We’re all getting richer

Last month, finance minister Pravin Gordhan announced a downgrading of SA’s gross domestic product (GDP) growth forecast for 2012. Against a background of especially mining sector strikes, the Marikana shootings and overseas economic travails found in the European state funding crises and the US federal government’s “financial cliff” overspend, we’ll likely have growth of 2,5% this year, down from the projected 2,7%. While this is nowhere near the annual 6% GDP growth called for by government’s Growth, Employment and Redistribution (Gear) policy, it is no bad shake given global and local circumstances.

You wouldn’t think so to listen to Congress of SA Trade Unions secretary general Zwelinzima Vavi. He’s in a permanent funk with his governmental ANC allies for pursuing Gear’s “anti-poor” agenda. They should instead follow the very policies of “stimulus” that have moneys that governments don’t have (debt) spent on things like artificial job creation, no matter their effect on interest rates and a diminishing budgetary pot from which to spend. The very stuff, in other words, that takes you to that financial cliff. Vavi’s ANC allies are right to laugh him off.

Economic growth, employment and resultant changes to household income, is what will be determine our future, whatever policies of “service delivery” or welfare payments are followed. It is in GDP expansion and a slowdown in population growth alone that the country’s future wellbeing lies. Everything else is secondary. So how are we doing?

Mainly through urbanisation, South Africa’s fertility rate has been dropping fairly consistently for more than 30 years. The initial results of the 2011 census show a current population growth of 1% a year, down from 1,4% ten years ago and to fall below 1% in two years. Our 51 million-strong population won’t be growing by much. GDP growth outstrips population growth, often by a factor of three.

In the Eighties we grew the economy at only an average 1,6% a year and at just 1,9% in the Nineties. The average for the first decade of this century was a much better 3,6%.

The SA Institute of Race Relations calculates that if we grow GDP at 3% a year, then by 2030 every person has an average annual income of R53 712. If growth were doubled to 6%, the average is R98 155, while 8% GDP growth would give R145 342 a person in present rands.

Indeed, while our real unemployment stands at almost 37%, it is worst for youngsters where it is half of everyone aged 18 to 24 years. But it is important to see not only the socio-economic “score” but also the “direction of play”. So Nedbank political economist J P Landman notes that we’ve added four million additional jobs since Gear started and increased per capita income by a third. This comes as our people slowly age (the census giving our current median age at 25 years, up from 23 year a decade ago). In just the past ten years, average household income rose 113% against inflation of 78% (for whites the figure is 88%, for Africans 169% although the latter come off a much lower base).  Interest rates stand at their lowest in 30 years.

Overall, we’re obviously getting something right in our macro-economic approach; just don’t tell Cosatu’s grumpy secretary general.

(First published in The Citizen, November 2012)

– By Paul Pereira