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Speaker 1: Confirmation today from Stats SSA our economy growing by zero

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Speaker 1: point five percent from the beginning of July to the

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Speaker 1: end of September. Obviously, the contribution from mining was up,

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Speaker 1: electricity services were down. Interestingly, gross capital fixed formation was up,

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Speaker 1: meaning more money is being spent on infrastructure. Gulambalam is

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Speaker 1: the chief economist at Standard Bank. Gulam Good evening, Good

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Speaker 1: to talk again. On the surface, point five percent is

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Speaker 1: quite a disappointing figure, but I imagine you and no

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Speaker 1: one else really expected anything better.

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Speaker 2: Stephen, Great to talk to you. The point five percent

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Speaker 2: was in fact consistence with conscientious so the forecasting community

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Speaker 2: had predicted this outcome. So to that extent, it speaks

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Speaker 2: to this idea that we cheer at the minimum four

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Speaker 2: consecutive quarters of growth. And remember the point five percent

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Speaker 2: is quarter on quarter, It isn't your own year growth.

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Speaker 2: What it therefore alludes to is that the plows ability

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Speaker 2: that for the whole of twenty twenty five the economy

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Speaker 2: could still muster roughly one point one maybe one point

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Speaker 2: two percent annual growth. Knowledge double the point five percent,

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Speaker 2: and I guess the last point of modest year is

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Speaker 2: that the economy is neither contracting nor stagnating, but seems

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Speaker 2: to be enjoying gentle ascendency.

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Speaker 1: We seem to be seeing a bit more money being

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Speaker 1: spent on infrastructure. So about a month ago, the Labor

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Speaker 1: Force survey indicated that many more people are being employed

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Speaker 1: in construction. We see from this figure our construction seems

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Speaker 1: to have turned a corner. I mean, are those very

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Speaker 1: weak signs of a kind of.

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Speaker 2: Change, modest buds to the extent that in both twenty

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Speaker 2: twenty four and this year at an annual level, what

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Speaker 2: you call growth fixed capital formation, which is just an

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Speaker 2: elaborate term for fixed investment, well left contracted and roughly

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Speaker 2: five percent over the two years. However, this moment does

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Speaker 2: signal that we could see growth in twenty twenty six

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Speaker 2: in the order of around three and a half percent.

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Speaker 2: So you're correct in suggesting that if we look at

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Speaker 2: other guide stones such as corporate credit, growth and imports,

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Speaker 2: and also investment by the public sector, it does August

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Speaker 2: somewhat favorably for twenty twenty six relative to the last

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Speaker 2: let's say, eighteen months, two years.

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Speaker 1: In so many ways, our economy has changed in so

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Speaker 1: many ways, it hasn't. I mean, it's because of strong

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Speaker 1: platinum and gold prices, and then again because of our farmers,

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Speaker 1: our economy is growing very slightly. And I mean you

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Speaker 1: could have said the same thing quite a long time ago.

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Speaker 2: So yeah, every time we get to discuss the economy rightly,

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Speaker 2: we talk about various industries, sectors, and then from the

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Speaker 2: demand side we talk about consumption, fixed investments and government spending. Overarching,

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Speaker 2: all of this ultimately is confidence, and confidence does take

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Speaker 2: pe on the politics. In some respects, the politics has

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Speaker 2: been incrementally favorable firstly. Secondly, which some good news in

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Speaker 2: recent months, for example the S and P upgrade. We've

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Speaker 2: been relieved of the Financial Action Task Force list with

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Speaker 2: regard to financial management, and we had a reasonably good

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Speaker 2: medium term budget. Now obviously getting news surrounding the manner

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Speaker 2: in which our criminal justice system seems to be encaptured

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Speaker 2: and the rule of law is being impugned, so that's

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Speaker 2: somewhat temper confidence. But there I say, incrementally the direction

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Speaker 2: of travel is favorable, and we hope the reform agenda

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Speaker 2: out of operation will end LELA as well as any

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Speaker 2: incursions with regard to dealing with crime and organized crime

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Speaker 2: particularly will be constructive through twenty twenty six, so we

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Speaker 2: can bake in a continued acceleration to say, two percent

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Speaker 2: growth by twenty twenty seven.

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Speaker 1: You talk about this high level things that are going well,

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Speaker 1: so yes, S and P global. I think there's possibly

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Speaker 1: moodies later in the week. To go from that high

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Speaker 1: level stuff to actually feeling a difference on the ground,

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Speaker 1: does one automatically lead to the other? I would like

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Speaker 1: to think the sort of a small wave of good

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Speaker 1: news that we've had over the last month does feed

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Speaker 1: into the broader economy in some way.

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Speaker 2: So you would think that they danced together reasonably well.

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Speaker 2: And I do think the statistics on the ground, as

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Speaker 2: you suggest, speaks to that. So, for instance, inflation has

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Speaker 2: been generally low and between three and three and a

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Speaker 2: half percent, while national wagers in real terms will be

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Speaker 2: about three percentage point higher than that. In other words,

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Speaker 2: South Africans are going to experience positive real income growth

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Speaker 2: both as a function of let me call it, sticky

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Speaker 2: nominal wage settlements against fairly low inflation. Secondly, interest rates

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Speaker 2: has have declined by accumulative percentage point, and in the

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Speaker 2: nature of the transmission mechanism, this year's decline and interest

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Speaker 2: rates will have its maximum effect in twenty twenty six. Yes,

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Speaker 2: people take advantage of that as a positive omen we

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Speaker 2: see car sales at its highest nominal number or sales

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Speaker 2: figures in years, just indicative of individuals willing to spend

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Speaker 2: on credit and also just easier credit conditions combined with

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Speaker 2: an improvement in get affordability. So on the ground is

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Speaker 2: a semblance of more constructive consumer behavior, which could be

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Speaker 2: a draw card for private investment in due.

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Speaker 1: Course and over the longer term a lower inflation target.

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Speaker 1: I mean, I would like to think that brings down

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Speaker 1: the cost of credit generally and has an impact, but

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Speaker 1: it will take a long time for us to feel that.

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Speaker 2: So yes, and no know in the sense that the

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Speaker 2: bond market, which is of course where corporates and government

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Speaker 2: to borrow that has already raised down. So you had

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Speaker 2: a steady state bond ken your interest rate of around

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Speaker 2: let's say eleven percent a year ago, and now you're

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Speaker 2: around nine percent, So there's already two percentage points just

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Speaker 2: generally speaking of savings as a function of the Reserve

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Speaker 2: Bank signaling that it will target three percent. Alongside the banks,

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Speaker 2: we study credibility to deliver what it anticipates it will deliver.

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Speaker 2: So in this respect you've already had let me say,

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Speaker 2: establish money, corporate money and government money enjoying the lower

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Speaker 2: interest rate environment as a function surely of their promise.

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Speaker 2: In due course, yes, consumers who borrow, as what we

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Speaker 2: say the short engngine know with prime interest rates, they

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Speaker 2: too will enjoy over the medium term lower interest rates

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Speaker 2: as a function of the possibility that the bank is

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Speaker 2: able to guide inflation and make it sticky at around

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Speaker 2: three percent. So some benefit already injected into the economy,

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Speaker 2: and in due course more to come, particularly for the

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Speaker 2: household sector.

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Speaker 1: Gullan Balam, thanks so much, chief economist at Standard Bank.

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Speaker 1: Really appreciate it.