Africa (Commonwealth Union) _ South Africa’s economy is now 37% lower than what it would have been if it had followed the growth trajectory of its emerging-markets competitors. In a recent report, Investec Wealth & Investment International wrote that if South Africa had maintained a 4.5% growth since 2010, its gross domestic product (GDP) by 2024 would be about R12 trillion, instead of where it stands today at R7.5 trillion.
A lot of this poor performance is attributed to decades of Jacob Zuma era malgovernance and entrenched corruption, best known as the period of “state capture.” Cyril Ramaphosa, his successor, estimates the bill for the economic damage at R500 billion. Corruption aside, there are other entrenched issues—power outages, crime, poor infrastructure, and foreign policy errors—that have also driven growth to a 15-year average of just 1% a year.
Investment strategist Osagyefo Mazwai at Investec warns that the amount of revenue lost through slowed growth is appalling, especially given the dire fiscal needs of South Africa. Tax revenues in 2024 alone would have been R800 billion higher with greater economic growth, providing much-needed funds for the state to use on infrastructure such as electricity, ports, and railways.
Rather than a jobless growth crisis, the nation is confronted by a debt bubble crisis, as this year its ratio of debt to GDP is set to hit 77%. As population increases faster than economic production, the majority of South Africans are poorer today than they were in 2010. Per capita, the typical South African is now 50% poorer than the global average.
South Africa held promise once. After their first democratic elections in 1994, Nelson Mandela and Thabo Mbeki led the nation into fiscal stability and growth, with GDP increasing by an average of 3% during Mandela’s leadership and 4.2% under Mbeki. GDP growth then declined to 1.7% and 0.6%, respectively, under Jacob Zuma and Cyril Ramaphosa, while debt reached R627 billion in 2008/09 and has grown to over R5.2 trillion today.
Mazwai maintains that without daring, pro-growth reforms, the country cannot address its entrenched issues of poverty, joblessness, and inequality. Once an economic beacon of hope, South Africa is now facing a fiscal precipice, and only errant leadership and reform can rescue it.
