At the crossroads of the South African economy, there are optimistic voices about the necessary connections for recovery. As discussions flow and prospects emerge at the Money Summit at the Sandton Convention Centre, it is critical to ask whether these conversations will translate into tangible change or whether they will remain mere repetitions of the same rhetoric as the economy struggles to take off.
South Africa’s harsh economic reality remains worrying. With a dismal GDP growth rate of 0.4% in the second quarter of 2024, far from the momentum needed to address our deep-rooted socio-economic problems. Gulam Bim, Standard Bank’s chief economist, acknowledged at the summit that “the economy has not performed as it should have,” while expressing cautious optimism about an eventual interest rate cut. Bim mentioned a possible interest rate cut by the end of the month, with further cuts to come in 2025. But will a few interest rate cuts be enough to spur meaningful growth?
The numbers suggest otherwise. In the second quarter of 2024, the unemployment rate among South Africans aged 15 to 34 jumped to 46.1%, significantly higher than the national unemployment rate of 33.5%. This is not a problem that can be solved by mere marginal adjustments to interest rates or vague talk of “unleashing entrepreneurial energies.” Even if businesses start investing again, who will benefit from this investment? Without targeted policies to ensure that marginalised groups, particularly unemployed youth, are integrated into the formal economy, any economic growth risks exacerbating the deep-rooted inequalities in our society.
Furthermore, while Bim expressed hope that the political centre would remain stable, the country remains politically unstable. The government’s continued failure to implement coherent long-term economic policies is undermining business confidence. South Africa’s history of stop-and-go economic interventions leaves much to be desired. A crucial question is: can a government plagued by corruption scandals and internal divisions actually drive the bold reforms needed to revive the economy?
The summit’s discussions also shed light on personal finances, including the fact that many South Africans, even middle-class ones, are overwhelmed by debt. It is worth noting that the average debt-to-income ratio is over 72% in 2023. Bim said that despite these challenges, “we have not seen a significant increase in non-performing loans,” thanks in part to South Africa’s social safety net. However, this statement understates the seriousness of the situation. In reality, many households are struggling to make ends meet, and relying on government handouts is hardly a viable long-term strategy. As of 2024, more than 20 million South Africans are on social grants. While these grants provide crucial relief, they do little to foster financial independence or long-term wealth creation.
The real issue here is not just individual financial literacy, which Bim believes has been democratized by access to social media. While it is true that more people now have access to financial advice, this is no substitute for the structural changes needed to enable true financial empowerment. A functioning economy requires people to have jobs, higher wages, and opportunities to generate wealth – not just better financial advice on how to manage their mounting debt. In fact, this focus on financial literacy serves as a convenient distraction from the real systemic failures of the economy.
Furthermore, Bim’s optimism that power outages are a thing of the past and that there is early momentum in logistics is also worth examining. While Eskom has made progress in reducing power outages, the country’s energy infrastructure remains fragile and long-term solutions are yet to be found. In fact, a 2023 report from the Council for Scientific and Industrial Research showed that power outages cost South Africa between R60 billion and R120 billion that year. Can we really say that power cuts are a thing of the past when infrastructure upgrades remain woefully underfunded?
What is most alarming is the persistent disconnect between the summit’s discussions and the lived realities of most South Africans. When we talk about “economic growth” in these contexts, whose growth are we really talking about? The growth of the elite, who attend these summits in luxury, or the growth of the millions of South Africans left behind? South Africa has one of the highest levels of income inequality in the world, with a Gini coefficient of 0.67. Without addressing this issue, no amount of dialogue will be able to address the fundamental structural problems of the economy.
It is easy to be hopeful about small signs of recovery, such as improvements in the logistics sector or the promise of interest rate cuts, but these are merely band-aids on a gaping wound. What South Africa needs are bold reforms.