South Africans are poorer today than they were in 2014

South Africa’s GDP per capita data paints a bleak picture of declining wealth for its citizens compared to a decade earlier in 2014.

To understand why South Africans are poorer today, we can look at GDP per capita, a critical measure organisations like the International Monetary Fund (IMF) and the World Bank use to assess economic well-being.

GDP per capita divides a country’s gross domestic product by its population, offering a snapshot of the average income and, by extension, the standard of living in that country.

Over the past decade, South Africa’s GDP per capita has declined, and the reasons for this erosion of wealth can be traced to multiple interrelated factors, particularly poor economic growth and wages failing to keep pace with inflation.

GDP per capita is a useful indicator of a country’s general population wealth because it reflects the value of all goods and services produced per person, providing a rough estimate of individual economic capacity.

When GDP per capita rises, it suggests that citizens, on average, have access to more resources, higher incomes, and an improved standard of living.

Conversely, a decline in GDP per capita points to shrinking economic opportunities and diminishing wealth for the average person.

For South Africa, the figures from the IMF and World Bank are concerning: GDP per capita in 2024 is lower than it was in 2014, signifying a decline in the average wealth of the population.

According to the World Bank and the IMF, South Africa’s GDP per capita was around $6,200 by the end of 2023, which is a noticeable decline from a peak of nearly $8,000 in the early 2010s.

This decline illustrates a broader trend of stagnating economic growth.

South Africa’s economy has been growing slowly, hampered by factors such as electricity shortages, policy uncertainty, and high levels of corruption, all of which have resulted in an unstable investment environment.

For example, economic growth slowed to just 1.9% in 2022, a significant decline from earlier years, while Investec economists expect 2024 to have achieved growth of around 1.0%.

One of the major contributors to this decline is South Africa’s poor economic growth over the last decade.

Between 2014 and 2024, the country has struggled to maintain a consistent and robust economic expansion.

In fact, the annual GDP growth rates have been weak, often lagging behind population growth.

This is a crucial point; as a country’s population grows, its economy needs to expand at an even faster rate to ensure that GDP per capita keeps up.

However, South Africa has faced significant economic challenges, including policy uncertainty, a struggling energy sector plagued by frequent power cuts, and high levels of corruption and government inefficiency, which have all dampened investor confidence and stifled growth.

These structural economic problems have resulted in stagnation, leaving the economy ill-equipped to support a growing population, and this has translated into a shrinking GDP per capita.

Moreover, wages and salaries in South Africa have not kept pace with inflation, further compounding the economic challenges faced by ordinary South Africans.

Over the past decade, inflation in South Africa has consistently outstripped wage growth. This mismatch between rising living costs and stagnant salaries has left many South Africans struggling to maintain their standard of living.

This wage-inflation disparity affects all levels of society, who spend a larger proportion of their income on basic necessities such as food, transport, and utilities.

As these essential costs rise, South Africans’ purchasing power diminishes, effectively making them poorer in real terms even if their nominal salaries appear unchanged or slightly increased.

In addition, South Africa’s public debt has grown, reaching nearly 77% of GDP​, according to Economists like Dawie Roodt.

The country’s weak fiscal position has led to higher borrowing costs and constrained its ability to invest in infrastructure and social programs that could stimulate economic growth.

This has added to the economic challenges that prevent the GDP per capita from increasing in real terms.

The decrease in GDP per capita between 2014 and 2024, alongside high inflation, slow wage growth, and a fragile economy, explains why many South Africans feel poorer in 2024.

Without stronger economic reforms and efforts to address structural problems, it is likely that these trends will continue, making economic recovery more challenging in the years ahead.

Read: Medium-Term Budget 2024 – what South Africans should expect