An economist warns that South Africans should brace themselves for tougher economic times as the government waivers on the implementation of its National Development Plan (NDP).
South Africa’s Gross Domestic Product (GDP) is expected to come in at 0.9 % in 2016, down from 1.3% in 2015, reflecting the impact of the current drought and depressed global conditions, finance minister Pravin Gordhan said in February.
Cees Bruggemans of Bruggemans & Associates, Consulting Economists said in a note on Tuesday (22 March), that to suggest 0.9% growth ‘appears unrealistic, though perhaps still politically useful as we approach local elections’.
“Recession is such an ugly word, yet it rules the roost practically everywhere now,” the economist said.
He said that given the reported extent to which private interests have captured the state for their own benefit this past half decade, there is a major political challenge taking shape – it concerns the recapture of the state.
Bruggemans said that in the meanwhile, the country is adrift and sinking ever deeper into the abyss.
He pointed out that agriculture, motor trade and electricity generation are deep in recession, manufacturing, mining and non-residential building activity continues to drift in and out of a coma, while the household sector is seeing its real income gains wasting away.
The economist said that confidence is needed to support risk-taking, fixed investment and job creation in the country.
“Under these challenging circumstances to steadily raise interest rates and impose R18 billion of tax increases while constraining government spending – cutting the budget deficit from 4% last year to 3.2% of GDP this year – is to hammer yet more nails into the collective coffin.”
So what could hold us up?
Bruggemans said that confidence would fire private businesses to do more. It would boost the rand, and in turn would inject ‘less spiky inflation turbulence’, and could invite interest rate cuts. He said that a growth revival would also safeguard the country’s credit rating.
“But inspiring confidence seems to be far from our politicians’ minds. Instead, they are going bare-knuckle for the soul of the ruling party, and thereby power over society, while any heroic economic rescue missions are focused on top-down project wish lists rather than focusing on how to shape a generally confident climate in which many role players are willing to engage strongly,” Bruggemans said.
He called for sustainable breakout policies, as intended by the National Development Plan (NDP), but so so far cynically abandoned ‘while hailed with wild abandon’.
“If it is still to be a while, expect further sinking a la Brazil (-4%),” the economist said. He said that an economic revival has its very own preconditions that have not yet even begun to be met.