After 18 years of declining average living standards, the establishment commentariat has suddenly concluded that vibes alone will be enough to lift South Africa’s GDP growth rate and reduce unemployment.
The first outbreak of misplaced optimism based on intangibles that cannot be measured came after the formation of the government of neoliberal unity in June 2024. But the economy did not recover because that government continued to implement the ANC’s failed economic policies.
Chronically low GDP growth for so long is not normal for a country that is not at war. We cannot continue like this. Why do we tolerate such macroeconomic policy incompetence and continue to make excuses for it? What is so difficult about growing the economy fast enough to reduce the unemployment rate?
IMF statistics show that 155 emerging and developing countries grew more than 4% a year from 2009 to 2024. Emerging and developing Asia (30 countries) grew more than 6% a year. Now, a year later, there is a new wave of optimism, and the establishment commentariat is again highlighting intangibles that will somehow miraculously turn the economic tide.
South Africa has been lifted from the Financial Action Task Force’s greylist and has had a ratings upgrade, though its debt is still rated as junk. The medium-term budget policy statement (MTBPS) announced a 3% inflation target and forecast a third consecutive year of primary budget surpluses.
But as EFF MP Omphile Maotwe said during a debate on the mini-budget in parliament last week, finance minister Enoch Gondongwa only mentioned job creation once during his entire mini-budget speech.
There were 12.5-million unemployed people during the third quarter of 2025. A budget that does not tell us how South Africa will reduce the unemployment rate is a waste of our time. And now that the irrelevant G20 sideshow that will not benefit South Africa is over, can we please focus on the economy?
South Africa does not have an inflation problem; it has a GDP growth problem. It is difficult to understand the irrational obsession with inflation in a country that has a 42.5% unemployment rate. The inflation target is pointless because South Africa has supply-side inflation, and there is nothing the Reserve Bank can do to address it.
Adjusting interest rates to tackle such inflation is a performative illusion to deceive the public into believing the powers that be are doing something and to disguise the fact that the Bank’s monetary policy committee is clueless. The recent 25 basis points cut in interest rates will make no difference; it will only increase the disposable income of someone who has a R1m bond by R168.
There is no reason South Africa should have a real prime lending rate of 6.7% — one of the highest in the world — or why the Bank can’t aggressively cut interest rates to stimulate spending in an economy that will grow less than 1% in 2025.
According to the Treasury’s own forecasts, which always overestimate the effects of its structural reforms on GDP growth, its policies will not succeed because the economy will grow 1.8% a year from 2026 to 2028. The mini-budget cut the 2025 GDP growth forecast to 1.2% from 1.9% in February.
Since the MTBPS forecasts will inevitably also be reduced, it is reasonable to assume GDP will grow less than 1.5% a year over the next three years. In an economy that has had chronically inadequate aggregate demand for so long, we should not be celebrating primary budget surpluses.
Three consecutive years of primary budget surpluses have coincided with three consecutive years of declining GDP per capita. This is because primary budget surpluses suck demand out of the economy.
• Gqubule is an adviser on economic development and transformation.
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