In­stead of blam­ing Zuma, look at re­al­ity of ex­port trade

Anal­y­sis

The New Age (Gauteng) - - OPINION & ANALYSIS - Mfundo Bon­gela is the re­gional sec­re­tary of the ANC’s Joe Gqabi re­gion in the East­ern Cape

SOUTH Africa’s econ­omy is per­form­ing be­low ex­pec­ta­tions and this trend is likely to con­tinue, with 2017 growth pro­jected at less than 1%.

This weak eco­nomic growth is pro­jected to con­tinue for the rest of the year be­fore pick­ing up mod­er­ately in 2018, as pri­vate con­sump­tion (and ex­ports) is ex­pected to rise on the back of a re­cov­ery in com­mod­ity prices and growth in ex­port mar­kets.

How did we get here? Most “ex­perts” blame what they call Pres­i­dent Jacob Zuma’s per­sis­tent po­lit­i­cal de­ba­cles said to be caus­ing col­lat­eral dam­age to the econ­omy. Specif­i­cally, ANC in­ter­nal di­vi­sions and pol­icy un­cer­tainty have been cited as the more dam­ag­ing ef­fects of the Zuma pres­i­dency.

Ac­cord­ing to Ju­dith Fe­bru­ary, who is based at the In­sti­tute for Se­cu­rity Stud­ies, “Zuma can­not speak with any le­git­i­macy or cred­i­bil­ity on the econ­omy since he has sin­gle-hand­edly done more to un­der­mine and de­stroy the econ­omy than any post­apartheid pres­i­dent”.

Zuma him­self, she says, is a ma­jor stum­bling block to a grow­ing, healthy econ­omy, and, con­trary to pop­u­lar be­lief Fe­bru­ary says it is ac­tu­ally the pres­i­dent who is “a stum­bling block to eco­nomic trans­for­ma­tion and the re­dress­ing of the struc­tural eco­nomic in­jus­tices of the past”.

Ju­dith Fe­bru­ary is, of course, echo­ing views of many of the so­called eco­nomic ex­perts who have gone over the edge to align their ex­per­tise with their deep­seated sen­ti­ments on the po­lit­i­cal and eco­nomic dy­nam­ics of the coun­try.

When you fol­low their ar­gu­ments, in or­der to find causal­ity, in or­der to de­ter­mine the spe­cific ac­tions that Zuma has taken or not taken, and their di­rect im­pact on the econ­omy, th­ese ar­gu­ments be­gin to fol­low an in­fi­nite regress.

The de­par­ture point for any con­ver­sa­tion on the econ­omy has to be “what are South Africa’s driv­ers of eco­nomic growth” and how have th­ese been com­pro­mised or made in­ef­fec­tive by Zuma’s per­sis­tent po­lit­i­cal de­ba­cles.

Real in­vestors in South Africa, par­tic­u­larly in min­ing, will tell you that many in­vestors are ac­tu­ally more fear­ful of China’s slow­down as the planet’s main driver of growth.

China’s econ­omy is still grow­ing at higher per­cent­ages but what sparks the mar­kets is an­tic­i­pa­tion than ac­tu­al­ity and an­tic­i­pa­tion is that China’s growth is not go­ing to con­tinue at higher rates.

The re­sult is the mar­kets are ad­just­ing to this re­al­ity be­fore it even hap­pens, caus­ing it to hap­pen sooner, a self­ful­fill­ing proph­esy.

China’s slow­down has huge im­pli­ca­tions for most mar­kets, par­tic­u­lar sup­pli­ers of com­modi­ties – which ties in with RSA’s slow eco­nomic growth. RSA re­mains largely de­pen­dent on com­modi­ties as its driver of eco­nomic growth due to ex­port mar­kets.

Our min­ing in­dus­try ac­counts for more than 50% of the coun­try’s ex­ports. Reliance on min­ing for ex­ports, along with the slow­down of ex­port de­mand for com­modi­ties, has re­sulted in the steady de­cline in the value of the rand.

As a re­sult, the econ­omy heav­ily de­pends on global re­cov­ery of de­mand – some­thing that has im­pli­ca­tions on the prices of com­modi­ties.

