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StatsSA reported that the South African economy contracted by 0.7% in the second quarter of 2022 while the already unimpressive first quarter growth has been revised downwards from 1.9% to 1.7%. This is in stark contrast with Treasury’s overly optimistic forecast of 4.8% growth in GDP for 2022 at the beginning of the year.

For more than half of the second quarter South Africa experienced record-breaking loadshedding which stifled economic output whilst a lackadaisical response by the ANC to the devastating floods in KZN stopped any hopes of a quick recovery in its track. During this period 70% of South African industries also reported negative growth.

41% of households are battling to put food on the table and this contraction has a significant impact of the poorest households in particular.

These figures are particularly concerning in the midst of hundreds of billions of rands of deficit spending and fiscal and monetary stimulus. Low business confidence, soaring inflation, more debt, negative growth, and millions of people out of a job. All of which can be attributed to the constant overreaches of ANC interventionism.

South Africa’s so-called post-pandemic recovery has been underperforming on every front and the size of the economy is once again smaller than it was before the pandemic.

As an emerging market with a massive labour force at its disposal, the South African economy should be well on its way to experiencing a virtuous growth cycle, which, by the end of this decade could see the country’s economy (given the implementation of the necessary fiscal reforms) emulating the growth rates of the world’s most successful emerging markets.

Instead, the South Africa’s economy is trapped in a vicious downward spiralling self-reinforcing cycle driven by failed policy agendas, low growth, high unemployment, high government budget deficits, unstable energy supply, declining foreign and local private capital formation due to uncertainty regarding the future of private property rights, poor national and local governance, and vast poorly run public sectors dominated by state enterprises and patronage networks.

Each iteration of the current vicious cycle bleeds into the next as one factor feeds into another. The longer the cycle persists, the more growth potential is damaged. This is not sustainable.

Unless the necessary fiscal reforms are implemented, a tipping point will be reached, and untold damage will be done, from which there will be no return.

Issued by Dr Dion George MP - DA Shadow Minister of Finance