Johannesburg - Finance Minister Pravin Gordhan stretched the boundaries of patriotism yesterday and called on South Africans to be inclusive in striving for the betterment of the economy and country.
The call came as US bank Goldman Sachs released its 20-year report on the country, which pointed out past structural advances and challenges for the next two decades.
Gordhan said there was a need to move from the “me” generation to the “we” generation and he stressed the importance of sharing.
He said South Africans must know that they were not a dismal country and there was too much despair in South Africa. “We need to inculcate in our younger people that change does not [happen] easily.”
He also attacked those who felt grant beneficiaries were living on taxpayers’ money. He added that they also paid taxes as they were purchasers.
“The social grant system is sustainable now and in the future,” he said of the system that supports 16 million of the poorest in the country.
Gordhan was speaking at the launch of a report by Goldman Sachs that analyses empirically how South Africa has changed in the past 20 years.
The report, titled “Two Decades of Freedom: what South Africa is doing with it, and what needs to be done”, identifies 10 areas in which the country has made structural advances, 10 large challenges that remain to be tackled, and 10 issues that must now be addressed.
Goldman Sachs managing director Colin Coleman said the country needed to aim for a growth rate of 5 percent a year to reach a $1 trillion (R10 trillion) economy by 2030, which he said would cut unemployment and the debt burden in half.
The firm also pointed out the risk of over 1 million middle class citizens falling through the cracks by defaulting on debt.
The report says South Africa has made key structural advances since 1994:
- Gross domestic product (GDP) has almost tripled from $136 billion to $385bn today;
- Inflation fell from an average of 14 percent between 1980 and 1994 to an average of 6 percent between 1994 and 2012;
- Gross gold and foreign reserves rose from $3bn in 1994 to $50bn today;
- Tax receipts of R114bn from 1.7 million people rose to R814bn from 13.7 million;
- In the last decade, there was a dramatic rise in the middle class, with 4.5 million consumers graduating from the lower living standards measures (LSMs) of 1-4 and a total of 10 million consumers joining the middle to higher LSMs of 5-10;
- Social grant beneficiaries rose from 2.4 million to 16.1 million today.
The report says South Africa is a small economy in a global context, with only 0.5 percent of world GDP. The performance of the economies of the US with a $16 trillion GDP and China with a $9 trillion GDP were central to South Africa’s economic prospects. It says South Africa achieved average GDP growth of 3.6 percent between 1994 and 2007. The report suggests that in the next 20-year period the country should aim to raise its annual growth rate to 5 percent, thereby growing the size of the economy to $1 trillion by around 2030. Such growth, if attained, would cut the unemployment rate and the debt-to-GDP ratio in half and double the GDP per capita.
Goldman Sachs said macroeconomic, fiscal and monetary balances had improved between 1994 and 2007. Unemployment, however, remained the biggest hurdle. It remained stagnant at 25 percent from 23 percent inherited in 1994.
The report says some other challenges are:
- The current account deficit remains high;
- The volatility of equity and bond flows between 1995 and mid-2007 demonstrate the vulnerability of South Africa should it rely on these flows as a major source of finance;
- It estimates that a correction equivalent to around 2 percent of GDP is required to remove the vulnerability and to restore the external balance;
- While South Africa needs to revitalise its export sector and bring down the current account deficit, it also needs to take aggressive steps to attract foreign direct investment; and
- The mining and labour uncertainties are unsettling the market. – Additional reporting by Bloomberg