South African economy failing behinds its counterparts

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The South Africa economy would be R5-trillion better off if we’d simply kept pace with other emerging countries over the last 15 years. In the last decade and a half, the South African economy has grown at an average of 1% annually. However, other emerging counterparts have grown at 1.4% or higher.

This damning data was revealed by Investec’s Osagyefo Mazwai. 15 years of lost growth coincides with the South African economy plowing money in State-Owned Entities (SOEs) like Eskom, Transnet and the Post Office.

SOUTH AFRICAN ECONOMY FLAGGING

“It is our proposition that the South African economy is falling behind. Had it followed a more pragmatic approach, focusing on the structural enablers of the economy, the outcomes could be much better for society,” Mazwai said in a Daily Investor report.

Likewise, the South African economy displays a stark dislocation in GDP per capita. Proving that, essentially, residents are worse off than they were in 2010. The government has been ineffectual in addressing poverty, unemployment and inequality. And, per capita, the rest of the world is 50% richer than the average South African.

EMERGING MARKETS

With more money to play with, many of the country’s crippling debt issues could’ve been avoided. Image: File

As such, Investec compared the South African economy to other emerging markets over the same period. Many emerging nations have been growing at upwards of 4.5% per year. “Had we grown at 4.5%, our nominal GDP would have been just below R12 trillion. Compared this with the actual number, R7.5 trillion, which is 35% less,” explained Mazwai.

This lack of economic growth cost government revenue R800 billion in 2024 alone. And remember that the 2025 Budget impasse squabbled over a mere R75 billion from proposed VAT increases. This is an insignificant amount when one considers how much more growth our emerging-market peers have to play with. In practical terms, Mazwai explains that the missing R5 trillion would have been enough to clear nearly all of the country’s national debt.

WHAT CAN BE DONE?

Should SASSA grants be given a re-think in light of this damning data? Image: File

As such, finance experts point out that Eskom and Transnet’s lacklustre performance is arguably the most significant factor impeding the South African economy. Eskom is R400 billion in debt. Transnet is R140 billion in debt. Likewise, South African Social Security Agency (SASSA) grants cost the fiscus around R265 billion annually.

SASSA grants, while well-intentioned, breed an unhealthy dependency on the social welfare system, reducing employment. SASSA grant beneficiaries now number 45% of all residents, and five out of nine provinces have more SASSA recipients than salaried employees.