ECONOM Y
THE SORRY STATE OF
SA’S ECONOMY Duma Gqubule takes a look at the dismal performance of the economy, particularly over the period 2009-2019
SLIPPERY DOWNWARD SLOPE Between 2009 and 2019, South Africa had a “lost decade” during which GDP per capita did not grow. Between 2015 and 2019, there were five consecutive years of declining GDP per capita. The country had two recessions in two consecutive years (2018 and 2019). Since the start of 2018, there have been seven out of ten quarters of declining GDP and eight out of ten quarters of declining investment. There have been three consecutive quarters of declining GDP before the start of the lockdown at the end of March 2020. The country was heading for its third recession in three consecutive years. Since the lockdown, 2.2 million people lost their jobs. The expanded unemployment rate is 42 per cent.
There cannot be an infrastructure-led recovery within the context of austerity budgets, which make deep cuts to public investment. GDP per capita will decline by about 10 per cent during 2020. By the end of 2020, South Africans will, on average, be only 15 per cent richer than they were in 1994. The government’s response to the crisis has been far less impactful than the actual shock to the economy. The real stimulus to the economy was far less than the R500-billion package that was announced in April. For example, the R200-billion loan guarantee scheme has only disbursed R16-billion. The government only contributed an extra R36-billion in noninterest expenditure. The Unemployment Insurance Fund paid R47.4-billion to people who were temporarily retrenched during the crisis.
government’s INFRASTRUCTURE PLAN BARELY ADEQUATE Announcing his infrastructure-led recovery plan to Parliament in October, Rampahosa said: “To ensure that there is active implementation of our infrastructure build programme, we have established Infrastructure SA and the Infrastructure Fund with the capacity to prepare and package projects. The Infrastructure Fund will provide R100-billion in catalytic finance over the next decade, leveraging as much as R10-trillion in new investment for strategic infrastructure projects.” However, the president first announced the establishment of a R400-billion infrastructure fund in September 2018. In the February
Between 2009 and 2019, South Africa had a “lost decade” during which GDP per capita did not grow. Between 2015 and 2019, there were five consecutive years of declining GDP per capita. 12
2019 budget, National Treasury reduced government’s commitment to this fund to R100bn over 10 years. Government has yet to make an allocation to the fund, which is not a new initiative. The government infrastructure plan does not address two issues. First, a public sector investment strike is the main reason for the collapse of total investment over the past five years. Between 2015 and 2019, public investment collapsed by 22 per cent. Government has not explained how it will reverse this trend and mend the broken balance sheets of state-owned companies (SOCs), which account for about half of public investment. National Treasury says there will be further declines in total investment during 2020 and 2021, despite government plans. Second, there cannot be an infrastructure-led recovery within the context of austerity budgets, which make deep cuts to public investment. In his speech to Parliament in October, Ramaphosa said: “According to modelling done by National Treasury, the implementation of this plan will raise growth to around three per cent on average over the next 10 years.” However, Pali Lehohla, the former statistician-general says: “At annual growth of three per cent over the next 10 years, never, in one’s wildest dreams, will jobs be created that will be different from the pre-COVID-19 scenario. A 30 per cent unemployment rate will continue to dog South Africa.” South Africa needs a plan that can achieve far more than three per cent growth.
*Duma Gqubule is founding director at the Centre for Economic Development and Transformation.
IMAGE: SUPPLIED
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resident Cyril Ramaphosa’s reconstruction and recovery plan is an inadequate response to the country’s once-in-a-century pandemic and economic depression that could eviscerate the dreams of our country’s liberation. It repackages old ideas that were developed before the crisis and presents them as part of a new plan. Lest we forget about the crisis before the crisis, South Africa’s economy has performed dismally since the dawn of democracy in 1994. Gross domestic product (GDP) per capita, an international benchmark of average living standards that takes into account the growth of a country’s population, has increased by only 28 per cent between 1994 and 2019. By comparison, “per capita incomes in India and China are now 300 and 760 per cent of what they were in 1995”, says Hendrik Du Toit, CEO of Ninety One.
Duma Gqubule
EMPOWERMENT
Economy - Duma.indd 12
2020/11/27 3:50 PM
