South Africa’s real recession hits home

28 Mar 2024 in News

By Dr Dion George MP, DA Shadow Minister of Finance

Earlier this month, minister in the presidency Khumbudzo Ntshavheni praised South Africa’s latest GDP growth figures — which, in contrast to the minister’s fawning, confirmed that our economy is heading nowhere, fast. Still, the presidency’s posturing did echo the government’s perennial disconnect from the harsh economic realities vulnerable South Africans face daily.

While the ANC has been quick to celebrate what it would have us see as an economic victory, the reality for the millions of households battling to put food on the table is far from celebratory. This harsh truth becomes clear the moment you dig beyond the paltry 0.1% growth figure of 2023’s fourth quarter.

To fully contextualise the crisis, we need to juxtapose GDP growth — or the lack thereof — with other aggregates.

For instance, when considered against population growth, it becomes evident that the average South African’s purchasing power continues to decline at a steady pace. This more than a decade-long trend of diminishing GDP per capita signifies that, amid an escalating cost of living crisis, the vast majority of South Africans are experiencing economic regress, not progress.

According to data from the International Monetary Fund, South Africa’s GDP per capita dropped from $6,680 in 2022 to $6,190 in 2023 — far below the record-high of $8,800 recorded in 2012. Additionally, South Africa’s GDP per capita in 2023 now lags behind the $6,450 average for emerging and developing markets. We also record a significantly below-average GDP per capita across the world of $13,130.

But GDP is one of many benchmarks that are used to measure a country’s economic development. Among many more, metrics such as unemployment, crime, poverty, hunger and malnutrition, birth rates, literacy rates, life expectancy, access to basic service delivery and environmental sustainability paint a broader, more troubling picture.

Three decades after being elected into government, across every single one of the above-mentioned dimensions, the ANC’s track record demonstrates a distinct failure to deliver the empowerment South Africans deserve.

For every three people aged between 16 and 24, two will be without a job, while national unemployment across all ages hovers at about 40%.

On crime, between October and December 2023, the country endured 7,710 murders, 15,284 sexual offences and thousands of assaults and robberies. These numbers mark a grim increase from the previous year, as murders are up 2.1% and attempted murders by 12.9%, while robberies and carjackings also show alarming increases.

Many wallets have already been wrung dry this year, and stomachs left growling. We have yet to experience the full extent of the crisis. According to the World Data Lab, by 2025, the escalating food crisis will leave half of South Africans unable to meet their basic food consumption needs.

Adding to our malaise, the latest national “Blue Drop Report”, which is an assessment focused on critical risk areas within water services, unveiled an unfolding public health crisis. It found that nearly half of all water supply systems (46%) do not comply with microbiological standards. In these water supply systems, drinking water is contaminated by sewage and bacteria. As per the constitution, this is an infringement on the basic human right of every single South African to have access to clean drinking water.

Under these circumstances, attracting investment, both foreign and local, becomes markedly difficult. Foreign investors are deterred from engaging with such a high-risk environment. They have withdrawn a net R1-trillion from bond and equity markets over the past 10½ years. This colossal capital drain was triggered by successive credit downgrades, the sharp deterioration in South Africa’s fiscal position, rampant corruption and the sustained decline of state-owned entities.

The need for policy reform

With national elections looming, the ruling party cannot afford the spectre of recession, or even a whisper of narrowly avoiding one, hanging over its head. Even the slightest uptick in output must be presented as a major victory.

But this attempt to establish a narrative of having forged economic resilience and recovery must be seen as a ploy to boost the party’s image after decades of industrial-scale mismanagement of the economy. Instead of adopting ruthless and targeted growth-focused reforms, the government is doubling down on destructive policies such as expropriation without compensation and racialisation of our employment legislation and public procurement framework.

Instead of wasting resources on gaslighting South Africans, the government must direct all its efforts to course-correct before we reach the fiscal cliff. It must understand that without deregulating the policy environment, economic durability will not be attainable, inflation will continue to run rampant, the rate of unemployment will continue to spiral upwards and economic growth will remain tepid, if at all positive.

South Africa is a developing country with a growing workforce and a healthy demographic profile. We ought to have, by now, secured sustained positive economic growth. If the government were to implement the requisite policy reforms, it would be possible to realise economic growth rates comparable to our emerging-market counterparts.

The ANC must face a hard truth. Without immediate, comprehensive reform, our fiscal crisis will deepen. Deregulation, decisive action against corruption, and the replacement of destructive policies with those that consider poverty as a proxy for empowerment, instead of race, have become non-negotiable.

The alternative is a country that will continue to spiral further into poverty and instability. Every promise of progress, squandered. All South Africans deserve better.