It must be true, as Goethe claimed, that numbers are like the hard, serious accountants of life. Numbers are not about playing favorites or glossing over the facts. They are the ultimate truth tellers, providing numerical narratives that exclude personal opinions and emotions.
In the world of finance, sports, or any other world, numbers always have the final say. In a world where opinions are as diverse as the colors of the rainbow, numbers are a solid and reliable source of truth. So when we say “numbers don't lie,” we are saying it with the confidence of an experienced mathematician.
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The South African economy has been slowing down compared to the previous year, with both the unemployment rate and gross domestic product (GDP) on the rise. These numbers are cause for concern about the state of the country's economy and its impact on its people. The situation is dire and many people are feeling the effects of the recession. Despite being a common topic around the world, life and its prices have been openly discussed in South Africa for several years. Piketty (a prominent French economist) argues that the cost of living for most people will continue to rise because the rate of return on capital will continue to outpace economic growth. This creates a situation where the rich get richer, while the rest of the population struggles to keep up with rising costs of living.
According to World Bank data, annual GDP growth averaged 3.3% from 1995 to 2000, but is expected to slow to 1.2% from 2023 to 2024. This statistic shows an alarming annual decline of approximately 0.8%, which is rapidly increasing year on year. It's already a very stressful situation, and the coronavirus pandemic has made it even worse. High levels of debt and inflation are inevitable. The government has promised that the Treasury will support coronavirus loans in the event of a default. However, the pipeline (bank or similar financial institution) may be responsible for picking up the tab.
The first decline in GDP since 1995 has hit the country's economy and weighed on the Johannesburg Stock Exchange (JSE). Despite efforts to attract more companies to list and improve market liquidity and efficiency through initiatives and reforms, the JSE has shrunk.
Our economy's low growth rate is concerning because it is well below the long-term average and insufficient to significantly eliminate poverty and unemployment.
High unemployment, low business confidence, and weak domestic demand are all contributing factors to the current recession. South Africa has been in a difficult situation in recent years. Research shows that the South African government is reluctant to implement fundamental reforms such as labor market transformation and privatization that would increase productivity and competitiveness. These changes have the potential to halt Transnet's current decline by preventing the late-stage failures that doomed Eskom and South African Airways (as one example). To save face, The Economist compares South Africa to Venezuela.
Apart from prioritizing the own cadre survival strategy of the African National Congress (ANC), which has ruled the country since the fall of apartheid, the country's economic woes have also not been resolved. The Marxist policies of these executives prioritize co-ownership of productive assets and neglect individual responsibility.
The emperor has no clothes on. The truth about the ANC's shortcomings is widely known but unrecognized and unaddressed. Historically, Marxist regimes are notorious for lacking transparency and accountability, as they centralize power at the expense of the people. The ANC is no exception. As Voltaire once said, “The best government is the one that governs the least.” Unfortunately, the ANC appears to have missed the memo. The ANC's toxic combination of corruption, nepotism and impunity is tearing the government apart. To add insult to injury, this only makes poverty, unemployment and economic stagnation more prevalent and entrenched.
This is because the ANC is unable to address the country's economic problems. Investors and companies are cautious about making major commitments. As a result, foreign investment has fallen by more than 50% over the past decade, from more than R70 billion in 2008 to around R28 billion in 2020.
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Additionally, South Africa's credit rating has been downgraded to 'junk' status after years of downgrades by various rating agencies. Over the past decade, the country's trade balance has deteriorated and it now runs an annual trade deficit of more than R144 billion.
South Africa's unemployment rate is projected to reach 35% by 2024, up from 25% in 2008. Inflation is expected to reach 4.5% in 2020, up from 6% in 2008. Approximately 30% of South Africa's population will be living in poverty by 2024, up from 25% in 2008. As mentioned earlier, that number is around 25-30 million people. As of 2022, South Africa had the highest income inequality in the world, as measured by the Gini coefficient (a measure of economic inequality). Such economic indicators foster an environment of dissatisfaction and anxiety in society, which is dangerous.
South Africa's economy faces a number of challenges, including soaring unemployment, shrinking GDP, ballooning debt and out-of-control inflation. And government inaction on issues such as corruption, nepotism and poor governance will only make the situation worse in the eyes of investors and would-be entrepreneurs. On top of that, the coronavirus pandemic is only adding fuel to the fire.
South Africa needs healthy reforms and accountability to turn the tide. Electing leaders who will tirelessly pursue a better future for all of us is as simple as following the advice of the old adage: “Your vote is your voice, so use it wisely.”