Govt report outlines how South African economy has grown and the challenges since 1994

Govt report outlines how South African economy has grown and the challenges since 1994

The Department of Planning, Monitoring and Evaluation has released its report that evaluated South Africa’s growth and development in the last 30 years.

The evaluation said that the South African economy remained one of the largest economies in Africa and is the most industrialised and technologically advanced in the continent.

The report, compiled in conjunction with officials in provincial and national government, said between 1994 to 2022 long-term GDP growth averaged at 2.4% with a peak of 5.6% in 2006. It also acknowledged that the South African Reserve Bank (SARB) has over these years supported broad macroeconomic stability by containing inflation around the inflation target of 3-6% band

Presidency Minister for the Department of Planning, Monitoring and Evaluation, Maropene Ramokgopa, handed over the report to President Cyril Ramaphosa this week.

Employment

It said South Africa’s labour market has expanded and transformed in three decades. The labour force grew from 11.3 million in 1994 to 28.3 million in 2023. Total employment grew from 8.9 million in 1994 to 16.7 million in 2023.

In terms of investment and infrastructure development, the report said that South Africa’s policy targets require Gross Fixed Capital Formation (GFCF) to reach 30% of GDP by 2030, with the contribution of both public and private investment at ratios of 1/3 and 2/3, respectively.

“Foreign direct investment (FDI) is required to be at least 10% of GDP and infrastructure should serve as a flywheel for the economy and support social inclusion and development in general,” according to the report.

“The annual South Africa Investment Conference has mobilised over R1.51 trillion in investment commitments. By 2023, over R500 billion of these commitments have materialised as fixed investments in factories, production lines, mining operations, retail outlets and infrastructure.”

Economic transformation

The review said that SA’s BEE policies have made important inroads over the last 30 years.

The black middle class has expanded, according to the research, and moreover, there has been an up-tick in increased representation of black professionals in management positions.

“African representation in top management increased from 6.0% in 2001 to 17.0% in 2021, and on senior management from 9.0% to 15.6% over the same period.”

Transformation of the financial sector and financial inclusion

South Africa’s financial inclusion is high, as noted by the report, and it emphasised that approximately 84% of South Africa’s population had bank accounts in 2022, compared to about 54% in 2010.

Access to internet

Over the last three decades, population coverage for 3G and 4G/LTE in 2021 was 99,9% and 97,7%, respectively.

The report added that 5G has taken off in the country, and 7.5% of the population has access to the technology. This is up from 0.7% in 2020.

“This means that nearly all the people in South Africa are within a range of a mobile-cellular signal, irrespective of their subscription.”

South African has an internet penetration rate of 68.2%, according to the report.

What are the challenges SA needs to confront in order to improve economic performance?

There are a number of structural constraints that hamper SA’s potential growth.

The report said that energy security, transport logistics efficiency, infrastructure backlogs, economic concentration in key sectors and a lack of technological innovation are areas that hamper economic growth.

South Africa is also vulnerable to global shocks and a declining manufacturing industry.

How can we make 2030 an economic success?

The report said by 2030, government needs to prioritise the implementation of the Economic Reconstruction and Recovery Programme (ERRP).

Furthermore, government needs to address structural reforms such as private sector electricity generation; third-party access to rail network; red-tape removal on licensing and approvals; e-Visa scaling up; spectrum digital access and reduced data costs.

The report also highlighted that multilateral structures such as the BRICS, can provide an opportunity for the expansion of trade, investment and industrialisation.

Supporting the African Continental Free Trade Area (AfCFTA) outcomes for industrialisation and infrastructure development was also emphasised by the report.

Lastly, the report said that government should help support small businesses and spatial economic development such as Special Economic Zones.

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