Economist gives bleak outlook for South Africa’s economic future

13th September 2023 By: Darren Parker - Creamer Media Contributing Editor Online

Economist gives bleak outlook for South Africa’s economic future

CAMM founding director and GIBS economics lecturer Dr Adrian Saville
Photo by: Creamer Media

In a stark assessment of South Africa's economic performance Centre for African Management and Markets (CAMM) founding director and Gordon Institute of Business Science (GIBS) economics lecturer Dr Adrian Saville has expressed his disquiet about the nation's economic trajectory, stating, "This is unimpressive. This is what I would call being left behind."

Speaking at a panel discussion at GIBS, in Johannesburg, on September 13, he raised concerns about the country’s declining income growth, dwindling exports and a persistent deficit between policy ambitions and actual outcomes.

Saville highlighted the importance of assessing income growth relative to other upper-middle-income and Latin American countries and adjusting for purchasing power parity to determine economic success. In this regard, Saville noted that South Africa was not keeping pace with its peers.

A concerning trend that he highlighted was South Africa's diminishing share of world exports, which has been ongoing since the 1980s, he said.

Saville noted that South Africa's policy promises consistently do not align with its economic outcomes.

"We continually talk about a 5% economic growth proposal. However, under [Growth, Employment and Redistribution], South Africa produced about 3.5%, while the net domestic product only comes to about 1%. This is a yawning deficit between ambition and outcome," he said.

The insufficient level of gross domestic fixed investment, currently at 15% of gross domestic product (GDP), with Saville suggesting it should be closer to 25%, was cited as a key factor impeding South Africa's ability to achieve 5% economic growth.

“Increasingly, that 15% is being hollowed out, because the budget is constrained, and the budget deficit is consuming a growing share of South Africa's savings pool," he said.

South Africa's manufacturing sector has also been on a steady decline for decades. In 1990, it contributed 25% of GDP but it currently contributes only 13%. Profitability in the sector has steadily declined, with total income measured by profitability dropping from 7% in 2005 to a mere 2%. Job losses in the manufacturing sector have been substantial, with 1.4-million jobs lost in 2005 and an additional 1.1-million jobs lost in 2021.

He noted that there was only one sector, petroleum and chemicals, that had made any advance over the past 15 years, thanks in large part to energy company Sasol. Every other sector had experienced decline.

"Something is wrong. Something is missing. It's hard to escape the conclusion that South Africa is stuck, that innovation and agility are absent,” he said.

Saville further warned that the likelihood of finding replacement jobs for displaced workers appeared ever more bleak, suggesting that South Africa may face a new wave of permanent unemployment without viable substitutes.