Sub-optimal GDP growth a consequence of government inaction

6 June 2023

Today, the ANC government’s inability to respond to a rapidly deteriorating economic landscape is reflected in the dismal 0.4% growth in our gross domestic product (GDP) over the first quarter. This tepid performance is edging us closer to an economic brink. Although we narrowly avoided a technical recession, these grim figures are alarm bells on a faltering economy that government cannot ignore.

The National Treasury's 2023 Budget estimated a growth rate of 0.9%, a target that, even though low and uninspiring, now appears overly optimistic given our dismal start.

Our greylisting in February; record-breaking electricity blackouts; pro-Russian foreign policy and lack of fiscal response to the inflation fuelled cost of living crisis, will prevent recovery. Our economy will not grow at the projected 1.4% over the medium term. This means that revenue is overstated in the budget and less money will be available for service delivery.

The ANC's approach to solving the electricity crisis has proven grossly inadequate as load-shedding and widespread corruption in the energy sector continues to deal crippling blows to economic activity while casting a vast shadow on small businesses and multinational corporations alike. This load-shedding crisis is nothing short of a litmus test for ANC's failings in governance.

Markets have reacted to government's pro-Russian stance on Russia's illegal invasion of Ukraine, with negative sentiment resulting in capital outflow, depreciation in the rand, and an increase in inflation. Markets have offloaded South African shares and bond and are already behaving as if sanctions are in place. If government does not actively demonstrate a return to a “non-aligned” position, South Africa faces the real risk of further isolation on global financial markets.

These policy missteps impact directly on vulnerable South African households, already reeling under the yoke of a government-induced cost-of-living crisis and a brutally high unemployment rate. This is the grim reality of an economy suffocating under the ANC's iron grip at the centre of our economy.

Earlier this year the DA presented our Alternative Budget for 2023, a blueprint for virtuous growth, that remains possible. To establish resilience and stimulate economic growth our Alternative Budget proposes innovative solutions to attract foreign capital, encourage domestic savings, revitalise state-owned entities, fix our crumbling infrastructure, enhance labour market participation, secure our social net, and facilitate the expansion of both the small and large business sectors.

The DA pledges to continue applying pressure on the ANC to adopt effective economic fiscal strategies and urgently address the burgeoning cost-of-living crisis. We will work tirelessly to change the government at the ballot box next year. That is the only way to change the current trajectory that will result in the economic failure of our country.

Statement issued by Dr Dion George MP - DA Shadow Minister of Finance, 6 June 2023