Christine Mungai writes in the Mail & Guardian:
South Africa's problem could be that it's economy is too "modern". It is over-financialised, but also over-formalised compared to rest of Africa.
A few weeks ago, reports out of South Africa indicated that the number of initial public offerings on Johannesburg’s stock market (JSE) in the first quarter of 2015 accelerated to levels not seen since the global financial crisis, as the benchmark index rose to a record and companies took advantage of the rally - even as the broader economy is in the doldrums. (READ: S. Africa’s curious Dutch disease: Money is making the economy sick - then there’s Zimbabwe).More here
In 2014 there were two IPOs in the first quarter, in 2013 just one, and none in 2012.
It seems paradoxical that the stock market would be doing so well, considering the rest of the economy almost stagnating, with growth rates now less than 2% and unemployment almost 25%.
While the rand has declined 2.4% against the dollar this year, the stock market has climbed 6.1% and touched a record in February; in effect, the JSE bears little resemblance to the economy.
But far from being an aberration, the disconnection between what happens on the JSE and in the wider South African economy is the key to understanding the country’s structural problems.