South Africa could be headed for a recession in the next year, economist Chris Hart has warned.
Speaking at a Collaborative Stakeholder Movement (CSM) Jobs Pledge launch event to challenge organisations to grow an inclusive economy through the expansion, enhancement and preservation of jobs, on Tuesday, he said industries across the board were suffering because of various self-inflicted problems.

“South Africa’s economic backdrop is looking ugly. The South African economy has entered a ‘stagflation’ phase, where growth is low and inflation is high.

“The bad news is that if we continue the way we are, we will get the outcomes we expect; however, if we change course, South Africa could be a haven for investors,” he stated.

Hart said the country urgently needed to adopt policies to encourage people to save more and to increase investment.

“The economy is only bad if we don’t do anything but we can turn it around. This country has deep economic potential and the only way to fund growth is to save more as a country,” he commented.

Hart further noted that interest rates were too low and were not compensating the saver, adding that South Africa had a debt-led consumption growth model, which was becoming an “exhausted, painful adjustment” to the country’s economy.

“We are seeing huge cost pushers though the public sector at the moment, with State-owned entity Eskom at the forefront of this.

“Our debt levels have shot up and are back to where they were in 1994 and our government budget is going down an unsustainable path. We have been downgraded from a credit rating point of view a number of times now since 2008,” Hart pointed out.

He outlined an economic crisis that could potentially push South Africa to the brink of insolvency but stressed that there were ways to negate negative outcomes.

Hart highlighted that expenditure threats, including the public sector wage bill, national health spending, parastatal funding and nuclear energy costs were contributing to South Africa’s looming solvency crisis, which he believed could take place within three to four years.

“South Africa’s public sector wage bill is higher than Greece’s. That alone can [push] the country to a solvency crisis. National health has become a tax burden and parastatal funding needs to come out of the tax base, which is in deficit,” he stated.

Hart noted that South Africa’s proposed nuclear energy roll-out was a threat to the financial tax base.

“Government is dead set on going nuclear, but does not have the money to buy nuclear plants. Therefore, Russia is going to build, own and operate nuclear plants in the country and we will have to buy the electricity from them at the price that is set to pay for the plant, in dollars, which means we will be importing electricity,” he commented.