Inflation rates have equally peaked in South Africa, and that it is possible that the annual inflation rate in South Africa may comfortably be below 5% in 2024, says the writer. File picture: Armand Hough / Independent Newspapers
Next year will mostly be about the national and provincial elections in South Africa, at least for the first half of the year. It will be all about who is going to be in power after the elections, which we hope will be held in May 2024.
South African national and provincial elections are usually highly emotionally charged, sometimes bordering on irrationality in the way people think and talk.
We therefore don’t think that many people will necessarily give themselves enough time to seriously, pragmatically think about the real solutions to the economic challenges that we face.
But, expect many people to pronounce on what they expect the “new” government to do. We must thus expect many political parties, independent candidates and their supporters to make many political promises which likely include many reckless statements with regard to the South African economy.
It is against this background that some of the economic matters must be viewed.
We will start the year 2024 on a very weak note because of the cumulative effect of the weak negative South African economic performance of the past decade and stretching back to the major global economic meltdown of 2008.
We expect our economy to marginally grow in 2024, despite starting the year still not sure whether the last quarter, the fourth quarter, of 2023 would have had a positive GDP economic growth rate or a negative economic growth rate.
If the fourth quarter of 2023 comes out with a negative GDP economic growth rate, that will mean we would have started 2024 in a technical recession.
This will be because the third quarter of 2023 had a negative GDP economic growth rate of -0.2%; and if the fourth quarter of 2023 also has a negative GDP economic growth rate, that will result in a technical recession because two consecutive negative quarterly growth rates means the country is in a technical recession.
We, however, do expect the fourth quarter of 2023 to have a positive GDP economic growth rate, which means that the final annual GDP figure for South Africa may be a small positive of say 0.4% that some economists are already predicting.
We do not expect much from the 2024/25 National Budget speech at the end of February. The reason for this is that the national Minister of Finance, Mr Enoch Godongwana, made it very clear at his last MTBPS speech in November that his focus in the 2024 National Budget will be to focus on cutting down on the continuing budget deficits, hence the directives that the National Treasury sent to almost all the government structures and state-owned entities saying they must give some inputs on how they plan to trim their operational budgets.
This will be mission impossible in this 2024 National and Provincial Elections Year.
Godongwana will be privately, or even criticized by his own ANC colleagues, for his pragmatic approach to reducing government expenditures.
The bloated public servants expenditures for 2024 have already significantly increased by far more than the 7.5% salary increases that public sector trade unions blackmailed or bulldozed the government to grant, literally in return for possible ANC votes in 2024 from these public servants.
As many of these opposition parties and many other political wannabes will be promising so many unsustainable social welfare expenditures, the ANC will definitely be sacrificed in some instances to equally make such reckless promises in 2024.
It was therefore not surprising when one national Cabinet minister recklessly told some mass media journalists that “the ANC government is seriously considering implementing the Basic Income Grant”, which was a lie. The ANC knows very well that the Basic Income Grant will be unsustainable for South Africa, where our youth unemployment is at 60% and our expanded definition of unemployment puts our national unemployment at over 40%.
The only countries with some workable sustainable “BIG” or “dole” are only a few countries with one-digit unemployment rates.
Another challenge to the 2024 National Budget will be the ANC ideologues’ insistence on pushing through the National Health Insurance, the NHI, which currently has no actual verifiable budget. We can only conclude that it was deliberately insisted on for election year purposes.
Can Godongwana accommodate this NHI in the 2024/25 National Budget? The answer is a big no.
Eskom’s load shedding has been a major culprit for our recent lower economic growth levels; and if things continue like this, we must give up on any hopes of ever getting out of this bad economic situation.
The South African government will thus be forced to continue giving other bailouts and/or “government guarantees” for the country to recover from all the problems which are directly or indirectly attributable to “Eishkom’s Mess”. Having recently had at least over two weeks without any load shedding, let us hope Dr Kgosientsho SPUTLA Ramakgopa and his team are beginning to tame the corruption-prone Eskom damage to our economy.
Godongwana said that it currently has a total government debt of R4.8 TRILLION as in 2023, and that this will be as high as R6 TRILLION as in 2026. Remember, he did not deal with some SOE debts at the last MTBPS. Some reckless people are even recommending that the government must now dip into the R497 BILLION Special Contingency Reserve Account in order to deal with these serious fiscal challenges. I disagree; you don't dig deep into your last-minute reserves in order to deal with ordinary operational challenges.
We are, however, hopeful that we have by now reached the peak of the peak of the global inflation challenge; hence many reserve banks are already planning to start cutting down on their interest rates.
I am comfortable to say that it looks like the inflation rates have equally peaked in South Africa, and that it is possible that the annual inflation rate in South Africa may comfortably be below 5% in 2024. It is on these grounds that we believe that the South African Reserve Bank may start reducing their Repo Rates from the highs of the current 8.25% at least by May 2024.
We must in the meantime give a tentative acknowledgement to the government that it looks like they are now seriously starting to fight lawlessness and porous borders; we see some active arrests of the people involved in illegal mining, which is being used to rob our country of the revenues lost due to these illegal miners. The introduction of the Border Management Authority may go some way in protecting South African jobs which have been lost due to our porous borders.
*Prof. Bonke Dumisa is an independent economic analyst.
**The views expressed do not necessarily reflect the views of Independent Media or IOL.