South Africa’s political woes couldn’t come at a worse time for a 'dire' economy, analysts say

South Africa’s political woes couldn’t come at a worse time for a 'dire' economy, analysts say
South Africa’s political woes couldn’t come at a worse time for a 'dire' economy, analysts say

S&P Global expects economic growth in South Africa to improve to a modest 1.4 percent, up from a near lifeless 0.5 percent performance in 2016.

At the same time, the justification for rate hikes that would normally lure investors in search of higher returns is diminishing. Price pressures are running above the comfort zone of the SARB.

"As a result, we expect the downside risks will continue to lie dormant for the domestic banking sector," Matthew D. Pirnie, a Johannesburg-based credit analyst with S&P Global wrote in a note to clients recently.

There are a few bright spots, analysts say. South Africa "is much less commodity-dependent that other large African economies such as and Nigeria," according to Stadion's Fresk. Meanwhile, the rand—South Africa's official currency—surged to its highest level in more than a year after inflation data beat expectations.

Still, Fresk told CNBC the country's overall situation remains "dire," a sentiment echoed by other observers troubled by Zuma's weakened political clout.

Domestic political tensions are expected to remain high this year, as Zuma's African National Congress (ANC) heads toward its leadership conference in December. That is when a successor will be chosen ahead of general elections in 2019.

"We expect the leadership and policy status quo to remain intact until then, with Zuma holding on as ANC head and President," Maya Senussi, a London-based senior economist with research firm 4CAST-RGE.

"That said, there is a possibility of a cabinet reshuffle, with the respected finance minister, Pravin Gordhan a potential…victim," she added—an outcome that would be damaging for growth and investment.

CNBC

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