Instead of tracking what economic growth SA is getting, we should be asking a different question: What kind of growth does SA need?
Much ink has been spilt in the analysis of Finance Minister Tito Mboweni’s recent supplementary Budget, in particular to the revised GDP growth estimate of -7.2% in 2020 and the explosion in government debt to 81.8% of GDP in the current year. It is likely that the importance of the denominator in the latter calculation explains the optimism of the former.
Tracking SA’s GDP per capita is informative. From 1990 to 2000 in real terms it picked up only very slowly. Then from 2000 to 2008 GPC rose strongly and relentlessly, interrupted by the financial crisis which led to a one-year contraction. From 2010-2014 GPC picked up again but at a far slower pace, struggling to make headway in an eroded economy. Finally, from 2014 onwards this eroded foundation could no longer hold, and GPC has declined ever since .
The quality of growth was questionable and the seeds of much future erosion and mismanagement were being sown, but at the time many South Africans would have agreed their lives were getting measurably better. This seems like a high required level of growth, but we can test the same problem against a back-of-the-envelope calculation from a government expenditure approach under the following assumptions:
By either hypothetical method, consistent growth in the region of 5.0% over the medium term is required to push progress in South Africa — improve the welfare of society, increase living standards, maintain government expenditure levels in inflation-adjusted terms on healthcare, schooling, social support and other institutions such as the police and the court systems.
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