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<img src="economy.jpg" alt="economy" width="300" height="300">

What are the Factors hampering the SA Economy?

South Africa has the potential to outstrip or equal the economic growth of African countries like Rwanda and Nigeria. The country has the ability to reach the same or even better growth than other African countries. Yet the economy keeps slipping backwards. It can be argued that we are in a state of self-inflicted economic melancholy.

The government should pause to reflect on whether they should proceed on the current route. The following issues are at the root of the problems crippling an economy that has all the potential to become one of the fastest growing on the African continent:

  • An inefficient, too-big public sector with far too many people working for the government with pay packages far outstripping inflation.
  • Poorly designed welfare programmes – the social grants system is basically financed through tax.
  • An education system that has spent millions of Rands trying to fix its inefficiency, yet has thus far failed to show improvement, let alone results.
  • Prolonged structural unemployment and the reluctance of the private sector to create jobs
  • Unemployment rate of 25.5%, absorption rate of 43.8% and labour force participation rate of 58.8%.
  • The labour market is split between labour unions and employers. As a result, those employed enjoy the protection of the labour laws, and those doing the employing are constrained by the same laws.
  • The country’s horrifying public expenditure ratio to GDP. Government debt increased from of 27.3% of GDP in 2008/09 to 45.8% of GDP in 2013/14 and is projected to rise to 48.3% of GDP in 2016/2017
  • Rising protest actions by members of the public not affiliated to any labour union, especially the nationwide students’ ongoing #FeesMustFall. This protest was led by young people who are tired of being idle while peers move up the economic ladder.

South Africa has much to learn from the similarities it shares with the French economy. The government should focus on relaxing inflexible labour laws which are killing incentives for employment and unless the struggling education system is righted urgently structural unemployment will persist.