Is there still hope for SA’s ailing economy?

Three of our best economic minds in the country unpacked this burning question during a robust webinar on 24 August 2022 hosted by the Bureau of Market Research as part of this year’s Economist of the Year competition.

What makes this competition so prestigious is that it is fully supported by the University of South Africa (UNISA) as partner, but more so it creates a platform for economists to share their views on the state of our economy, and more importantly what South Africans may expect in the near future.

This, in the wake of the current nationwide shutdown by COSATU and SAFTU as the union members call for urgent government interventions to curb the socioeconomic and political factors resulting in the bleak economic climate – a clear indication that South Africans have had enough and have lost faith in government’s economic policies.  One of the primary concerns expressed by the unions is that while workers’ salaries have not shown much of an increase, consumer inflation has increased substantively, i.e. the latest CPI release by Statistics SA showed that annual consumer price inflation was 7.8% in July 2022 up from an already high 7.4% during June 2022.

Despite the recent unemployment figures currently standing at 33.9% in the second quarter of the year, the 0.6% decline does little to quell the problem that most South African households are facing.  The bottom line is that 8 million South Africans are currently unemployed according to the latest Statistics SA Quarterly Labour Force Survey.

The panellists during this year’s webinar were Ms Nicola Weimar, Chief Economist for Nedbank Group Ltd, Dr Roelof Botha, renowned economic advisor from the Optimum Investment group and Dr Nthabiseng Moleko from the University of Stellenbosch Business School.

These distinguished economists had divergent views regarding questions that pertained to what they believe were the major actions that needed to be taken in order to fast-track economic growth and to re-instil hope.

Ms Nicola Weimar says that we can have a positive outlook and hold on to growth.  From her perspective, the support for growth comes from continued consumer spending, and that it is evident that some life is returning to infrastructure.  Weimar also notes that it is expected that fixed investment activity will be positive, while government spending is making a small contribution towards GDP growth. Weimar predicts a GDP growth of 1.7% for this year, even though our economy has been negatively impacted by what is happening globally like the Russian-Ukraine war. She believes that to fast-track investment growth, it is key that the energy crisis be resolved, and that load shedding needs to be ended so that adequate space is created for faster economic growth.

Dr Roelof Botha however says; “Wrong economic policies can make or break a country as seen in countries like Venezuela and that South Africa is currently still recovering from a decade of pathetic government and that of incompetent appointments in state-owned enterprises.” He did, however, express his optimism about the fact that he believes we currently have a president who understands economics, to turn the ship around from useless economic policies to one that has closer cooperation with the private sector.

Meanwhile, Dr Nthabiseng Moleko believes that South Africa is unique in that we have a stable macro-economic policy framework.  We do have a history of fiscal policy that is sustainable.  We can argue whether this is sufficiently expansionary, and how we can ensure that the revenue generation is balanced, but also sustainable and how better to use that allocation in terms of the functionality of the government.

But the main key thrust is that we must deal with the issue of growth.

“What is important are the drivers of the growth for our country – however, we have not seen sufficiently for example the productivity from the side of business amongst others.  I also project growth being at around 2%.”  She also added that we see constrained consumption by households, interest rates are going up, the cost of living is really at levels we have never seen before.  The rate at which wages are going up is not equal to the cost of livelihoods and cost of living – and this echoes the rationale of the national shutdown on 24 August 2022.

Dr Moleko strongly advocates for reinvestment in the productive sectors especially in marginalised provinces like the Eastern Cape, Mpumalanga, the Northern Cape, the North- West Province and the Free State.

During the webinar, attendees were asked what poses the greatest risk to South Africa’s economic performance in their opinion. The main concerns raised were corruption, unemployment, government policy and energy supply. When posed with the question whether they still had hope for the South African economy, the attendees leaned towards feeling hopeful, confirming the views expressed by the panellists.

“The Bureau of Market Research, in partnership with UNISA, was privileged to host this compelling conversation as a means to bring a message of hope to all South Africans for a brighter future that we all deserve,” said Professor Deon Tustin, chief executive officer of the organisation, upon concluding the webinar.