GLOOMY FORECAST DE­SPITE IN­DEX RISE

Weekend Argus (Saturday Edition) - - FRONT PAGE -

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.

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