Some of the country’s leading economists say structural reform and policy certainty are necessary for jobs to be created and the economy to grow.
They say even after the national elections, it will take some time to improve the economy as the country is still grappling with the aftermath of state capture.
The economists share the view that there are still hurdles that are preventing the country from realising greater economic growth.
Chief Economist at Econometrix, Dr Azar Jammine says improved education and skills development are key to growing the economy and creating jobs.
“State capture and corruption has been eating away at a lot of the revenue that could be generated from the economy and going to just a handful of pockets and not redeployed within the economy. Some of it, or much of it has been has been leaving the country. Secondly, we have inadequate education or skills development. So a lot of people who are looking for jobs just can’t find them.”
In 2018, investment level as a percentage of GDP decreased to its lowest level in thirteen years. Jammine says increased regulation in the economy and policy uncertainty will deter potential investors. “An inclination to regulate even more rather than to reduce regulation in the economy is inhibiting real entrepreneurial activity.
Over and above all those there’s been a lot of policy uncertainty especially surrounding land expropriation without compensation and to a less extend the mining charter, national health insurance scheme and few other such issues and I’m not sure if those uncertainties are simply going to be eliminated by a general election.”
Investec economist Annabel Bishop says she expects economic growth of 1-point-7 percent in 2019, but that the country needs growth of 3 percent to take it out of its economic woes. She says the country still remains in a tight spending position due to the high national debt as well as debt by state owned companies.
“We obviously have a lot of debt and concern from many state owned entities which also weighs on the fiscal figures. So the situation we have in South Africa depends on many factors, not just trade but also commodity prices and indeed interest rate expectations. So I think the risk certainly for 2019 is for a volatile domestic currency, but we’re not looking for any interest rate hikes in the half of this year.”
Wits economist, Lumkile Mondi, says the biggest risk to economic growth this year is political uncertainty, especially with the looming general elections. He says government needs to reduce its spending on the public sector wage bill and rather invest more in infrastructure.
“South Africa requires a stable government that’s committed to macro-economic management but prudent where there is capable people in the state who understand that it is not the politics but the economics but more importantly also, cross management so that we can reduce our budget deficit as well as the huge expenditure that goes to salaries.”
During the mid-term budget policy statement in October last year, government revised its growth outlook downward – to 1-point-7 percent in 2019.