Economists call for radical reform agenda after GDP figures

Economic experts have called for massive economic reforms which are critical in putting the economy on a sustainable growth path, following Gross Domestic Product (GDP) figures released by Stats SA, which revealed that the country’s economy grew by 1.2% in the fourth quarter of last year. 

According to the chief economist at Econometrix, Dr Azar Jammine, while there has been an increase that has brought the annual growth rate for 2021 to 4.9%, the country needed reforms in all spheres, especially state-owned enterprises (SOEs).

 “We need to reform SOEs for them to be more competitive and efficient and that could im- ply partial privatisation to encourage more competition and improve oversight,” Jammine said. “Firstly we need to end corruption and state capture … We also need more infrastructural investment. We saw from the GDP figures yesterday that in- vestment keeps lagging behind consumption.” 

ALSO READ: GDP shows growth in 4th quarter of 2021, but still not quite recovered from Covid

This comes after the entity on Tuesday said that mining, agriculture and manufacturing recorded the highest growth rates, with finance and personal services were among the largest positive contributors to overall growth. However, Stats SA warned that despite the positive figures, the country’s GDP was yet to recover to the level recorded in the second quarter of 2021 before the July civil unrest and strict- er lockdown restrictions in the third quarter.

 Meanwhile, Jammine also said economic reforms were key, as growth alone could not create enough jobs in South Africa. “It needs labour market reforms to make it more attractive for businesses to want to employ people on a full-time basis instead of just opting for temporary employment,” he added. 

“At the heart of it [the economy] needs more education so that people can leave school and become more productive and contribute towards the economy a lot better.” Economist Chris Hart said SA was underperforming to the rest of the world by a significant margin in all sorts of measures like poverty, unemployment and so on. Hart also said the country needed a radical transformation as there was a need to get out of poverty and also reduce unemployment. 

“The current situation is not serving us, SA cannot compete in the world with our economic freedom,” he said. Meanwhile, the chief executive of the Steel and Engineering Industries Federation of Southern Africa, Tafadzwa Chibanguza, said the outcome of the economy’s performance in 2021 should be read in the context of the base effect that will influence the readings. “That is, the Covid-induced lower readings of 2020 will naturally exaggerate the 2021 outcomes when the two years are compared on a year-on-year basis,” he said.

Chibanguza said the gross fixed capital formation for the year 2021 increased by a disappointing 2.03%, as the economic growth rate for 2022 was projected to be 2.1%, and it is expected to average 1.8% over the next three years. 

“An aggressive reform agenda, focused on implementation, in the energy, transport, water and security sectors; and great- er fixed investment into the economy is urgently required.” – reitumetsem@citizen.co.za