Economic rescue

THINGS are not looking good for South Africa’s economy, so what happens over the next six months or so is really important for the nation as a whole. The latest GDP figures published by Stats SA indicate that the economy shrank by 1.2 percent quarter-on-quarter with year-on-year growth for the same quarter at -0.2 percent.

A range of issues such as waning Chinese demand, high unemployment, weak commodity prices, a severe drought and drops in important sectors such as mining and transport have all played their part in this troubling situation. Political uncertainty, high unemployment, hefty taxes and possible interest rate increases have also done damage.

Although both S&P and Fitch have recently held off giving the country a ratings downgrade to “junk status”, some analysts believe this could change for the worse in December.

Hundreds of thousands of people, and hundreds of businesses, are already feeling the pinch of a difficult economy. There is low growth in real disposable income for consumers and for corporate profitability.

Six months is a long time in politics but a short time in business. It’s a good thing that business and the government are getting on better than previously. This should be taken advantage of – in the short term.

SERIOUS discussions should start on how best to handle the more obvious problems affecting economic growth. Signs of structural reform are needed more now than for several years. There are things that could be done to indicate at least a willingness to tackle the more problematic issues, among these would be the promise of a more investor friendly business environment.

Staving off a recession should be of paramount importance for those who have the power to make a difference in this country. Years of sluggish growth have done immense damage, a recession would be truly disastrous, leading to negative repercussions.