The SA Institute of Race Relations has warned that South Africa is likely to enter a long-term period of low economic growth.
The Institute recently released a report featuring long-term trends for major economic indicators together with forecasts of GDP growth, per capita GDP, inflation, interest rates, the Rand, and household disposable income levels up to 2019.
Spokesperson, Mienke Steytler, says some of the key findings were that GDP growth levels were likely to average below two percent up until 2019 and that the Rand will weaken further, going up to R17 to the US dollars, possibly even up to R20 according to some analysts.
She says those are the two findings which worry them the most.
Steytler says the Institute of Race Relations is suggesting that government look at the broader policy field.
"We're seeing that government is really hemming in any potential avenue for economic expansion in South Africa and that's why the SAIIR is calling for the return of the Growth, Employment and Redistribution (Gear) policy that was brought in in 1996. It was a liberal, conservative policy that the ANC adopted around then and it really had a positive impact on South Africa's economic growth, so we're saying that needs to come back," Steytler said.
The IRR’s CEO, Dr Frans Cronjé, said the “the African National Congress did particularly well in driving growth rates upwards after the adoption of the Growth, Employment, and Redistribution (GEAR) policy in 1996. Between 2004 and 2007, South Africa even averaged growth in excess of 5% of GDP as unemployment fell sharply."
"However, in the current policy climate, which is hostile to investment-led growth, the picture is very different. GDP growth levels are likely to average below 2% to 2019, even as interest rates begin to rise. This will preclude any reduction in the unemployment rate and will begin to exert growing pressure on household disposable income, which will in turn reduce domestic consumption levels," Cronje said.
He added that policies on labour and empowerment make any export-driven manufacturing recovery impossible, despite the benefits to exporters of a currency "that we expect to run to beyond R17.50/$US."
"The current commodities slump will also run for much longer than many other analysts predict and this will preclude a mining export recovery. Policies on migration, foreign exchange control, and intellectual property will hobble a recovery driven by the service industry. It is extraordinary that in the broader policy field, the current Cabinet has effectively hemmed in every potential avenue of economic expansion in South Africa,” Cronje concluded.
