South Africa
| On 2 years ago

SA’s ‘two great failures’ contributed to the downward spiralling of the economy

By Brian Sokutu

Poor government policy decisions and a skills mismatch are among key factors to have contributed to the downward spiralling of the South African economy, according to this year’s socio-economic survey of the Centre for Risk Analysis (CRA).

The state of the economy, public finance, employment, education, industrial relations, health, crime, government, politics, crime and security are among several topics comprehensively covered in the 800-page CRA report released on Thursday.

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In tracking some of SA’s socioeconomic broad trends from 1994 to the projected 2024, the report identifies key government policy risks, which include:

  • Government’s continued doubling down on damaging regulations in policies, such as the Employment Equity Bill and the draft Companies Amendment Bill;
  • Poor business sentiment leading to low levels of investment and growth which, in turn, has led to record-high unemployment rates;
  • A further constraint on household budgets, while South Africa’s middle class is struggling to meet debt obligations; and
  • Lack of jobs having increased a xenophobic sentiment, with protests becoming more violent.

Looking at key economic trends, CRA senior economic analyst Bheki Mahlobo said the ANC administration under President Cyril Ramaphosa continued to perform poorly on the economic front, despite Ramaphosa’s promise to usher in reforms.

SA’s gross domestic product (GDP) performance from 1994 until the projected year of 2024, found that there were two distinct periods that mark performance.

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“In the early years of ANC government under presidents Nelson Mandela and Thabo Mbeki, the country saw a substantive economic performance to a point where, from 2004 to 2007, the average GDP growth level in the country reached about 3% to 5% – something comparable to other emerging markets.

“Subsequent to that period, we saw a move away from early pragmatism and market-friendly policies like Gear [growth, employment, and redistribution] to be replaced by hostile policies under former president Jacob Zuma and the Ramaphosa administrations.

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“This led to a massive contraction in the GDP of a negative 6.4% for the year 2020,” the report says.

“South Africa lacked a skilled workforce to be absorbed in specialised employment,” the analyst said.

“These sectors require highly skilled individuals but our education system does not properly equip individuals with such skills,” said Mahlobo.

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