The venue of the World Economic Forum at the Swiss Alps resort of Davos, Switzerland, January 19 2020. Picture: REUTERS/DENIS BALIBOUSE
The venue of the World Economic Forum at the Swiss Alps resort of Davos, Switzerland, January 19 2020. Picture: REUTERS/DENIS BALIBOUSE

Climate change tops the agenda as world leaders converge on the Swiss skiing hamlet of Davos this week for the 50th World Economic Forum (WEF).

With teen global-warming activist Greta Thunberg and climate-change denier US president Donald Trump due to attend, the stage is set for an interesting gathering.

The WEF’s annual Global Risks Report 2020 has listed environmental risks as the top five risks the globe faces in terms of likelihood of occurring and severity of impact.

Team SA — led by finance minister Tito Mboweni, international relations minister Naledi Pandor and trade & industry minister Ebrahim Patel — will head there dogged by domestic problems such as crisis-ridden state-owned enterprises (SOEs), which threaten an already fragile fiscus, and anaemic economic growth.  

Speaking at a breakfast ahead of the SA delegation’s departure to WEF, Mboweni said it will take the message that there is a “determination on the part of SA authorities to implement serious structural reforms”.

Mboweni said the reforms were outlined in the strategy document drafted by the Treasury, and included  “effort to put SOEs on the correct path” and getting SA’s network industries, such as road and rail, operating effectively and efficiently.

Growth prospects

“We face a difficult fiscal environment,” Mboweni said. Nevertheless, SA authorities were determined to proceed “responsibly in supporting growth-enhancing initiatives”, he said.

On Monday, the IMF is due to release its World Economic Outlook for 2020 and give its view on the world’s economic growth prospects, including its forecasts for SA.

After a visit to SA in November, the fund urged the government to take a “more decisive approach” to instituting reforms needed to address the three main challenges facing SA: weak growth, ailing SOEs and government finances.

The World Bank recently cut its forecast for global and SA growth. The bank cited “persistent” policy uncertainty, constrained fiscal space, weak business confidence and power cuts by utility Eskom as the reasons for reducing its forecasts of SA growth to 0.9% in 2020.

On the data front this week, the Reserve Bank’s leading composite business cycle indicator for November is due out on Tuesday. The gauge gives an indication of the direction of the SA business cycle for the next six to 12 months.

October’s leading indicator, which declined an annual 1.7%, marked a year’s consecutive declines. The leading indicator is expected to remain lacklustre in November amid a weak economic climate, FNB says.

Surprising analysts

Consumer price inflation (CPI) for December is expected out on Wednesday. CPI inflation has slowed in recent months — partly due to fuel price base effects — with November’s reading coming in at 3.6%, the lowest since December 2010.

This and lower expectations for growth were the main reasons the Reserve Bank saw fit to cut the interest rate by 25 basis points on Thursday last week, surprising many analysts.

Consumer prices are, however, expected to have grown at a faster pace in December, as fuel prices rose 22c a litre. The median outcome of a survey of 14 analysts by Bloomberg pointed to a 4% increase in consumer prices.

Investec economist Kamilla Kaplan said that with December’s numbers included, CPI in 2019 could average 4.1%, underscoring the persistent absence of meaningful demand in the economy, restricting the extent to which retailers and service providers can pass on price increases to consumers.

The Reserve Bank views the risks to inflation to be balanced, as demand in the economy is subdued and global inflation remains low. It revised its forecasts for inflation in 2020 sharply down to 4.7%, from its previous 5.1%. The bank’s modelling suggests another rate cut is possible in late 2020.