South Africans now earn the same as in 2006 – GDP

South Africans now earn on average what they earned in 2006 taking inflation into account because South Africa’s economic growth has been trending lower since 2013. The country’s economy only grew by 0.6% in 2023 according to GDP data, crowning a decade of negative per capita growth.

Although South Africans breathed a sigh of relief after the release of the GDP data for 2023 because the economy at least grew marginally, the outcome was in fact negative if it is considered as GDP per capita due to the fact that population growth is outpacing GDP, Busi Mavuso, CEO of Business Leadership South Africa, says in her weekly newsletter.

“Last week’s GDP figures were a very loud clarion call for us to act fast. The people of South Africa are becoming poorer and their legitimate aspirations to be able to work, generate income and take care of their families are being frustrated. It is incumbent on government and business to work together to support the economy, ensuring key network industries deliver and that utilities function as intended.”

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South Africa’s self-induced growth crisis as reflected in GDP

Mavuso says this is a self-induced growth crisis that comes down to a failure of state-provided infrastructure and services.

“Inadequate electricity supply and logistical constraints were the key obstacles to growth. While load shedding eased in the fourth quarter when the economy grew by 0.1%, logistical challenges were a major constraint on economic activity with port delays damaging exports and import volumes.”

She points out that investment also declined in the fourth quarter, with residential building, transport equipment and construction leading the negative trend.

This is why it is so important for us to tackle the logistics crisis, while following through on the progress made to confront the electricity crisis.

Mavuso says the country’s logistics and energy systems are obviously important for business, which is why the private sector dedicated considerable resources to work with government to resolve the challenges.

“We have partnered with government through the National Energy Crisis Committee and the National Logistics Crisis Committee to bring business expertise and resources, including over R170 million in funds raised by business to support both.

“We are aligned through the Electricity Action Plan and the National Freight Logistics Roadmap which are both good plans for how we can achieve deep structural change as well as short-term solutions to ease the impact of both crises.”

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No excuse not to get it right this time and grow GDP

She says there is now really no excuse not to get this right.

“We have the resources and the plans and if there is sustained political will, we will succeed. The risk is that in an election year there are many distractions, when we need to keep focused on delivering the reforms needed.”

At the same time, Mavuso says, it is critical that we also plan to manage new and emerging threats to the economy. She identifies the national water system as an increasing concern.

“We have already seen how local water service delivery failures can damage business, forcing factories to close and relocate.

“Water service failures seem to be growing with reports last week of taps running dry from Mbombela to the south of Johannesburg. Incidents are blamed on crumbling infrastructure, load shedding and a culture of non-payment by consumers. Bulk water supply to large manufacturers and mining companies is an increasing concern, posing further risks to economic activity.”

Mavuso warns that we cannot find ourselves in a situation where we resolved the energy and logistics crises only to be confronted with a new crisis that ultimately means economic activity does not happen.

Therefore, she says, while tackling immediate crises head on is important, we must remain vigilant to identify the next major constraint.

“As I wrote last week, the looming cut-off of gas supply to industrial users is a challenge we have to grapple with, mobilising late in the day to try and ensure gas consumers are not left unable to function come mid 2025 when existing supplies will cease.”

ALSO READ: Another energy crisis is waiting for SA

Focus on economic growth because it matters

She says the national effort must focus on what matters: economic activity. Electricity, logistics, gas and water are all important to enable it, as are many other things like tackling crime and corruption.

“One of our strategic priorities is to support a capable state. We want a government with the capacity to be effective in delivering services to business and the country at large. We want people and businesses to receive quality services from local and national government, as well as state-owned entities.”

Mavuso emphasises that this goes beyond firefighting on crises but working at a more fundamental level to support the state to be effective, providing high-quality services and avoiding crises from emerging in the first place.

“That fundamental work is also an important part of our agenda. Partnership between business and government is essential for us to achieve what we want for South Africa. I want the poor economic performance of the last decade to be consigned to the history books and I know many in government want the same. Let us act with urgency to make it happen.”