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In an Annual Client Presentation series exploring the theme “Leaving a Legacy”, Citadel’s Chief Economist and Advisory Partner, Maarten Ackerman, drew on 26 years of Citadel history and 25 years of a democratic South Africa as an opportunity to pause and reflect on the successes, as well as the challenges that lay ahead.

Yes, there is turbulence in the markets currently, but this doesn’t mean it’s the end, said Ackerman. “As long as you have a trained pilot in the seat, and a certain protocol that you follow, then things will be ok.”

Taking that analogy further, Ackerman took clients through the weather forecast for the next few years.


Since 2008 the majority of the G7 countries have been benefitting from the stimulation put in place since the global financial crisis – the United States (US) more so than others. At 11 years, this is now the longest economic recovery on record, especially in the US. But this doesn’t mean the trend has to end, only an economic imbalance can trigger and derail this recovery. In fact, Australia is still rebounding at 25 years, so the length of the recovery is not the key determiner.

That said, the trade tensions between the US and China have the potential to provide a negative catalyst which could disrupt the world, resulting in a recession.

The state of the global economy, compared with 2018, is very much the same movie: Economic growth is continuing, although there are some signs which warrant concern. A recession is still in the pipeline, but is unlikely to transpire in the next 12 months or so.

For the past two years, however, key global exporters like Germany have started to flatline, this is down to the trade issues between the US and China, which has seen a contraction in trade over the last year. So big exporters like Germany (roughly 50% of economic growth is export driven) are feeling the pain more intensely than closed economies like China and the US (where about 20% of those economies is export driven), explained Ackerman.

Germany is by no means alone. Going into 2020, the leading indicator for the G7 points to a slowdown in momentum across the board. This has heightened concerns around the likelihood of a recession and already points to softer economic growth, a situation exacerbated by geopolitical tensions and trade issues which are further impacting global confidence and sentiment. The likes of Corporate America are seeing a decline in confidence, precipitated by US President Donald Trump’s trade war rhetoric and the associated rise in tariffs.

“Although the US economy is still growing quite nicely at the moment, and we don’t see a recession at least in the next 12 months, Corporate America is not that happy any more, because they need to take these tariffs on the chin and they are paying more importing all those components and so they are all warning that profitability will be under pressure,” said Ackerman.

While all indications are that Trump’s actions are hurting the US economy, it remains to be seen what happens come November 2020 and the next round of elections. What could prove a factor is that, historically, the US economy has never gone into recession during an election year; so the US will do whatever it can to paint a rosy picture in the build-up to the election.

The US Federal Reserve, alongside global central banks, is continuing to provide stimulation and to cut rates – with the likes of Denmark now becoming the first country in the world with a negative mortgage rate. China is also stimulating through various monetary and fiscal measures like recently cutting its VAT rate.

“With stimulation, we will probably get to a situation where there is a rebound in economic growth in 2020,” said Ackerman. But with a negative US yield curve (a key indicator of an impending recession within 14 months – historic average – of going negative), it is highly likely that while 2020 will weather the storm, the clouds could be gathering come 2021.


When it comes to the South African economy, Ackerman admitted that “it’s bleak out there. People are very negative.”

At around 0.6% growth, South Africa is certainly recording a weak number, “but we had worse in the 1980s and 2008,” said Ackerman, pointing out that the current growth number was weak but not negative. “Only when you get into negative numbers for years do you have to go to the International Monetary Fund. We are not there yet.”

However, there are notable concerns, not least of which is the fact that while growth remains sluggish, population growth is outstripping economic growth over the past three years. If this trend continues, it will result in yet higher unemployment numbers.

Looking back, South Africa weathered a bad cycle from 1980 to 1991 where economic growth was around -2% over the last three years of this declining period. “Currently we can stop the decline before we hit negative growth over three years,” said Ackerman, who was upbeat that the Ramaphosa administration had already stopped the decay and that the National Treasury plan was “a huge step in the right direction”. But over the next 12 months it is vital that these reforms start taking place, he said, noting that practically “it will take the better part of three to five years to see progress”.

On the upside, and despite bleak growth numbers and frustration around a lack of action, it was important to remember that South Africa had seen a 33% hike in per capital income since 1991. In a highly unequal society this wealth accumulation had certainly not benefitted all, he noted, but there were more opportunities on the horizon and the growth of a sustainable emerging middle class was a positive which should, ideally, continue to develop in the future.

“A lot of people want to emigrate. A lot of people are selling assets at ridiculous valuations, just to cash in,” said Ackerman. “But if you are willing to commit to the country at this point in time, and over the next three to five years matters turn out better than expected, then there is a lot of money to be made.” Ackerman pointed to positives like investment in early childhood development, increased foreign direct investment (FDI) and a critical focus on turning around state-owned enterprises, specifically Eskom.

FDI, in particular, was back at 2013 levels after almost drying up in 2016. In 2018 FDI grew three times faster than the economy – something that was last witnessed in the early-1990s. “Foreigners are coming back to South Africa,” said Ackerman. “You won’t read about it in the daily newspapers, but it is happening.”

On a pragmatic note, Ackerman admitted that South Africa has always had structural issues which the country has weathered. There are green shoots, but now we need to see action from a policy reform point of view.