South African Economy: We've been here before
The abrupt U-turn in South Africa’s economic outlook following the May 29 poll is as welcome as it is unexpected.
It is also a timely reminder that South African Inc. is not necessarily a sinking ship, as some doomsdayers would have us believe. On the contrary, the current fiscal deficit and daily loan interest of around R1billion-a-day – let that sink in – could well be reversed by a period of sustained economic growth.
In fact, a period of sustained economic growth is now essential if we wish to take any meaningful step back from the fiscal cliff.
The good news is we’ve done it before. The first democratic administration ran a tight ship, and achieved an annual growth rate of 2,7% - a massive increase compared with 0,2% growth level for the four years leading up to the historic 1994 election. And the growth rate continued to climb to over 4% during much of the Mbeki administration, an achievement often overlooked in the context of more recent service delivery failures.
However the boom years, distant though they may seem, remain a crucial reference point for many commentators, among them Social Research Foundation head Dr Frans Cronje who says they prove an important point: cutting government debt and growing the economy are not the stuff of dreams.
Mbeki presided over a period when South Africa ran budget surpluses and increased its credit rating – almost unthinkable when compared with the precipitous decline during the Zuma years, a descent so alarming it appears to have cast a retrospective pall of gloom over three decades of democracy.
Cronje insists we too easily forget that for several years after the fall of Apartheid basic living standards increased significantly for many South Africans.
It’s a fact that, when not subsumed in political rhetoric, is useful to dispel the notion that life either gets better or worse.
History suggests it’s far more muddled than that, and that the graph of economic performance is anything but linear. That South Africa sits at another crossroads is common cause, but we do have a track record of self-preservation.
Our sobering balance sheet, showing loan debt of over R5 trillion -- about 74% of GDP -- has at least focused attention on what is now also common cause: that economic growth and job-creation is non-negotiable.
Amidst the inevitable and ongoing rowdy debate around how to move South Africa forward, it is always worth remembering that we have done it before.
John Lawson
CEO of the Cape Chamber of Commerce & Industry