GLOOMY FORECAST DESPITE INDEX RISE
EVERY day South African consumers are confronted by more disturbing news about the state of the economy, Professor Carel van Aardt says.
If South Africa’s economic performance between 2011 and 2016 (for which Momentum/ Unisa Household Financial Wellness indices are available) is extrapolated through to 2018, a fairly gloomy picture emerges, he says. This includes declining gross domestic product growth, higher unemployment, lower compensation for workers, and higher levels of income and wealth inequality.
Van Aardt says the number of people in employment grew from 14.1 million in 2011 to 15.95m in 2016, and it is expected to grow only marginally (to 15.97m) by the end of next year. The number of unemployed increased from 4.6m in 2011 to 5.9m last year, and will be about 7.2m at the end of 2018, which means there will be about 1.3m more unemployed people at the end of next year than at the end of last year. Some of the implications are: • It is going to be tougher to find and hang on to a job this year and next year. “It’s clear from the available employment figures that many businesses are struggling to survive, with the implication that they will, on average, rather shed jobs than create jobs,” Van Aardt says.
• You should prepare for unemployment, because analysts have found that the current situation is “not a cyclical downswing but a self-made recession, which cannot be escaped by means of the regular fiscal economic stimuli”.
• Many households will find that their expenditure will grow much faster than their income, which will make it increasingly difficult for them to maintain their financial wellness levels, Van Aardt says. Effective budgeting and sticking to a budget will be increasingly important to survive financially.
• Rising unemployment, poverty and inequality will exacerbate political, economic and social instability.
• The historically low rate of saving, the low level of entrepreneurship and inadequate skills make South Africa particularly vulnerable to economic stagnation this year and in 2018. Consumers will be in an even worse position if a significant economic turnaround does not take place by late next year, Van Aardt says.
• High levels of poverty and inequality, together with the current high level of economic stagnation, are having an increasingly negative impact on the legitimacy of institutions such as government, the public sector, the Reserve Bank and the courts. “This could have dire societal implications during the years to come,” he says.