope for the future – is, in boosting growth prospects. This, combined with good news about the progress being made on youth unemployment initiatives, is the recipe for success South Africa needs right now.

Amid all the doom and gloom that surrounds us globally and locally, a recent trend highlights just how hungry South Africans are for good news about their country amid ongoing horror stories of abuse of women, soaring crime rates, and concerns about whether the lights will stay on, and maintaining its investment-grade rating.

On 7 September, a group of South Africans set up a Facebook Group called #ImStaying. Its aim: to honour all those who still believe that we, as a nation, can turn things around. The group goes on to say: “To all those who choose to stay and work together to save this beautiful country we call home! This group belongs to all willing to make a positive difference!”

As it turns out, there are many South Africans who still believe in the Rainbow Nation, with the membership of the group rising to almost 78,000 by the weekend and then nearly doubling to 112,500 by Monday morning this week.

Why is this so important? Not only is the stream of positive news about South Africa in this small but growing online community encouraging, but it is also a keen reminder that it is confidence that builds economies and nations. That is why consumer and business confidence indices are viewed as such important leading economic indicators the world over.

Consumer confidence data provides valuable guidance on future consumer spending patterns, with robust consumer confidence usually resulting in increased spending and, in turn, better growth in gross domestic product. It is also possible to gauge the success of monetary policy by looking at consumer confidence trends.

In South Africa, consumer confidence has been under pressure as a result of political uncertainty, and Eskom blackouts earlier in 2019 but did improve marginally in the second quarter of the year. Elsewhere in the developed world, consumer confidence has held up surprisingly well, given fears of a global economic slowdown amid trade war jitters.

In the US, the University of Michigan Consumer Confidence Index rose to 92 in September 2019 from 89.8 the previous month and above market consensus of 90.9. Meanwhile, consumer confidence in the Euro area became slightly less negative in September, with the indicator beating expectations when it rose to a four-month high of -6.5 in September 2019 from -7.1 the previous month.

Another useful index that highlights when good news predominates is the Economic Surprise Index. Both Citigroup and Bloomberg publish their versions of the US index and last week these rose steeply; at odds with the prevailing pessimism about the US growth outlook as a result of trade tensions.

Investec Wealth & Investment chief investment strategist, Chris Holdsworth, confirms that economic surprise indices across the world have been turning up. “While there is firm evidence that global growth has slowed, it appears to be slowing by less than expected.”

He notes that the US reading is now the highest since the middle of 2018 and that, while the economic surprise index for Europe has also been picking up, it is still well behind the US version.

On the latest Bloomberg Economic Surprise Index, Bloomberg journalist Jeff Kearns said: “The readings are signalling a somewhat brighter mood about the world’s largest economy after some indicators and markets stoked fears last month of a quicker ending to the record-long economic expansion.”

He pointed out that the US Fed had highlighted the American economy’s strength last week when it reduced interest rates by another 25 basis points as expected. Investors were growing more upbeat too, he said, with US stock market indices almost at record highs again in September.

This rosier outlook for US growth provides South Africa with essential tailwinds. Positive surprises and robust consumer confidence, together with actual on-the-ground achievements, like the government’s YES! youth employment Initiative, are the seeds that could well trigger a much-needed nationwide shift in perspective about the country’s future.

CEO of Goldman Sachs sub-Saharan Africa, Colin Coleman, gave an update on how big business has been progressing in its internship programme and setting up Youth Employment Service (YES) hubs around the country. Coleman co-chairs the CEO Initiative with former Investec CEO Stephen Koseff, a partnership initiative between government (who help with tax credits and BEE incentives), business (who take on interns for one-year paid experiences in companies) and labour and communities.

He says: “YES is leading the way on the critical challenge facing SA: crippling youth unemployment affecting around 6-million South Africans. We are still targeting a ramp-up of the programme to 1-million interns over five years, and 100 township hubs and the CEO Initiative is right behind YES!”

Coleman noted that challenging economic conditions meant progress was slower than hoped but about 21,000 paid interns had been committed by companies so far, and a further 4,000 were in the pipeline to end October.

One multipurpose YES hub is up and running in Tembisa, and another six are funded and planned for 2020,” he said. These will help provide training and other facilities for youth in townships throughout SA.

The response to his update was measured but positive. Tshepo Mdwaba, head Citizenship Manager Absa Group, commented: “South Africans can surely do with inspiring and positive news, especially young unemployment job seekers who are feeling disempowered!”

This is good, slow progress is better than no progress,” said Neo Mekgoe, a marketing assistant at Safripol. “The results may not be immediate; it’s an investment, the impact will be visible in the future.”

Confidence combined with visible results is just the recipe the South African economy needs right now to boost the economic trajectory above its anaemic 1% growth anticipated in 2019. That becomes more likely when all hands are on deck – committed to #ImStaying and whole-heartedly invested in the country’s future. BM

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