Economic outlook bleak

FOREIGN DEBT BIGGEST DOWNFALL AFTER GRAFT, UNCERTAINTY Load shedding, election will play major role in outcome of economy.

Despite increasing evidence that rates of inflation are easing, South Africa’s economic outlook for 2024 still looks bleak, with foreign debt becoming the biggest downfall after corruption and policy uncertainty.

Various experts have alluded that SA was nowhere near a healthy economic trajectory, with the country carrying its shaky economic times from 2023 into 2024.

According to Prof Raymond Parsons from the North-West University Business School’s Business School Policy Uncertainty Index 4Q 2023 on the negative side, as 2024 arrives the economic outlook will remain a tough and challenging environment.

“The economy will continue to grapple with domestic and global headwinds as it moves into 2024,” the report revealed as it noted that policy uncertainty, load shedding, and the 2024 election would play a major role in the economic outcome.

However, Daniel Silke, a political economy analyst, said although growth was expected to improve to some degree, the lack of policy clarity – which was going to be with SA until perhaps for the better part of the year, or at least until after the election – was holding back the economy.

“The election skews all sorts of things, because in an election year governments want to hand out money, they want to deliver certain benefits to the people, up salary for the bureaucrats, and of course, we are cash strapped.

“We simply don’t have money, and this is the big trade off that the ANC has to make over the course of the first six months.

“How does it keep its voters relatively happy? How does it keep its big bureaucracy relatively happy with better-than-expected salary increases?

“But at the same time, where does it get the money from? It can’t really tax South Africans anymore because we’re already a very highly taxed nation.”

Silke said what SA could do was borrow more on global markets.

“And we’ve seen indications that our borrowing will go up. I don’t think our borrowing is in dangerous territory,” he said.

“But if you get into a cycle of borrowing extensively to placate your bureaucracy especially in the time of an election, someone’s going to have to pay back the money at the end of the day.”

Economist Dr Azar Jammine said the government projects government debt to rise to 78% of GDP by 2025-26. “So we’re running after our own tails, collecting taxes to pay interest,” he said.

“On a debt level that is spiralling all the time. That is the real problem, you can carry on so far and eventually you run out of money to pay the interest.”

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