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Ramaphosa lacks creativity, Mabuza talks austerity

Cyril Ramaphosa has stated that land redistribution is the only way for South Africa to bridge the gap between rich and poor according to EWN.

He further called for South Africans to be unified in tackling the land issue.

Meanwhile his deputy, David Mabuza is warning that stringent austerity measures may be required to save the economy, according to eNCA.

My Take

Brand South Africa in January released a breakdown of the South African economy, showing the largest contributors to GDP as at the end of the third quarter of 2017.

Agriculture accounted for about 3%. The largest contributors were finance, at about 20%, government at 18%, and trade at 15%.

So how is redistributing 3% of GDP supposed to address inequality in the other 97%?

And this has shrunk since then, agriculture was the biggest loser in the latest Stats SA GDP figures.

Now onto austerity, there is a basic problem with what he’s saying that comes to light if you look at how South African consumers are behaving right now.


source: tradingeconomics.com

As you can see since 2008 South Africans have been trying to pay off our personal debt, debt to income has dropped from 86.4% to 71.9%.

This is good news right? Not entirely. We have massive unemployment, yet our personal indebtedness is going down – this means we’re spending less. The private sector is producing less demand for goods.

And if you go back to Stats SA on our latest GDP figures they say this:

Household final consumption expenditure decreased by 1,3% in the second quarter, contributing -0,8 of a percentage point to total growth.

We also have America engaging in a policy of market protectionism and trade wars – go see the Mail and Guardian for a rundown on this. This means that the nation that tends to be the biggest consumer isn’t so keen on importing goods.

It has also provided a license for other nations to get a bit protectionist too – we’re seeing a rise in populist governments – which means governments which would rather have factories opening up at home than import stuff from South Africa.

So government starts engaging in austerity, what happens? Our economy shrinks. Why?

Because you are not going to make stuff if there is nobody to buy it. Why would you open a factory if there is no demand?

Particularly in a situation where you can’t be guaranteed that you will get to keep the factory?

Land redistribution is being treated like an economic panacea, but agriculture is probably under 3% of GDP right now. What happens when the government decides this didn’t work, and goes after manufacturing, which constitutes around 13%?

Do you want to build a factory right now?

I look at the ANC right now and I don’t see solutions to our problems as a nation. I see cliches, I see a president who has told me he has one plan, which isn’t a good one, and if that fails he has nothing more. He’s down to desperation moves right at the opening gate of his presidency.

From his deputy I see cliches about the importance of tightening our belts, but I don’t see much in the way of plan here. We need better than this.

  • Picture courtesy of GCIS via Flickr.
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