Time to buckle up for the proverbial winter
The economy is headed downward.
No surprise to the approximately five million currently unemployed South Africans.
According to Gulf Business and BusinessTech, South Africa is currently ranked eighth on the list of countries with the highest unemployment rates.
Estimates for economic growth in South Africa in 2015 went down from around two per cent, after the 1.5 per cent contraction in the second quarter.
Growth estimates for 2015 have been reduced to 1.4 per cent by the International Monetary Fund (IMF) and to 1.5 per cent by the Reserve Bank.
Last year, South Africa’s gross domestic product (GDP) growth was 1.5 per cent, compared to 2.2 per cent in 2013.
After an apparent worldwide recovery of the economy following the 2008 recession, several developing economies are slowing down, largely as a result of China.
Where the US was previously the leader of the pack, China now carries the fate of the developing world with it.
A recent slowdown in the Chinese economy resulted in a decrease in demand from the giant nation.
The lesser demand envelops the commodities market, on which South Africa is still very dependent.
With fewer exports to China and the recent drops in commodity prices, South Africa is in trouble, with thousands of jobs in the mining sector hanging in the balance.
After two months with only two hours of load shedding, the energy crisis has calmed down, but its effects are still felt and are now being compounded by unrest in the labour market.
With strikes in Ceres, the coal mining sector and now the mines, things don’t look bright going ahead.
Of course it’s not all gloom and doom, the mining sector in South Africa has shrunk compared to others.
While it still forms a significant portion of the economy, it has been overtaken by services, public administration, manufacturing and transport.
With services forming the largest part of the GDP in 2014, the country has several strong buffers against any negative effects the mining industry might have.
Even so, we are heading for a recession and, however small it might be or quickly it might blow over, we’ll still have to tighten our belts for a while and face the harshness that inevitably comes with capitalism.
