Menu Close

Unemployment, inequality, stifle SA’s economic growth

Add to my bookmarks
ClosePlease login

No account yet? Register

Share This Article:

Picture: Unemployed youths , who mostly have matric, still have the likelihood of learning new skills and least require state assistance. There are academic debates about whether South Africa is the largest economy in Africa, with some arguing that Nigeria and Egypt overtook the country a long time ago, the writer says.

By Bonke Dumisa

South Africa is widely regarded as the economic powerhouse of the African continent. There are academic debates about whether South Africa is the largest economy in Africa, with some arguing that Nigeria and Egypt overtook the country a long time ago.

Officially, the Nigerian and the Egyptian economies are ranked ahead of South Africa; with Nigeria ranked the 31st largest economy in the world, followed by the Egyptian economy as the 33rd largest economy and the South African economy ranked the 36th largest economy, albeit with South Africa having a marginally higher GDP than Egypt.

The academic debates on this are mainly based on the allegations that Nigeria changed their statistical reporting format – a paper entry – which instantly pushed up their GDP figures. Let me look at the economies of seven countries, which include four African countries and three major countries that are members of BRICS.

South Africa has averaged a 0.61 percent economic growth rate from 1993 to 2023, reaching an all-time high quarterly economic growth rate of 13.7 percent in the third quarter of 2020, and a record low of -17.0 percent in the second quarter of 2020. The country has one of the highest unemployment rates in the world, with its official unemployment at 32.9 percent and the expanded unemployment rate at around 42 percent. Its GDP is at $400 billion. It is ranked the 36th largest economy in the world.

India has averaged about a 6-7 percent GDP economic rate between 2006 and 2023, with a high of 8.7 percent in 2022 and a low of -6.6 percent in 2021. In 2015, India was recognised as the Most Rapidly Growing economy in the world. Its unemployment rate stands at 5.98 percent while its GDP stands at $3.7 trillion. India is ranked the fifth largest economy in the world.

China averaged a 1.64 percent GDP economic growth rate from 2010 to 2023, with a high of 11.8 percent in the second quarter of 2020, and the lowest economic growth rate of -10.3 percent in the first quarter of 2020.

It is important to mention that the lowest point in 2020 was during the first phase of the Covid-19 pandemic. China had to shut down its economy at the time when it was branded the epicentre of or the primary source of the Covid virus.

Its 11.8 percent quarterly growth rate in the second quarter of 2020 was equally directly linked to the beginning of the easing of the Covid19 pandemic restrictions when the country started easing up their border controls. The country had an 8.97 percent average economic growth rate between 1989 and 2023. Its unemployment rate stands at 5.2 percent in the urban areas, although its youth unemployment is significant at about 20.8 percent. China has a GDP of $17.73 trillion and is the second-largest economy in the world.

Brazil averaged a 2.45 percent economic growth rate between 1991 to 2023. Its unemployment rate is 14.4 percent. Its GDP is at $2.08 trillion. They are ranked the 10th largest economy in the world. Nigeria averaged about 2.66 percent from 2011 to 2023. Its unemployment rate stands at 9.79 percent. The GDP is at $504bn.

Nigeria is globally ranked the 31st largest economy in the world. Egypt averaged a 4.18 percent GDP economic growth rate between 1992 and 2021. Its unemployment rate is 10.26 percent. The country’s GDP is at $387bn. Egypt is ranked the 33rd largest economy in the world, higher than South Africa despite it having a lower GDP than South Africa. This is an academic debate for another platform.

Rwanda averaged a 7.2 percent economic growth rate in the past 10 years. Its unemployment rate stands at a mere 1.6 percent. The country’s GDP stands at $9.5bn. Rwanda is ranked the 146th largest economy in the world. It is interesting how many people easily compare the achievements of this 146th-ranked country with those of 36th-ranked South Africa.

The most conspicuous statistical figure which distinguishes South Africa from the other six African countries is that South Africa has the highest unemployment rate compared to them. This may be the root of most of South Africa’s economic problems. Most economic studies show that South Africa is one of the most unequal societies in the world, which can be traced back to the apartheid past.

Most studies on the Gini coefficient show that the previously advantaged race(s) is still mostly economically advantaged, and that the black African population is still the worst economically disadvantaged. This is at the core of the country’s economic challenges. The high unemployment rate in South Africa means that many people, who could be contributing to the economic growth of the country, are instead waiting for government handouts. This means the government is forced to focus more fiscal allocations on social service delivery instead of on increasing expenditures on what will accelerate economic growth.

The need to increase social welfare expenditures has played a major role in pushing up corruption levels in South Africa. Most housing projects, which were meant to alleviate homelessness, have instead enriched a very few politically-connected individuals, and a lot of money not accounted for houses allegedly built according to government expenditures thought such houses were never built. This is just one of those glaring examples of how the very high unemployment rates have been exploited to the detriment of real economic growth. South Africa’s porous borders have enabled many people to actively participate in its economy without paying their dues to the South African government.

Therefore, the money which circulates within such businesses does not enhance economic growth. Eskom’s load shedding – which has at its core corruption involving staff members and Eskom’s service providers, lawlessness and widespread criminality, including the involvement of police in some of that criminality – has all contributed significantly to destroying economic growth levels in the country and there is no political will to deal decisively with these barriers to economic growth.

Prof Bonke Dumisa is an independent economic analyst