The Democratic Alliance believes the ‘sad 0.6% growth in the gross domestic product (GDP) over the second quarter of 2023 is a direct result of a failed ANC policy.
RNews reported earlier that South Africa’s economy grew by 0.6% in the second quarter of the year. This follows the 0.4% rise in GDP recorded in the first quarter. According to Statistics South Africa’s (StatsSA) latest figures, six industry sectors grew on the supply side in the second quarter – with manufacturing and finance particularly providing upward momentum.
Dion George, the DA’s shadow finance minister, says the national treasury has estimated a growth rate of 0.9% in February 2023, but this is a target which, even if it was low and uninspiring, was obviously over-optimistic.
“In fact, our economy will not grow at the projected 1.4% over the medium term, given the ongoing power crisis – caused by the government. This means that income is overemphasized in the budget and less money will be available for essential expenses for service delivery and social support.”
George says the country’s economy has underperformed over the past 15 years, with an average annual GDP growth rate of 1.2% since 2008. “In addition, GDP per capita decreased by approximately R3 000 during this period. The snail-paced growth has manifested itself in increasing public debt, a smaller fiscal space, disappearing employment opportunities and a greater disillusionment among the public.”
George adds that the country’s inclusion in February on the so-called gray list for financial systems, record load shedding, pro-Russian foreign policy and a lack of a fiscal response to the food and fuel inflation that drives up the cost of living further hinders economic recovery.
“Instead of adopting ruthless growth-focused reforms, the government continues to stick to destructive policies such as expropriation without compensation and strengthened BBBEE. These policy mistakes have an impact on vulnerable South African households who are directly affected by a cost of living crisis – caused by the government.”
George believes the message from today’s figures should be that South Africa’s private sector has remained resilient, despite the government’s reluctance to implement the necessary growth-friendly reforms, a testament to what can be achieved with competent management.”
However, Prof Raymond Parsons, economist from the North-West University’s business school, says the better-than-expected GDP growth of 0.6% is welcome news.
“This shows a resilience in the economy. This is mainly due to more moderate load shedding application in June compared to April and May as well as mitigating factors that resulted in better figures.”
Parsons says, however, that there is still a high degree of turbulence in the growth dynamics.
“This is evident in the divergent opinions on growth prospects for the second quarter of 2023 which range from 0.1% to 0.7%. This is a reflection – not only of the difficulties in quantifying the biggest obstacles in the economy, but also a significant source of uncertainty in growth expectations.”
Parsons adds the economy is still struggling to gain sufficient momentum to sustain a higher rate of job-rich growth. “A growth outlook of less than 1.0% for 2023 as a whole – with not much better rates expected for 2024 – has immediate negative implications for fiscal sustainability, as tax revenues fall short of projections and government expenditures exceed planned budget levels. “
‘GDP growth not good enough’
Songezo Zibi, leader of Rise Mzansi, says there is nothing to celebrate. “This is devastating news for South Africans. For context, such an economic growth rate is much lower than the 5.4% annual economic growth rate mentioned in the National Development Plan as the minimum growth requirement to reduce unemployment and poverty in a meaningful way. The country never came close to this target, which means that a much higher growth rate is needed to achieve the same.”
Zibi says the persistently weak economic growth rate also means the government will not meet its tax collection targets this year. “The National Treasury is also struggling to raise additional funds through loans due to low investor confidence. Out of ideas and options, the government has now asked for budget cuts. Low economic growth is not a technical abstraction. This has devastating consequences for the country and its people.”
Zibi adds that South Africa urgently needs an economic and fiscal turnaround plan, of which Eskom, Transnet and the fight against crime and corruption must be at the center.
“An effective parliament would demand a fiscal reprioritization plan from the finance minister to protect the poor from austerity measures. Unfortunately, we don’t expect any of these things to happen because the government doesn’t care or know enough to do anything meaningful. The only way to change this current gloomy economic projection is to stand up, register and vote.”