SA’s state of economic disarray

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

Duma Gqubule

President Cyril Ramaphosa’s Th ere cannot be an infrastructure-led recovery within reconstruction and recovery plan is an inadequate response to the context of austerity budgets, which make deep cuts the country’s once-in-a-century to public investment. pandemic and economic depression that could eviscerate the dreams of our country’s liberation. It repackages old ideas GDP per capita will decline by about 2019 budget, National Treasury reduced that were developed before the crisis and 10 per cent during 2020. By the end of 2020, government’s commitment to this fund to presents them as part of a new plan. South Africans will, on average, be only R100bn over 10 years. Government has yet

Lest we forget about the crisis before 15 per cent richer than they were in 1994. to make an allocation to the fund, which is the crisis, South Africa’s economy has The government’s response to the crisis has not a new initiative. performed dismally since the dawn of been far less impactful than the actual shock The government infrastructure plan democracy in 1994. Gross domestic to the economy. does not address two issues. First, a product (GDP) per capita, an international The real stimulus to the economy was public sector investment strike is the main benchmark of average living standards far less than the R500-billion package that reason for the collapse of total investment that takes into account the growth of a was announced in April. For example, the over the past fi ve years. Between 2015 country’s population, has increased by only R200-billion loan guarantee scheme has and 2019, public investment collapsed by 28 per cent between 1994 and 2019. By only disbursed R16-billion. The government 22 per cent. Government has not explained comparison, “per capita incomes in India and only contributed an extra R36-billion in how it will reverse this trend and mend the China are now 300 and 760 per cent of what noninterest expenditure. The Unemployment broken balance sheets of state-owned they were in 1995”, says Hendrik Du Toit, Insurance Fund paid R47.4-billion to people companies (SOCs), which account for about CEO of Ninety One. who were temporarily retrenched during half of public investment. National Treasury the crisis. says there will be further declines in total SLIPPERY DOWNWARD SLOPE investment during 2020 and 2021, despite Between 2009 and 2019, South Africa had a government’s INFRASTRUCTURE PLAN government plans. Second, there cannot “lost decade” during which GDP per capita BARELY ADEQUATE be an infrastructure-led recovery within the did not grow. Between 2015 and 2019, there Announcing his infrastructure-led context of austerity budgets, which make were fi ve consecutive years of declining GDP recovery plan to Parliament in October, deep cuts to public investment. per capita. The country had two recessions Rampahosa said: “To ensure that there is In his speech to Parliament in October, in two consecutive years (2018 and 2019). active implementation of our infrastructure Ramaphosa said: “According to modelling

Since the start of 2018, there have been build programme, we have established done by National Treasury, the implementation seven out of ten quarters of declining GDP Infrastructure SA and the Infrastructure Fund of this plan will raise growth to around and eight out of ten quarters of declining with the capacity to prepare and package three per cent on average over the next investment. There have been three projects. The Infrastructure Fund will provide 10 years.” However, Pali Lehohla, the consecutive quarters of declining GDP R100-billion in catalytic fi nance over the former statistician-general says: “At annual before the start of the lockdown at the end next decade, leveraging as much as growth of three per cent over the next 10 of March 2020. The country was heading for R10-trillion in new investment for strategic years, never, in one’s wildest dreams, will its third recession in three consecutive years. infrastructure projects.” jobs be created that will be different from Since the lockdown, 2.2 million people lost However, the president fi rst announced the the pre-COVID-19 scenario. A 30 per cent their jobs. The expanded unemployment rate establishment of a R400-billion infrastructure unemployment rate will continue to dog is 42 per cent. fund in September 2018. In the February South Africa.” South Africa needs a plan that can achieve Between 2009 and 2019, South Africa had a “lost decade” far more than three per cent growth.

during which GDP per capita did not grow. Between 2015

and 2019, there were fi ve consecutive years of declining GDP per capita. *Duma Gqubule is founding director at the Centre for Economic Development and Transformation.