Without growth, SA has no prospect of improving socioeconomic shortcomings - Daily Maverick

Terence Corrigan 
January’s gone. The strains of Abba’s Happy New Year have faded, the vacation is over and the novelty of being in 2025 has worn off. Earnest New Year’s resolutions are now embarrassing memories.

For many of us, this also means facing the wallet strain of the past month – “Januworry” – going back to work and hoping that the coming year will be an improvement on the last.

In other words, it’s back to reality.

As with each of us, so with us as a society. The dreadful familiarity of South Africa in 2025 is that it suffers less from the hangover of short-term indulgence than from a complex of systemic pathologies that have come to define the country.

Most immediately, some eight million South Africans will not be going back to work at all. “Too few people work”, the National Development Plan stated correctly in 2012. Even at that time, it was a well-worn concern.

Today it remains no less so; indeed, measured by the proportion of the workforce, the country’s unemployment rate has climbed from around 25% when the NDP was published to about 33% today.

Economic growth
Yet this is merely a symptom of a larger problem: South Africa’s economy is not growing sufficiently. In 2012, South Africa’s GDP growth rate stood at 2.4%. This was unimpressive, whether in terms of the country’s aspirations (the NDP aimed at 5.4% per year for an extended period) or in comparison with its emerging market peers.

In 2024, it is expected that the economy grew by a paltry 1.1%. In fact, real average GDP growth came in at a little over 1% a year over this period.

Oddly, growth has often been an underappreciated imperative, merely one objective among a long list, and not necessarily a priority.

The GNU’s Statement of Intent, for example, commits to: “Rapid, inclusive and sustainable economic growth, the promotion of fixed capital investment and industrialisation, job creation, transformation, livelihood support, land reform, infrastructure development, structural reforms and transformational change, fiscal sustainability and the sustainable use of our national resources and endowments.”

Each of these is of course desirable, but either feed into growth (in the case of investment), or depend on growth. Irrespective of how it is approached, significantly elevated growth is foundational and essential. Without it, South Africa simply has no realistic prospect of clearing its socioeconomic shortcomings.

Opportunity seized or wasted?
The GNU was hailed as an opportunity to change course for the country, a back-to-reality moment where the country’s political class accepted the need for durable compromise solutions in the interests of better outcomes. Absent doing so, the country’s decline would continue, and the GNU political parties presiding over it would be punished, as was the case with the fall of the once all-bestriding ANC.

The likely beneficiaries of this scenario would be those off to the fringe of our politics with no respect for constitutionalism; for probity in governance (admittedly, a sparse commodity at the best of times); for non-racism; or for economic rationality. Last year’s election saw parties in this space take a quarter of the vote.

But there is very little to suggest that this has been taken seriously, at least where a growth agenda is concerned. At this writing, proposals are being floated to appropriate funds from the private sector into a government-controlled Transformation Fund. The premise is that a state that has shown itself unable to manage some of its most basic responsibilities – keeping its population safe, maintaining infrastructure – will be able to mediate the allocation of enormous resources in the interests of “transformation”.

Empowerment or licence to pillage?
President Cyril Ramaphosa signed into law a deeply flawed Expropriation Bill without the courtesy of informing his nominal coalition partners, signalling that the degradation of property rights is firmly back on the table.

Nor is this an anomaly. Last year, Parliament passed the Public Procurement Act, which was assented to by the President in July – roughly a month after the establishment of the GNU. This doubles down on premiums granted in pursuit of “Broad-Based Black Economic Empowerment”(B-BBEE), allowing set-asides and “pre-qualification criteria”.

Expect all of this to amount to inflated costs and rent seeking. It’s instructive to recall that the State Capture Commission showed that empowerment demands were invoked to justify the pillaging of public resources. The report further remarked that where a conflict arose between B-BBEE demands and “value-for-money”, the latter demand should be preferred.

This advice has evidently been rejected, and the country as a whole will carry the cost. (A point to ponder, too, as the National Health Insurance envisages a monopsony – a market condition in which there is only one buyer – and the “opportunities”, to put it euphemistically, it will offer on a scale that will likely dwarf Eskom and Transnet.)

Minimum wage effects
Meanwhile, minimum wage requirements are estimated (estimates derived from data collated by the Development Policy Research Unit) to have destroyed some 227,800 low-wage jobs in 2024. New employment equity demands are introducing something that looks rather like quotas – ministerially determined “sectoral targets” – backed by potentially crippling fines.

The former labour minister pledged to be “very harsh” on employers that failed to live up to the state’s vision for them. No doubt; and no doubt for many within the state and the political class – people who have no sympathy with business, and as good as no understanding of it – this will be deeply satisfying.

For the country as a whole, however, it is an unappealing prospect. South Africa is not an easy place to do business in at the best of times. Choosing to overlay the environment with the threats and burdens of an incompetent but ideologically zealous state and a political economy hardwired with patronage only steers the country ever further into its malaise and destroys whatever prospects for growth may exist.

In other words, with the direction chosen, don’t expect growth to pick up sufficiently, or at a rate that reflects our true potential. For what it’s worth, the SA Reserve Bank doesn’t, projecting growth of 1.7% in 2025, 1.8% in 2026 and 2% in 2027. It’s perhaps a mark of just how dire things have become that this is likely to be celebrated. It shouldn’t be.

And for the millions of unemployed, the businesses that wither, the half of the population living in poverty, and indeed the stressed and frustrated middle class who wonder whether South Africa offers a future, well, neither the new year nor a new month promises much. Think about a “Januworry” that lasts all year, with no respite in sight.

Unfortunately, without a proper policy and mindset shift, this remains our reality. 

Terence Corrigan is projects and publications manager at the Institute of Race Relations

https://www.dailymaverick.co.za/opinionista/2025-02-05-without-growth-sa-has-no-prospect-of-improving-socioeconomic-shortcomings/