Efficient Group chief economist Dawie Roodt says South Africa is in crisis and heading for a disaster with rising unemployment and poverty.<\/p>\n
Roodt told Radio 702 that South Africa\u2019s economy could not grow faster than 1.5%, and the population is growing at 1.5% as well.<\/p>\n
\u201cWe have unemployment levels of nearly 50%. We have rising levels of poverty in South Africa,\u201d he said.<\/p>\n
\u201cWe are heading for a disaster. It is a crisis. We must understand this, and we have to act.\u201d<\/p>\n
Roodt said when he speaks to local and international investors, they express their hesitance to build factories or put more money into the country.<\/p>\n
The poor-performing government and a lack of a stable electricity supply partly drive negative investor sentiment.<\/p>\n
\u201cThe only sectors that will work in South Africa are those who can function without electricity, like the service and financial industries,\u201d Roodt said.<\/p>\n
However, South Africa needs more investment in sectors like manufacturing which employ many people and can grow exports.<\/p>\n
\u201cSouth Africa\u2019s manufacturing sector is contracting. It is now smaller than it was a year ago,\u201d he said.<\/p>\n
The poor economic conditions and high unemployment means 29 million people receive grants and rely on the state for income.<\/p>\n
Roodt said the state could no longer afford the grants as the tax base is simply not strong enough to carry it.<\/p>\n
The high levels of unemployment, rising poverty, and higher food and energy prices are \u201ca recipe for disaster,\u201d Roodt said.<\/p>\n
The World Economic Forum\u2019s (WEF\u2019s) Global Risks Report 2023 also highlighted state collapse, a debt crisis, and the collapse of services and public infrastructure as risks to the country.<\/p>\n
It added the cost of living, high unemployment, and poverty as other big risks the country faces.<\/p>\n
South African GDP growth under pressure<\/strong><\/p>\n Jeff Schultz, a senior economist at BNP Paribas South Africa, echoes Roodt\u2019s concerns about economic growth.<\/p>\n While many economists predict 1.1% GDP growth for South Africa, Schultz has a much lower 0.2% GDP growth forecast for 2023.<\/p>\n The bearish outlook is driven by tough global economic conditions and South Africa\u2019s energy supply crunch.<\/p>\n \u201cOur long-held expectation of more acute energy supply challenges continues to materialise,\u201d Schultz said.<\/p>\n \u201cWith 4.5 times the number of days of electricity supply cuts as in 2021, 2022 set another unwelcome record \u2013 and 2023 looks even worse, we fear.\u201d<\/p>\n BNP Paribas\u2019 estimate of a mere 0.5% short-term potential growth rate reveals an economy that is likely to stall in the absence of helpful global tailwinds and robust commodity prices.<\/p>\n \u201cFaltering labour stock and tepid levels of productivity help to explain South Africa\u2019s recent slump in potential GDP,\u201d he said.<\/p>\n \u201cWe believe potential growth will more meaningfully recover towards 1.5% to 2.0% only once the severe energy supply constraints have been removed.\u201d<\/p>\n \u201cEven in our most optimistic scenario, we see that only from 2025 onwards.\u201d<\/p>\n Momentum Investments economist Sanisha Packirisamy is more upbeat than Schultz but still only expects muted growth.<\/p>\n \u201cGrowth in South Africa is set to moderate from an expected 2.5% in 2022 to 1.1% this year,\u201d she said.<\/p>\n She said negative political developments, lower growth among SA\u2019s trading partners, electricity outages, and low demand all impact the economy.<\/p>\n This article was originally published on Daily Investor and reproduced with permission. Read the original here<\/a><\/strong>.<\/em><\/p>\n
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