SA crumbling: But don’t worry, we’re still far from ‘Zimbabwefication’

While a stagnant economy, growing levels of unemployment, collapsing infrastructure and rolling electricity blackouts, pointing to the country’s economic decline, economists yesterday said South Africa was still far from “Zimbabwefication”.

The phrase was used years ago to describe the extent of economic decline in the South African economy, compared to the economically-ailing Zimbabwe with an inflation rate of 243.8% year-on-year in December 2022.

Get the basic’s right

This, as respected agricultural economist Wandile Sihlobo, warned of how a crumbling basic infrastructure, has limited South Africa’s agriculture and tourism growth potential.

Sihlobo said many provincial governments and local municipalities, failed to execute the broad national vision of economic reconstruction and growth, “because they aren’t doing the basics”.

Getting basics right, required “intense focus in 2023 to get SA in better shape and ease the economic pain in rural areas”.

Writing on his blog, Sihlobo warned of interlinked problems of poverty, unemployment and weak economic activity, which continued to plague rural towns and communities in South Africa, with at least 18 million people living in abject poverty.

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Two industries that carry SA battling to survive

“Two industries that could help ease some of these challenges: agriculture and tourism, face various constraints that limit their growth potential.

“The everyday challenge for farmers, agribusinesses and tourism entities, is the dire state of local road networks, deteriorating water infrastructure and high crime levels.

“Food and beverage group Clover‘s decision in 2021 to move its cheese production from Lichtenburg in the North West, to an existing plant outside Durban in KwaZulu-Natal – as a result of ongoing poor service delivery – brought to light the real economic consequences of these challenges.

“The company had provided more than 400 jobs in Lichtenburg and there were other positive economic spin-offs for the community.

“There are other well-publicised cases, including Astral in the Lekwa Municipality, where the poultry-producing company lost millions, because of the municipality’s failure to provide reliable supplies of water and electricity.

“In the Eastern Cape, dairy-producing organisations such as Amadlelo Agri, are struggling to move their fresh milk to market, because of the dire state of the roads,” said Sihlobo.

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‘Zimbabwefication’

Despite its challenges, economists said South Africa, whose delegation – led by President Cyril Ramaphosa – will on Monday participate in the five-day World Economic Forum in Davos, Switzerland, to woo investors, was “far from being compared to Zimbabwe”.

University of Johannesburg associate economics professor Peter Baur, said the term “Zimbabwefication” could not be applied to South Africa.

“We are comparing two entirely different systems.

“The entirety of the political system within Zimbabwe, was developed into a cascade of political and economic trauma for that country.

“The structure of the South African financial and monetary system is central to the stability of the ZAR within a very turbulent global economy.

“While South Africa may have experienced challenges of corruption, political tension and socio-economic issues, it has remained somewhat resolute – internationally speaking,” said Baur.

Baur said SA has seen an increase in poverty levels, with about 18 million people living in abject poverty.

“With increasing interest rates, due to strict monetary policy, the cost of debt will increase and may force more households to default on debt repayment.

“This may have terrible consequences for the poor and households with low and irregular collective incomes,” said Baur.

While the economy has shown growth by about 1.6% towards the end of 2022, Baur said the impact of irregular energy supplies – coupled with the rising cost of electricity and the overall infrastructural challenge, “will most likely impact the business sector and have further impacts on the economic growth and outlook on the South African investment climate”.

Baur: “Business confidence has decreased from 39 to 38 points. “However, the Absa Purchasing Managers’ Index, rose to 53.1 points.

“We also see an increase in retail sales.

“Businesses creates work opportunities, but with increasing uncertainty, may impact on investment decisions by business.

“This will filter down to additional stress placed on households. “

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Comparing SA to Zim is ‘lazy’

Alternative Information and Development Centre, Dick Forslund, described “Zimbabwefication of SA” as “a lazy concept”.

“Zimbabwe is much worse-off economically and has another history.

“Even if we have looting of the state and massive corporate profit shifting in both countries, we should not use a lazy concept,” argued Forslund.

Society, he said, needed a massive public sector intervention and a jobs programme financed by:

• Half a trillion of rand in the state pension fund – put at risk on the stock market.

• Insourcing of public service and infrastructure project to stop 95% of all tenders, procurement and “the corrupted middleman system that has destroyed the ruling party.

• Much higher tax rates on the middle class, the rich and the big corporations, with more resources diverted to the SA Revenue Service “to stop tax dodging – restoring taxation on affluent lifestyles to what they were 20 years ago”.

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Forslund said the country needed “a battery of reforms in a socialist, pro-poor and redistributive direction”.

Political and policy analyst Dr Nkosikhulule Nyembezi, said South Africa still had “a potential to attract investment in different sectors of the economy”.

“Even the troubled Eskom and the decaying infrastructure, present investment opportunities that could yield attractive returns – provided the government does not insist on interference with decisions on how to run business efficiently,” said Nyembezi.

“SA leaders in Davos can still successfully attract investors – even if in less favourable terms.

“After all, SA continues to benefit from favourable external conditions, such as periodic commodity price boom and strong currency,” added Nyembezi.

brians@citizen.co.za