South Africa\u2019s economy needs to start expanding, and by a much higher rate, if it hopes to make any dent in poverty, says local economist Dawie Roodt.<\/p>\n
Projections for South Africa\u2019s economy have gone from bad to worse with the South African Reserve Bank (Sarb) last week predicting 0% growth for 2016.<\/p>\n
This comes after the International Monetary Fund (IMF) cut its 2016 growth forecast for South Africa from 0.6% to 0.1%.<\/p>\n
The IMF further said South Africa\u2019s economy is failing to cope with population growth of 1.7% while the country\u2019s unemployment rate is hovering around 26.7%, the highest in eight years.<\/p>\n
Subsequently, Roodt said urgent action is needed to kick-start the economy and get it growing at 5%, the lowest rate at which real change could be implemented.<\/p>\n
“We need to grow the economy at 1.6%, let’s call it 2%, just to keep track with population growth. Keep in mind that we also have productivity growth between 0.5% and 1% annually, which means we need to grow the economy by 3% just to maintain employment levels,\u201d explained Roodt.<\/p>\n
“We also have something like 8 million people without jobs. If we want to reduce that by say half a million per year, we need to grow an additional 2%,\u201d said Roodt.<\/p>\n
“So, even if we growth the economy by 2% that’s just not enough. We need to get at 5%,\u201d he added.<\/p>\n
South Africa’s annual GDP growth rates last expanded over 5% annually between 2005-2007, according to World Bank data.<\/p>\n
Since the 2008-2009 financial crisis and amid crippling power shortages, South Africa’s economy has struggled to grow more than an annual GDP growth rate of 3%.<\/p>\n
In 2015, South Africa grew by just 1.3%, according to World Bank data.<\/p>\n
For 2016, fears of a recession are abound as Stats SA announced in June that South Africa recorded a negative growth rate of -1.2% in the first quarter of 2016.<\/p>\n
Political leadership is desperately needed in a time of low or no growth, said Roodt.<\/p>\n
“Hopefully, we’re going to get some action from government. I am very concerned about the quality of South Africa’s political leadership. We’ve got a destructive government,\u201d Roodt told Fin24.<\/p>\n
“Everybody’s got an ideological base somewhere but the South African government’s ideological base is a confused one,\u201d he said.<\/p>\n
Scandals like President Jacob Zuma\u2019s multi-million rand Nkandla homestead are also \u201csmall change compared to the damages being caused\u201d to the economy, said Roodt.<\/p>\n
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