The South African economy is very robust and the country is in an excellent position for continued growth, according to renowned local political-economic analyst JP Landman. Giving the keynote address at the launch of AutomechanikaJohannesburg2013 today (May 30) the humorous Landman gave the guests in a packed ballroom at the Wanderers Club plenty of food for thought.
He said that unfortunately too much focus is placed on interpreting short term occurrences and their possible effect on the economy. Landman quoted the retired editor of the Economist, Bill Emmot, who said: “The journalist is constantly at risk of over-interpreting the short-term and under-rating the longer term trends….. What is needed is a longer view”.
This is the viewpoint taken by Landman and he had plenty of evidence to back up his stance.
The jovial analyst said the South African economy had tripped only twice since 1994 and both times, in 1998 and 2009, this had been due to global forces and that SA had recovered far quicker and better than many other global economies following the 2009 recession. He cited an average growth rate of 3.3% in the 16 years from 1995 to 2010, whereas average growth for the previous 16 years had been only 1.55%.
Landman admitted that there were many factors pushing down the rate of growth inSouth Africa, which included: the global economic environment, political confusion, strikes, inequality, crime, health and education concerns, some ineffective public sector institutions – especially local government – and tensions in the agricultural and mining sectors concerning transition.
On the other hand there are strong forces pushing growth upwards. These include increasing investments in infrastructure development which has moved from 4% of GDP in 2000 to a projected 7.9% in the current cycle to 2014, an average annual improvement of 3% in productivity, increasing relations with the BRICS nations and other African countries, as well as the benefits flowing from strong private sector institutions.
Based on this scenario the experienced analyst predicts an average annual growth rate of 3.25% going forward. However, he cautioned that this was also dependent on strengthening the glue that holds together the social capital of South African, with social capital including individual and community values and trust.
Landman gave very interesting insights into two other areas that concern many South Africans, being unemployment and corruption.
Although admitting that unemployment remained a major challenge he explained that although there had been retrenchments in the first quarter of 2012 the total number of people in SA who are employed was still more than 300 000 above the total at the end of March 2011.
On the question of corruption he said that this was very much part and parcel of a country emerging from a dictatorship in whatever form. On this front SA fared very well when compared to its fellow BRICS members, having the lowest corruption rating among Russia, India, China and Brazilin two of three surveys conducted recently.
Landman said the country also benefitted from a number of independent institutions, including the media, courts, Reserve Bank, business and trade unions, while there was also a good balance of forces between “left of centre” and “right of centre”
The audience was particularly impressed by a graphic showing how per capita income had declined by 11% in the 19 years between 1974 and 1993 and then grown by 32% in the next 18 years.
The period between 1981, when the gold price hit the equivalent in today’s money of US$2 250 an ounce, and 2006 when per capita income again reached thehigh pointachieved in 1981 is seen as the “25 lost years.” Currently the country is busy catching up on those lost years.
Landman said that taking the long view he believed the per capita growth rate could continue into the future and the next 32% improvement would take an even shorter time than the previous 18-year period.
In closing, the genial analyst, whose recent studies include completing a course at Oxford University on the BRICS countries, said that what is important for all South Africans is to realise they must live with ambiguity and not get caught up by negative short term occurrences, but rather take the long view, which was a bright view.