Narrating The Plodding South-African Economy
The second-largest producer of gold in the world is in dire need of its sluggish economic growth to be narrated and analysed. Along with gold, diamond and platinum are the top three exports of South Africa, it is the largest producer of chrome, manganese, platinum, vanadium, and vermiculite; second largest producer of ilmenite, palladium, rutile and zirconium, and most significantly, it is the world’s third-largest exporter of coal. Despite being a king-pin in precious gemstones and minerals, three in every four South Africans live with a constant threat of poverty taking over their daily lives. The most industrialised country of the African continent has not expanded by more than 2.5% a year since 2013, with nearly 50% of the South African population living in the state of poverty. Astoundingly, the swamp isn’t a decade old but has been impending for decades.
Struggling with a mere growth rate of 1.1% per year, the economy cannot absorb the rapidly growing population, leading to a higher rate of deprivation among the people. The cyclical tools which are veiled in monetary and fiscal policies cannot break down the encumbrances of structural weaknesses in the economy. To begin with, even after showcasing improvement, the household saving rate in South Africa is a meagre 0.2% (as per the fourth quarter of 2017). Why is the saving rate a matter of significance? Well, it is the savings that generate capital for investment spending, with no space for investment, the economy can never accelerate due to the lagging infrastructure that has the potential for future growth and provision of high returns to the Gross Domestic Product (GDP). The present rate of household savings is utterly unfavourable when compared to other emerging market countries which usually maintain a rate above 2% and invest rigorously in infrastructural development along with measures to generate and expand the capacity for new capital, unlike the African country.
Education, the pavement to advancement, has continued to be an issue of concern for South Africa as it was ranked the 75th nation out of 76 in the ‘Table of Education Systems’ drawn by Organisation for Economic Cooperation and Development (OECD). The fourth industrial revolution hovers over the globe and calls for a skilled workforce, which has been a clear lag for the African country, the paucity of a skilled workforce arising out of an underdeveloped education system has been ranked as the third-most problematic factor for doing business in South Africa. Revamping the educational structure and enhancing its delivery should be the top-notch priority while restructuring the government policies in order to escalate economic progress, standard of living, ease of doing business, and to attract global as well as domestic investors. The smooth functioning of small and medium-sized enterprises in a developing nation is as cardinal as education to eradicate unemployment and foster a healthy living index. Government bureaucracy, heavy tax burden, and constrictive labour regulations are few of the many unnecessary curtailments for the small and medium enterprises (SMEs). The state-owned enterprises, deployed to generate utility for the public have been relocated to cushion the coffers of a selected few. The public enterprises have capitulated to inefficiency, mismanagement of revenue, bureaucratic lapses, tender rigging, delay in project delivery. This has resulted in a distorted infrastructure, scanty services, and has robbed the national treasure of billions in terms of opportunity cost.
How disinteresting has it been for the investors? Well, South Africa was ranked 82 out of 190 countries in the ‘Ease of Doing Business Index’ drawn by the World Bank in 2017. It might seem impressive to find a country with numerous economic and financial blemishes to find a spot in the middle of the Index, but the 32nd rank in 2008 is an epiphany to the swift fall. The plethora of monetary policies that have been put into effect will remain ineffective if the grass-root structure of the economic administration is not revamped and paralleled with the fast-paced world.
Entering its 70th month of a downward cycle, the longest since 1945, the economy is stuck in a mire, with rescue looking like a far-fetched dream. A surfeit of sectors felt the tremors of the contracting economy but manufacturing, mining and trade, catering and accommodation, agriculture, and the power sector have been the worst hit. Experts are of the view that low demand, sharp rising fuel prices, and Eskom’s load shedding are the prime factors contributing to the contraction of the economy. Eskom is amongst the top twenty power utilities worldwide, it generates more than 90% of South Africa’s power and 40% of the electricity in the African continent. The surging salary, fuel, and debt-servicing costs along with mismanagement and corruption scandals have led to Eskom having a $30 billion debt.
The lack of ambitious economic programmes accompanied by the coronavirus pandemic will deepen the crack in the economy. As the nation is in a state of lockdown, hue and cry amongst the public with a lack of essentials and power cuts have worsened the strain on the government. South Africa was one of the few nations to implement the most draconian containment measures to curb the spread of the virus, with an already dwindling economy, a complete shutdown of all the major industries has piled up the heap of debts for the administration. A failure in the political atmosphere, inefficiency of the government to deliver to the public instead of stocking up their coffers, and inviting projects with vested interests have continued to cause a haemorrhage with no defined antidote to the South African economy. Revival seems like a mere dream when the present trends of a global slowdown are observed, the various developed nations which were key importers of the South African minerals and precious gems have curtailed their imports, leaving South Africa with a depleting repository. Failing to engage investors, the government continues to borrow in order to repay its already mounting debts, the matter of concern still remains a part of the vicious cycle as no monetary policy or financial injections can break down the persisting swamp which has driven half of South Africa into poverty.
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