While South Africa’s President, Cyril Ramaphosa, started well and has promised a lot more positivity than his predecessor Jacob Zuma poor economic performance remains his Achilles heel.
Yolanda Naudé Citadel Head of Fund Research and Portfolio Manager has captured in scary numbers the economic challenges facing South Africa.
Naudé states that the country’s scorecard paints a grim picture, particularly in the areas of unemployment, inequality and poverty.
She notes that in a population of 57.7 million people, the official unemployment rate remains at 27.2% – an especially frightening number when compared to emerging market peers such as Brazil with 12.3%, India with 3.5%, China with 3.9%, Russia with 4.7% or Mexico with 3.5%.
Of greater concern, she says, the unemployment rate for youth between the ages of 15 and 34 years is an overwhelming 53.7%, leading to greater potential for civil unrest and crime.
There is also the fact that the unemployment numbers are much higher when one considers the excluded numbers of discouraged work seekers, leading to an unofficial unemployment rate of close to 40%.
Naudé notes that the World Bank ranks South Africa as one of the most unequal society in the world. This inequality means that the poorest 50% of households in South Africa currently earn just 8% of total household income, while the wealthiest 10% of the population account for about 55%.
She observes that South Africa’s overall prosperity and wealth is slipping. The country’s average income per person has been decreasing since 2014, as average economic growth of only 1.1% per year over this period has been consistently outpaced by population growth of about 1.6% per year.
“South Africa is not a rich country by global standards, and the cake has even been shrinking over the past four years, while the global economy by comparison has achieved growth of around 3.5%,” says Naudé.
“To steer South Africa back onto the path of economic recovery, government now needs to recommit to pulling the right levers, or “the four P’s”: people, plan, policy and proper implementation.”