Durban - Leading economists have warned of a recession as the failure of the maize crop and the Chinese economic meltdown are guaranteed to hit the country hard.
Azar Jammine, chief economist at Econometrix, said today the impact of the drought could mean a recession similar to that of the late 1980s.
Economist Iraj Abedian said the country was “on the borderline” and if emergency measures were not taken, it would slide into recession. But he said it was not inevitable and that if the South African cabinet came up with the right policies, a recession could be avoided.
AgriSA executive director, Omri van Zyl, said the maize shortage affected the whole agricultural chain because maize was also used in animal feed. The effect of the decline in agricultural production would also be felt at grassroots, he said.
There was an oversupply of red meat because farmers were slaughtering livestock they could not feed. This would result in a protein shortage in the long term.
Jammine said South Africa produced 5 million tons of maize this year, compared with 13- to 14-million tons it usually produced and distributed across southern Africa.
Maize is the country’s staple food.
South Africa’s annual requirement is 10 million tons, which means 5 million tons can be imported.
Jammine said the knock-on would be increased food prices, which was already happening.
This would impact on inflation and people’s disposable incomes.
With the fall of the rand, this was the “worst time” for imports to increase. The rand was at R15.94 to the dollar this morning.
This comes after emerging market currencies dived after the Chinese stock market lost 7% and trading was stopped.
Global markets stumbled, with the blue-chip Dow Jones Industrial Average falling 2.3% A new “circuit breaker” mechanism in China – which stops trading for 15 minutes if prices on the index fall more then 5%, and stops trading for the day if prices fall more than 7% – was introduced this year after volatility on the Shanghai stock exchange sent jitters through global markets in the second half of last year, and led to a host of official measures to shore up prices.
The circuit breaker was designed “to comfort panic in the market”, according to Shanghai-based independent analyst Ye Tan.
But China’s stock markets were trading today without the “circuit breaker” mechanism, which the securities regulator suspended after it halted trade for the day twice this week
In a statement yesterday the China Securities Regulatory Commission said the system will switched off today because it had produced “more negative impact than positive effects”.
The commission did not say how long the suspension would remain in place.
DAILY NEWS