South Africa’s Cyril Ramaphosa was re-elected this week despite the failure of his ruling African National Congress (ANC) party to get a grip on the economy and corruption. The former union leader turned business magnate has promised to create jobs and continue to fight corruption. He needed a resounding victory to unite a party that has been deeply divided since the ousting of scandal-plagued Jacob Zuma a year ago.
Unemployment is at a 15-year high of 27.1 percent and youth unemployment is at the highest level globally at 54.7 percent. Ramaphosa has pledged to create 275,000 jobs a year but that can only happen if the economy is expanding at a rate of about 5 percent.
The economy grew just 0.8 percent in 2018 after recovering from a recession, the country’s second in a decade. And it has not grown more than 2 percent over the last five years.
All this is against a backdrop of inequality, electricity and water shortages.
What South Africa needs is private sector confidence to be reinvigorated for investors to start investing again in order to boost growth.
Razia Khan, chief economist, Standard Chartered
On the challenges facing the country, Razia Khan, chief economist for Africa and the Middle East at Standard Chartered, says: “The South African economy has really struggled to achieve lasting momentum and if any of the high-frequency data releases from the first quarter of this year are anything to go by, there’s even the risk of another economic contraction quarter-in-quarter at the beginning of this year.”
“The question is though, does this election result change anything? Will we now see the institutionalisation of reforms, will we see a surge in consumer and business confidence, could we see household spending and investments taking off?”
Khan says the South African economy needs to be growing a lot faster. “There have been a number of measures put in place to try to reduce the overall impact of inequality, not least the provision of social grants and [an] extensive social grant system, but ultimately the best way to reduce poverty would be to achieve an accelerated growth rate over time. It’s this issue that South Africa policy must focus on.”
“What South Africa needs is private sector confidence to be reinvigorated for investors to start investing again in order to boost growth,” says Khan