Trade union federation Cosatu and the EFF have raised concerns about the country’s struggling economy despite its promising performance in the third quarter.
Statistics South Africa (Stats SA) announced on Tuesday that the country’s gross domestic product (GPD) has restored the economy to pre-pandemic levels, taking it to the highest it has ever been.
Stats SA said the country’s GDP increased by 1.6% in the third quarter after contracting by 0.7% in the second quarter of the year.
“The size of the economy now exceeds pre-pandemic levels. Real gross domestic product, measured by production, was R1 161-billion [constant 2015 prices] in the third quarter, which is above the previous peak of R1 152-billion recorded in the fourth quarter of 2018,” said the national statistical service.
The numbers may be promising but they filter the reality of a stagnant economy, according to Cosatu, which said an increase in GDP only shielded the country from a recession.
“These are encouraging figures, but the country remains stuck in the reality of a stagnant economy. These numbers mean that the South African economy marginally escaped sliding back into recession this year,” said Cosatu spokesperson Sizwe Pamla.
“These numbers, though, hide the fundamental reality of an economy that still does not have a reliable electricity supply. The projected fuel price hikes, government austerity and the ongoing retrenchments are likely to reduce the purchasing power of many South Africans. This is calamitous for an economy that derives 60% of its capacity from consumer spending.”
Cosatu is not convinced that the economy has recovered, Pamla said, noting that the economy will only recover once government clamped down on corruption and managed its entities efficiently.
“South Africa has now taken over the dubious honour of being the most unequal society on the planet, and what is worse is the fact that in South Africa, inequality is severely racial, gendered and spatial.
“The government-led infrastructure development programme should help in strengthening local industries by increasing local content of the infrastructure development projects. Now more than ever, government needs to intensify its investments and infrastructure drives in the economy.
“This can be achieved if government deals with corruption and wasteful expenditure. The government’s spending patterns have implicated our members on pay and the size of the public service.
“Last year, 2020/2021 financial year, the auditor-general Tsakani Maluleke pointed out that irregular expenditure by national and provincial government departments increased by 34% to R167-billion, indicating the flouting of supply chain laws when making decisions.
“The auditor-general said this is not even a true reflection, and could be even higher due to some government departments and entities not having completed their financial statements for audit by the auditor-general’s office.”
Although the official unemployment rate has decreased by 1% from 33.9% in the second quarter to 32.9% in the third quarter of the year, Pamla believes there is still a jobs bloodbath that the state needs to effectively address.
According to Pamla, job creation is the best way out of the country’s economic crisis.
“Job creation is the only way to spur and sustain economic growth and to ensure the redistribution of wealth in a meaningful way. The jobs bloodbath that is continuing in all the sectors of the economy, and the rising cost of living, is a recipe for disaster.”
Meanwhile, the EFF said the country’s economy is “mismanaged”, noting that the new GDP figures were expected, as the strict Covid-19 regulations have been lifted.
“The increase in the third-quarter GDP was expected, as all Covid-19 restrictions have been lifted for over a year and most factories, operations, and businesses have now resumed operations,” according to EFF spokesperson Sinawo Thambo.
“The 1.6% growth is not an outcome of cogent, coordinated, or even planned policy intervention, as South Africa remains leaderless.”
Thambo explained further: “The EFF maintains that the South African economy is being mismanaged by incompetent people who have neither the intention nor capacity to lead industrialisation with the capacity to grow the economy and create jobs.
“The fact that there is no plan to salvage the collapse of Eskom is demonstrated by the reduction of the contributions of the electricity, gas, and water sectors to the GDP.”
Also read: Improved GDP figure restores economy to pre-pandemic levels
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