Pretoria - South Africans should prepare for tough times ahead as the economy continues to slow and the population grows, with an economist warning everyone could become poorer.
Last month, the South African Reserve Bank forecast zero percent gross domestic product (GDP) growth for this year.
Now, a Standard Bank report, released yesterday, shows the GDP per capita had slowed to 2 percent between 2011 to last year, compared to 10 percent between 2000 and 2005.
GDP measures the value of the output of the country and GDP per capita is an average of this per person.
Economist Siphamandla Mkhwanazi, who prepared the report which analysed selected living standards indicators, said: “The time for action is now. The downward trend is a cause for concern needing immediate attention.
“Given the global economy, if nothing is done at a national level, it would mean in the future we might see the gains accumulated so far start to recede and South Africans become poorer,” he said.
The analysis used national GDP per capita over the past 15 years and divided it into three time periods; 2000-2005; 2006-2010; and, 2011-2015.
It showed living standards improved the most during 2000-2005, while in the most recent period it recorded the lowest per capita growth.
“During the first period, the economy grew at a faster pace than the population. Using this measure, going forward there will only be an improvement if the economy outgrows the population, we want it to be able to sustain the population,” said Mkhwanazi.
The state of the global economy was a factor contributing to the decline in the growth of the domestic economy. There were also self-made factors such as the energy crisis. The most notable impact of this was felt by the manufacturing and mining sectors.
“These sectors were the largest contributors to the economy of the country for two reasons: in terms of output and as the biggest employers.
“But the energy crisis meant the cost of production shot up, making the output less competitive in the global market and South Africa then became less attractive as an investment destination.”
This was not the time for people to incur debt or leave jobs without a new one, warned Mkhwanazi.
“The slow growth was also affecting employers. The demand is low and companies may be experiencing losses. They, therefore, may look at retrenchment as a cost-cutting option, it is really a bad time for both employers and employees.”
Mkhwanazi warned against over indebtedness. “In this environment, you really need to manage your finances well, not get into too much debt,” he said. “Higher interest rates and inflation are both eating into your pocket.”
He suggested consumers cut off non-essential spending and rather invest in paying off their debts.
But it was not all bad news.
“There might be one last rate hike later this year and in the first half of next year we might start seeing interest rate cuts,” said Mkhwanazi.
PRETORIA NEWS