(Photo: Pieter Cloete/Maroela Media)
The South African economy grew by 0.5% in the first quarter, representing the sixth consecutive quarter of positive growth. However, economists warn that this growth falls far short of alleviating unemployment, poverty and increasing social tension in the country.
According to the latest figures from Statistics South Africa (StatsSA), the gross domestic product (GDP) grew by 0.5% between January and March, while annual growth stood at 1.9%.
The finance, agriculture, trade and transport sectors made the biggest contribution to the economic growth. Agriculture grew for a sixth consecutive quarter (by 3.9%), a performance largely attributed to a strong performance in the fruit and crop sector.
However, the manufacturing sector shrank by 0.8%, raising concerns about one of the economy’s main job-creating industries.
According to Theuns du Buisson, economic researcher of the Solidarity Research Institute (SNI), the latest GDP figures are just another proof that South Africa remains trapped in a cycle of low growth.
“Quarterly growth of 0.5%, or annual growth of 1.9%, is not enough to meet South Africans’ needs. It does not seem that the government wants to make any effort to save South Africa from further impoverishment,” he says.
Du Buisson warns that the country’s economic problems are increasingly fueling social tensions.
“It is simply a matter of time before South Africans start turning against each other due to economic pressure. Everything possible must be done to prevent this.”
“Everything possible must be done to prevent South Africans from turning against each other due to economic pressure.”
“Especially against the backdrop of xenophobia, inequality and growing discontent, South Africa cannot afford to plod along at this low growth rate. Low growth lies at the root of almost all of the country’s biggest problems.”
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He believes the government is not listening to the challenges the business world is facing.
“When large companies complain about expensive electricity, transport costs and the decay of Transnet, they usually only get half-baked promises. When they point out the costs of black economic empowerment, stricter regulations are instead promised. The biggest enemy of growth is the government itself,” he says.
According to Du Buisson, the decline in manufacturing is particularly worrying. Where the sector accounted for around a quarter of the economy in the 1980s, today it represents less than 12% of GDP.
“Manufacturing is a labor-intensive sector that has great potential to create jobs. Its continued decline should be a serious warning sign for policymakers.”
Another source of concern is the decrease of 1.1% in fixed capital formation – a measure of investments in the economy.
(Screenshot from video)
According to Du Buisson, this is in direct conflict with the objectives of the government’s national development plan, which aims for investments to represent 30% of GDP.
“The government continues to introduce policies that punish rather than reward capital. It is long past time to lower capital taxes in particular and create stronger investment incentives.”
StatsSA says that the decrease in investment was mainly the result of less spending on machinery, equipment and residential buildings.
Meanwhile, household spending grew by just 0.1% – the weakest growth in two years – while consumers spent less on food, drink and restaurants.
The persistently low growth rate may eventually have serious social consequences.
“This sustained low growth should be a wake-up call for the government. At the moment, foreigners are increasingly being blamed for economic problems.
“It is simply a matter of time before South Africans start turning against each other due to economic pressure. Everything possible must be done to prevent this.”