SA’s top 10 com­pa­nies ac­count for 70% of its 40 In­dex and min­ing com­pa­nies dom­i­nate the list, which heav­ily af­fects both the health of our in­ter­na­tional and lo­cal mar­kets.

In 2016, Stats SA found that the coun­try’s GDP slowed to 0.3%, with the big­gest con­trac­tions oc­cur­ring in in­dus­tries like min­ing, man­u­fac­tur­ing and quar­ry­ing.

De­spite the na­tion’s rep­u­ta­tion as a tech haven, some 57% of South Africa’s econ­omy is still com­posed of com­modi­ties, which as we have said, has been hard hit by de­clin­ing world­wide de­mand over the past sev­eral years.

In fact, the frail ex­port mar­ket has led to a sig­nif­i­cant de­crease in the value of the rand, caus­ing it to drop to an all-time low of R18 per dol­lar in 2016.

Yet an­other sec­tor that has seen more than its share of dif­fi­cul­ties is agri­cul­ture, long fa­mous for its wines and more re­cently, its olive oil. This sec­tor was once her­alded as a po­ten­tial saviour, with the prom­ise of nearly one mil­lion jobs which, un­for­tu­nately, turned out to be overblown as em­ploy­ers use sea­sonal work­ers and face un­cer­tainty be­cause a huge amount of their in­come de­pends on global de­mand. To make things worse, South African farm­ers are also fac­ing the worst drought in more than a cen­tury, which forced the agri­cul­tural sec­tor to shrink by nearly 14%.

Cou­pled with in­fla­tion­ary pres­sures and poor farm out­put, food costs are ris­ing by as much as 6.2%, re­sult­ing in a grim over­all out­look for the na­tion’s econ­omy.

It’s dif­fi­cult to see how all th­ese min­ing and agri­cul­tural eco­nomic de­ba­cles can be linked to Zuma’s so-called per­sis­tent po­lit­i­cal col­lat­eral dam­age.

Grow­ing ex­port rev­enues is a nec­es­sary con­di­tion for sus­tain­able growth in South Africa.The surge in do­mes­tic spend­ing be­tween 2004 and 2007 was only pos­si­ble be­cause there was a com­modi­ties boom.

Since 2012, de­clin­ing ex­port rev­enues have taken their toll. A ris­ing cur­rent ac­count deficit has weak­ened the rand, erod­ing real per­sonal in­comes.

Min­ing in­vest­ment has con­tracted. The ma­chine driv­ing growth has switched off.

This witch-hunt for who is re­spon­si­ble for our eco­nomic woes has seen peo­ple blam­ing the Zuma gov­ern­ment for ev­ery­thing, from fis­cal dis­ci­pline, salaries of gov­ern­ment em­ploy­ees, in­fra­struc­ture back­log, in­ad­e­quate ed­u­ca­tion sys­tem and poi­sonous labour re­la­tions, all just to avoid fac­ing the re­al­ity that we have an ex­port mar­ket (and lo­cal econ­omy) that is heav­ily de­pended on com­modi­ties and that global de­mand has been slow­ing down over the years, drag­ging our econ­omy with it.

We don’t dare talk about pri­vate sec­tor in­vest­ment boy­cott in the econ­omy, for some all the blame must re­side with the gov­ern­ment in bad times, in the good times, it’s the pri­vate sec­tor that is re­spon­si­ble for growth and boom.

It’s the same thing that is hap­pen­ing to oil­pro­duc­ing and de­pen­dent coun­tries, who have seen their rev­enues more than halved over the past few years, as global de­mand for oil has dropped dras­ti­cally.

The prob­lem, of course, with our coun­try’s ex­perts is that they are but pri­vate in­di­vid­u­als with pri­vate in­ter­ests – in­stead of be­ing so­lu­tion­driven ex­perts who help the coun­try find real so­lu­tions.

PICTURE: FLICKR

WEAK RAND: Since 2012, de­clin­ing ex­port rev­enues have taken its toll on the South African econ­omy while in­creased ex­port rev­enues is a nec­es­sary con­di­tion for sus­tain­able growth.

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