South Africa’s economy has been in down-cycle since 2013: IRR

Fin24 reports that research released by the Centre for Risk Analysis (CRA) at the Institute of Race Relations has found that South Africa is currently in its longest downward business cycle since 1945.

The CRA took SARB data, measured in months, and found that South Africa has been in a downward phase since 2013, despite how other emerging markets were growing at the same time.

According to the IRR, the long term nature of this crisis shows that a lack of government spending or stimulus isn’t the problem – the problem is business is being battered by hostile policy.

According to TimesLIVE, Mike Schussler reported in UASA’s 17th South African Employment Report, that fewer South Africans were working than not.

IOL reported in September that the Organisation for Economic Co-operation and Development had labeled South Africa as the worst performing economy amongst its peers.

South Africa’s gross domestic product (GDP) performance came in last for the G20 by the end of the second quarter, when South Africa recorded a recession.

Real GDP had contracted 0.7%.

My Take

I don’t think it was down to any specific business-hostile policies, I must admit I cannot think of very many real examples of new business policy which would lie at the root of this.

This negative cycle comes in 2013, so to figure what was going wrong, we need to look back a bit to see what changed.

Part of the contentions that led to Julius Malema getting expelled from the ANC Youth League was his push for nationalising land, mines and banks. He was expelled in 2012.

This I think highlights how the ANC’s position on expropriation without compensation came way after this business cycle that the IRR is talking about.

Malusi Gigaba’s idiocy with regards to tourist visas, similarly only came in after this cycle started.

Other than that, there was the same old talk of transformation but it difficult to see anything terribly specific that really changed that much in terms of policy.

The big change I think was more administration, the systems we use to enforce policy.

We elected a guy who was accused of multiple counts of corruption, with one of his cohorts being jailed for having a corrupt relationship with him.

In other words, I think the root cause of this problem was Jacob Zuma and the start of state capture.

While the emphasis thus far includes the Gupta family, they are hardly the only culprits. One only needs to look at the social grants crisis and how Cash Paymaster Services (CPS) got to go so long earning so much money – off of a contract the courts found to be illegal.

What ended up happening with Zuma was various programs that were supposed to uplift our country were perverted into corrupt contracts and incompetent administration.

Eskom is I think the biggest culprit. Manufacturing is one of our largest economic sectors – and having our country go from having relatively cheap power to expensive and unreliable power shut down large sections of that economy.

Under Zuma electricity got one heck of a lot more expensive. According to a 2017 Business Tech report, tarrifs increased from 15 cents per kWh in 2002, to 76 cents per kWh in 2016. If you look at their graph – most of that growth came under Jacob Zuma’s reign.

That wasn’t down to policy really – that was to a large extent the corrupt dealings our power utility had with Tegeta, and the Gupta family. It was a direct consequence of state capture and its impact on administration.

And then you’ve got the smaller things that just add to our problems, for example businesses have struggled to get VAT refunds from SARS. These small stuff-ups add up over time, and because of state capture they were across our entire government.

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