South Africa’s economy has been hit hard over the past while, with a large number of factors to blame.
From external conditions we cannot control – such as a strong US and slowing Chinese economy – to internal factors that policy makers have dropped the ball on.
A ‘perfect storm’ of these factors hitting at once in the past week led to the rand hitting a record low against the dollar on Sunday (10 January), briefly trading at R17.99 to the dollar before pulling back to around R16.45.
In trade on Thursday (14 January) the currency had settled after an erratic week at levels around R16.60 to the dollar.
Chief economist at Efficient Group, Dawie Roodt, identified the biggest factors hurting the economy – and what can be done to improve it.
When asked if there was any hope of the economy improving at all, the economist could only say: “Not yet…”
Roodt pointed to the following five factors contributing to the current state of South Africa’s economy:
- Unsustainable fiscal accounts, where we are spending more than we earn;
- Ongoing drought conditions, forcing us to import food at high prices thanks to the weak rand;
- Low commodity prices, impacting the country’s biggest exports;
- An ideologically confused government;
- President Jacob Zuma.
To fix the mess, the economist said the country would have to implement a few strategies:
- We would need to get a smaller and more efficient civil service;
- Scrap many labour laws (particularly the ones that make doing business in the country unnecessarily onerus);
- Privatise state-owned businesses;
- and stop undermining private property rights.
For a start, though – we should fire Jacob Zuma.
According to Roodt, Zuma is one of the biggest contributing factors to South Africa’s economic mess.
While South Africa is facing problems on a number of fronts, the president’s nonchalant attitude towards the dire state of affairs has done little to help matters.
In December 2015, Zuma infamously sacked finance minister Nhlanhla Nene, replacing him with unknown ANC back-bencher, David van Rooyen.
This led to a collapse in the market, pushing the rand to record lows against the dollar, amid all the other factors working against the country.
In a subsequent interview Zuma said that everyone – foreign investors, executives, analysts, economists and citizens – “overreacted” to his actions.
Following Zuma’s comments, Prince Mashele, executive director of the Centre for Politics and Research, said that it is very dangerous to have an uneducated president.
“We don’t need any more evidence of the dangers of an uneducated president…He can’t read numbers.”
“To have a guy who is illiterate when it comes to economics lead a sophisticated economy like ours – that is in dire straits – you must know you are going nowhere,” he said.
A recent survey run by research firm Afrobarometer found that Zuma’s approval ratings with the public have hit all-time lows, almost halving between 2011 (64%) and 2015 (36%).
Emerging markets economist Peter Montalto of Nomura said that it was possible that Zuma might be recalled as president by July 2016, though other experts and people close to the ANC doubt that the president will be going anywhere any time soon.