Green shoots pushing up out of good economic news
The news is dire: GDP has shrunk to its 2017 size, having grown just 1% annually on average from 2008 to 2019 and contracting 6.4% last year.
Hunger and poverty stalk the land, while SA’s “reserve army” of unemployed in 2021 is 12-million strong, representing 34.4% of the economically active population. The youth are worst affected at almost 75% unemployment.
The tax base has also been steadily eroding, with individual taxpayers, who came to a total of 6.4-million in 2012, shrinking to 2-million in 2020.
Little wonder, then, that Claude Baissac of consultancy Eunomix responds cynically to any talk of an economic recovery, describing the situation not as green shoots of revival but mushrooms growing on the dead body of the middle class, the backbone of any successful economy.
Yet there is no denying the quiet coalescing of good economic news, leading to more talk of rebuilding this battered country on the basis of a renewed commitment to social cohesion. Economists are beginning to talk of 2021 ending with annual growth of 4.5%-5%, while medium-term growth could average 2.3% a year.
This is due to a combination of factors, not least of which has been the windfall from the rise in commodity prices, a record trade surplus and improvements in tax revenue. Add to this record food production with the ending of the drought and the beginning of a robust global recovery that has caused parts of the manufacturing sector to sputter back to life.
EARLY VICTORIES
These developments have been complemented by a number of key moves by the state. The decision to allow independent power production goes far in helping firms secure consistency of energy supply while reducing the burden on state utility Eskom.
It has been touted as one of the early victories for Operation Vulindlela, a delivery unit run jointly by the presidency and the National Treasury. Other milestones will include the phased switch-off of analogue television signals by end-March 2022, the long-anticipated spectrum auctioning, and the rollout of an e-visa system to 14 countries.
Infrastructure SA, also located in the presidency, aims to tackle the drop in gross fixed investment by answering the call from the private sector for well-considered, large-scale projects.
Galvanising state resources and the private sector for tourism may sound like a Sisyphean task, but is required for a sector that by 2019 was contributing almost 3% to GDP and employed up to 440,000 people.
For a truly resilient economy to be built from the ashes of the era of state capture, Covid-19 and the July uprisings, economic policymakers should deal with some of their bêtes noires. Primary among these is the need to craft a single economic policy to create prosperity through the improvement of SA’s productive forces, not just a glut of plans that often contradict themselves.
It should be based on the following pillars:
● Addressing the skills and technology nexus to set SA on a higher growth path; and
● A shift towards fostering and promoting the development of the private sector through small, medium and micro enterprises (SMMEs).
The former would require a frank admission that our education system, worsened by Covid-19 disruptions, raises the hopes of parents and matriculants only for these to be dashed by the cold reality of workplaces that require skills they are not equipped with, or simply lacking employment opportunities.
An increase in the SMME segment requires the same laser-like focus President Cyril Ramaphosa has brought to many intractable past and current problems, so that enterprise development is core to his administration.
In this context, and that of the July uprisings in KwaZuluNatal and Gauteng, the Mapungubwe Institute and the Gauteng City-Region Observatory will be hosting a webinar series on the theme of rebuilding communities, the economy and the state.
The proposals that emerge can only enhance the positive developments.