Latest GDP figures reveal threats to race relations, and democracy

8 June 2022

However they are sugar-coated, Stats SA’s latest Gross Domestic Product (GDP) figures bring more bad news to South Africa. The average person’s ability to add value in the pursuit of happiness is flatlining or even shrinking.

“Seasonally adjusted” GDP increased by 1.9% from the fourth quarter of 2021 to the first quarter of 2022, which sparked some excitement. The “adjustment”, adding 3.8% to real growth, was slightly higher than the 2019 adjustment. However, typical “seasonal” factors may be overwhelmed by dislocations related to the Covid-19 pandemic and a massive war in Europe.

GDP in inflation-adjusted terms before “seasonal adjustment” contracted by 1.9%, quarter-on-quarter, off an already contracted base. This is a noteworthy and worrying sign. By comparison, India was already fully recovered from the pandemic contraction last year and grew by a further 4.1% going into the first quarter of 2022, before “seasonal adjustment”.

South Africa’s real-term reduction in GDP coincided with damaging employment conditions that have proved inescapable for the 9.5 million youth who are not in employment, education or training (NEET). The NEET rate of youth aged 15-34 increased from 44.7% at the end of last year to 46.3% by March 2022, despite headline employment figures that superficially appeared to be more positive.

According to a 2017 psychological study (https://pubmed.ncbi.nlm.nih.gov/28910122/), racial bias (both anti-black and anti-white) increased when resources were perceived to be more scarce. As the authors from Columbia University and Yale wrote: “When the economy declines, existing racial disparities typically expand, suggesting that economic scarcity may promote racial discrimination.”

This worries most South Africans, but it is music to race nationalists’ ears in tough economic times.

In South Africa declining employment and shrinking productivity per person have unfortunately spiralled in a negative feedback loop for over a decade. According to World Bank data, the average South African peaked in productivity in 2011, with no prospect of returning to that high point in the next five years.

Against an almost overwhelmingly positive growth trend among post-colonial emerging markets, GDP per capita in South Africa declined by a third during the Zuma era, with a brief recovery during 2017-2018, only to decline again – in inflation-adjusted terms – when President Cyril Ramaphosa took the helm before the Covid-19 pandemic.

Most South Africans understand that economic growth and jobs growth are two sides of the same missing coin. According to a survey by IPSOS in early 2022, 78% of South Africans thought the country was going in the wrong direction, results matched by every IPSOS survey since 2019.

An opinion survey commissioned by the IRR in 2021 showed that most South Africans think unemployment is the problem most in need of resolution nationwide.

Said IRR Head of Campaigns Gabriel Crouse: “Rather than go for a pro-growth, pro-poor policy that maximises merit, as the Zondo Report recommends, the current scandalous administration is doubling down on racialised regulations based on failed policies that only drive State Capture 2.0, while the majority languish in dire straits.”

International experience shows that political leaders whose policies consistently produce sub-par growth are either removed by democratic means or maintain power by demagogic tricks, like shifting the blame from failed policies to personnel dramas and bloodline grand narratives.

The combination of palace intrigue at Phala Phala, a failing economic recovery, the increasing alienation of youth from opportunities that would change their lives, and already captured democratic institutions should put all citizens on high alert.

Issued by Gabriel Crouse, IRR Head of Campaigns, 8 June 2022