Indifference to the real economy will lead SA on path towards disaster

8 March 2022

Despite the higher-than-expected economic growth for the Fourth Quarter of 2021 that Statistics South Africa (SSA) announced earlier today, Solidarity expressed its concern over South Africa’s increasing dependence on government spending and financial services.

According to Solidarity, the increasing financialisation of the South African economy has disastrous consequences for the majority of South Africans.

Theuns du Buisson, economics researcher at the Solidarity Research Institute, explains: “‘Higher-than-expected’ does not mean much, especially when the most essential industries are precisely the ones that are shrinking. On the one hand we must start to cultivate better expectations for our country, and on the other we should stop looking at overhead figures only instead of looking at the fate of ordinary South Africans.”

Solidarity furthermore stated that the sense so many South Africans have that the economic growth they are reading about today makes no real difference in their lives, is justified.

“In the end, real economic growth means that the lives of South Africans improve in a way that is observable. While increases in the price of financial assets and instruments are important, unilateral growth in this direction will do little to solve our country’s main problems,” Du Buisson said. “Almost every sector of the real economy is shrinking or is stagnating – today mining, manufacturing, construction, trade and utility services are all smaller than what they were even five years ago. It is in those very areas where we should see the highest levels of employment, where most prosperity can be created for the greatest number of people and where South Africans can see direct and visible added value to their lives.”

Solidarity contends that the contraction of the real economy can be attributed mainly to government policy and that substantial changes are urgently needed to get South Africa back on track.

“It is actually a shame that a country such as South Africa, with everything that counts in its favour, still continues to plod along without any significant growth. Everything we need to eradicate poverty is at our disposal, but the state is still clinging to obsolete ideology. We lack investment in those industries that create jobs. We are still very far off the levels of fixed capital formation of 20 years ago. We need far-reaching reform to make our country a more attractive proposition for investors in the long run. Naturally, investment in the stock market is good but we will have to cultivate enough confidence to attract investment in plants, factories and tangible assets. This is the only way in which we can improve the fate of ordinary South Africans,” Du Buisson concluded.

Issued by Theuns du Buisson, Solidarity Research Institute: Economic Researcher, 8 March 2022