Headlines and statistics don’t always tell the entire story or the full truth about a situation. But the current news and statistical flow on the state of the South African economy is more than a little worrying – even for those who have hitherto lived by the adage that it’s never as bad in this country as it could be, despite being far from what it should be.
The image-battering column centimetres, broadcast images and tweet lines dedicated, correctly, to the recent xenophobic attacks are in no way being offset by the macro- and microeconomic storyline.
At the macroeconomic level, South Africa continues to perform at the lower end of expectations, as epitomised by the International Monetary Fund’s latest downward revision of the country’s 2015 growth forecast to around 2%. Remember, the National Development Plan and the Medium-Term Strategic Framework are both premised on a growth rate of better than 5%, seen as a minimum level for dealing with the country’s major socioeconomic problems of unemployment, poverty and inequality.
In the absence of growth, employment has become an even more intractable problem, with a fiscally constrained public sector having hit the proverbial limits of its ability to employ more people, while private-sector employment generation decreases in line with a weak economic cycle.
Notwithstanding these high levels of unemployment, industrial action remains an ever-present threat in a number of sectors – spurred less and less, though, by economic realities and more and more by a contestation for membership.
Consumer and business confidence is also extremely weak, with little on the immediate horizon to suggest a recovery is on its way.
At the microeconomic level, the manufacturing sector’s troubles are not easing, with the seasonally adjusted Kagiso Purchasing Managers Index dropping to 45.4 in April from 47.9 in March – a four-year low. A large part of the problem appears to relate to South Africa’s electricity supply constraint, with manufacturers attributing a good portion of the blame to load curtailment and load-shedding.
Lip service continues to be paid to leveraging infrastructure expenditure to help drive demand for locally manufactured products and construction services. But just about all companies in any way aligned to the country’s gross-domestic-fixed-expenditure cycle are reporting weak order books and shrinking margins. Many are even facing serious import competition despite the rand’s weakness, which implies either dumping or a serious lack of competitiveness.
The problem for business is that there are far too few signs that government has fully grasped the seriousness of the situation. The pace at which interventions take place even in the most obvious areas of constraint, such as electricity, is glacial.
Far too many issues are being allowed to fester for months, if not years – from dealing decisively with a payment solution for the South African National Roads Agency’s new Gauteng motorways through to the ongoing financial and operational collapse of the South African Post Office.
Now these are complex matters, but they are well within South Africa’s capabilities to solve. In the absence of urgency and leadership, however, these currently surmountable challenges will become insuperable obstacles in the way of demo- cratic South Africa’s growth and development aspirations.