GDP numbers must be a wake-up call

It is hard to imagine a sadder piece of public relations than the statement the government issued on Tuesday welcoming the economy’s fourth-quarter growth. A figure of 0.1% is not growth. It is basically zero.

Nor does it reflect the “gradual economic recovery” or the resilience of which minister in the presidency Khumbudzo Ntshavheni speaks in the statement. That she finds it “particularly encouraging” that the fourth quarter surpassed pre-pandemic levels is also sad: GDP has fallen from its post-Covid peak in the fourth quarter of 2022, so we have squandered even the recovery we had managed to achieve.

The economic growth rate of 0.6% for the whole of 2023 is not too far from zero either, even if it is better than some of the worstcase scenarios envisaged early last year.

What makes the latest numbers even sadder is that they complete a decade in which the economy has grown by an annual average of just 0.8%, as the Treasury pointed out in its recent macroeconomic policy review. That is exactly half SA’s population growth rate. The country is going backwards, with average living standards sliding fast.

Nor is the outlook that much better. Most economists expect growth to pick up to just 1%-1.5% in the next couple of years. The pick-up, such as it is, will come largely from private sector investment in renewable energy and from lower inflation, which will allow the Reserve Bank to start reducing interest rates in the second half of this year. Few are factoring in any growth-boosting reforms or any real turnaround at Eskom or Transnet. And that is despite Ntshavheni’s claim that the latest figures signify “the positive impact of government interventions”.

The full-year 2023 figures do contain some bright spots. The finance and business services sector, which accounts for almost a quarter of SA’s economy. The transport sector grew strongly too, no doubt as private sector operators stepped up to counter Transnet’s failures. It was also the first year since 2019 that the construction sector showed limited growth.

Importantly for SA’s prospects and productivity, fixed investment spending grew by 4.2%. But this was slower than in 2022 and the pick-up in investment stalled in the second half.

Growth in exports also slowed last year compared with 2022 but was still positive, despite the downturn in the commodities cycle. With imports still increasing faster than exports though, external trade was a net negative for economic growth in 2023.

President Cyril Ramaphosa met this week with the business leaders trying to work with the government to tackle the crises that constrain investment and growth. The leaders will no doubt have told him that while progress is being made, it is far too slow. The president’s reform promises face resistance and inertia within government departments and state-owned enterprises that can only get worse with an election looming.

We can but hope that whatever the outcome of the election, the new administration gets back rapidly and with resolve to those hard yards.