Whichever way one slices the data, Cyril Ramaphosa’s presidency has been a disaster for the economy. We should be talking about “five wasted years” in addition to the “nine wasted years” under Jacob Zuma.
But the “five wasted years” are actually worse as the country now suffers with the most severe power blackouts in history and faces a terrifying economic outlook.
SA undoubtedly had a “lost decade” from 2009-2019 during which GDP per capita did not grow. Then it plunged 6.3% in 2020 in the wake of Covid-19 pandemic lockdowns, and bounced back 4.9% during the next year. After a forecast 0.4% decline in GDP during the fourth quarter of 2022, the economy grew by 2.3% in 2022, according to Nedbank’s economics department.
This means GDP per capita for 2022 will be lower than it was in 2019. The SA Reserve Bank has made a shock forecast of three more years of declining GDP per capita. The economy will grow by 0.3% in 2023, 0.7% in 2024 and 1% in 2025. SA is heading towards a second “lost decade” from 2020-2030. The country is on the edge; something will soon explode.
When he became president in February 2018 Ramaphosa’s investment-friendly policies were expected to boost the economy. In six state of the nation addresses he talked about the need for a social compact, but has done nothing to develop one. In 2022 he said there would be one within 100 days. We are still waiting. He also hosted summits that were supposed to revive investment and jobs.
But there were eight out of 10 quarters of declining gross fixed capital formation (GFCF), a measure of investment, before the lockdown at the end of March 2020. In February 2019 the government announced a R100bn infrastructure fund. Four years later it does not contain a cent. Despite four investment summits where pledges of R1.1-trillion were made, GFCF plunged to 13.1% of GDP in 2021 — the lowest since 1946 when the Reserve Bank started collecting statistics — from 16.4% in 2017.
From the fourth quarter of 2017 to the first quarter of 2020 the SA labour force increased by 1.8-million and the economy created 212,000 jobs. The number of unemployed people soared by 1.6-million to 10.8-million and the unemployment rate increased to 39.7% from 36.3%. The economy was collapsing before the pandemic. Since Ramaphosa became president the number of unemployed people has increased by 2.7-million to 11.9-million. The unemployment rate has increased to 43%.
SA’s economic response to the pandemic was lame. Ramaphosa announced a R500bn stimulus package, which was allegedly worth 10% of GDP. But if one looks through the smoke and mirrors of the package the direct state contribution — higher government spending and foregone tax revenues — was R27bn, equivalent to only 0.5% of GDP compared with a world average of 10.6%.
The government is now considering whether to announce a national state of disaster for Eskom. It will have to explain in detail what this will achieve that cannot be achieved without it. The ANC I know does not know what to do to end the power blackouts but wants to be seen to be doing something.
The government also talks about structural reforms to grow the economy. But it has only closed 22 renewable energy projects that will install 1,909MW and invest R50.3bn over the next few years. It announced preferred bidders for the sixth window that will install 860MW and invest R12.1bn.
This is small change in a R6.5-trillion economy and will not close much of the energy shortfall after considering wind and solar capacity factors. After talking about structural reforms for a decade it should be obvious that the government cannot deliver higher GDP growth.
If Ramaphosa does not develop a proper plan for the economy he could go down as SA’s worst president since 1994.
• Gqubule is research associate at the Social Policy Initiative.
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