GDP data fail to reveal the truthComment on this story
Every so often there comes a time when figures begin to sound meaningless relative to the everyday reality of many South Africans.
Yesterday’s figures showing that in the second quarter South Africa narrowly averted recession are meaningless. Unsurprisingly, most economists were hard-pressed to trumpet them as signalling some sort of reprieve. But judging from the past, these latest gross domestic product (GDP) figures will most possibly lull us into believing that all is well that seems well.
Yet, the reality is that for many South Africans the question of “recession or no recession” is an academic one.
News that the economy did not officially slip into recession in the second quarter is of no real significance if one considers that South Africa continues to tip the scales in unemployment, poverty and inequality.
Just by those three standards, it is easy to argue that the economic expansion of 0.6 percent in the second quarter just means more of the same. At best, the figure suggests that the economy is muddling along, meaning that with the right policy interventions in the months or years ahead, and with a bit of luck, we should hope for better growth.
At worst, the economy’s current trajectory means South Africa faces serious growth risks, especially if we were to see a major dislocation on the global front. In simple English, an economy that is barely growing is as good as stagnant. And this is what policymakers need to be perceptive about. It is a tragedy that while we, in fact, know full well the causes of this stagnation, there appears to be little or no appreciation of the inherent risks associated with an economy that is sputtering along the precipice.
It is probably high time that we considered an economic stimulus of sorts because signs are out there for all to see that the economic engine is bereft of the necessary fuel to bring the National Development Plan to life. Whatever is envisaged through infrastructure plans, industrial policy, trade and so on will come to nought if we are unable to get the basics right.
The basics should evolve around creating a climate that is conducive to doing business by instilling confidence, more so on the domestic front. There should also be a focus on solutions to leverage the masses of South Africans who remain economic bystanders.
If the economy continues on the path that it is currently on, both the government and business stand to lose, and when either side loses, the country will lose big.
What also needs to be understood is that economic stagnation is not something that suddenly sneaks up on a country. In the case of South Africa, our history has a lot to do with the current state of affairs, where nobody really wants to take responsibility to get the economy moving. The government blames business and business blames the government. So it’s a stalemate.
Until there is a co-ordinated approach to stabilising the economy, we should much rather get used to seeing economic figures that bear no real meaning about what is actually happening on the ground. The country has just witnessed the collapse of African Bank, a phenomenon that has not sufficiently been explained as to why it happened.
It is reasonable to argue that had the economic environment been more sound, African Bank’s day of reckoning might have been somewhat delayed. It is a canary in the coal mine.
Its cataclysmic demise carries more meaning about the extent of the problems that our economy faces than does the latest GDP reading.
Even so, it is not lost to those with a keen eye that the government is increasingly becoming the only show in town when it comes to underpinning the economy.
Folks at Econometrix, an economic analysis firm, have rightfully pointed that had it not been for an improvement in the contribution of increased spending in the public sector, the economy would have been in recession in the second quarter.
All told, the economy has not escaped from anything: it continues to be a “more of the same” kind of economy, requiring a drastic overhaul to get it to work. South Africa has recently moved from being the number one economy in Africa in terms of size to being second-largest behind Nigeria. Yes, size does matter, and South Africa must not now become the most sluggish economy in Africa.
* Ellis Mnyandu is the editor of Business Report. Follow him on Twitter: @Ellis_Mnyandu