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South Africa unlikely to achieve 2% growth

by David Gleason, 28 November 2013, 05:34

David Gleason

South Africa unlikely to achieve 2% growth

THAT dreadful statistic of gross domestic product (GDP) growth of 0.7% for the third quarter means growth over the nine months was just 1.9%. Macroeconomic consultancy Econometrix says the fourth quarter will need to deliver 3.3% growth if the economy is to have grown of 2% this year.

Given the clearly visible slowdown in the economy, that’s unlikely. Most economists I spoke to concur that the GDP number for this year is likely to be about 1.7% or 1.8%.

Efficient Group chief economist Dawie Roodt says that means population growth is faster than that of the economy, so for the first time in five years South Africa’s GDP per capita will actually decline.

ETM Analytics economist Jana le Roux agrees that structural issues are those doing most damage.

Roodt says the economy will grow faster if labour legislation and regulations are relaxed and the inefficiencies of the state are addressed. There’s no chance that either of these will occur, which points the country at another year of far below acceptable economic growth.

Econometrix says the main cause of the decline in GDP was the sharp contraction in manufacturing — negative 6.6%, due mainly to strike activity. If manufacturing is excluded, GDP for the third quarter would be 1.7% — still horrible. And Roodt reminded me that next year is the last of the two-year agreement with the public service unions about remuneration. So what is the likely outcome in an election year when the ruling party finds it necessary to marshal every available vote?

The public service is where the unions are most powerful, and they will use their bargaining position to secure a favourable outcome for members. That will probably be inflation plus 3%-4%, so we’re looking at about 10%.

If that is what transpires, it will be very bad news. Addressing a Parliamentary Institute of SA symposium last month, Business Leadership SA vice-president Michael Spicer said: “This administration has lost control of the public sector wage bill.” It currently consumes a big 35% of the state’s budget. That is apparently a cool 50% more than the budgets of the country’s peers (Business Day, October 22).

And that leads to the space occupied by the unions. By and large it is probably fair to observe that union leaders devote most of their energy to looking after the interests of their unions, in other words, themselves, rather than those of their members. Nor have they calculated quite where they are in the national discourse, straddling as they do the divide between politics, power and patronage, and the real economy.

The UK unions suffered the same hubris, to the extent where their leaders thought they had every right to dictate the terms on which they would permit the government to govern. At least they were brought down to earth. The South African versions haven’t yet absorbed the radically new concept of the world which the confrontation in the UK imposed. The country is drowning in strikes. In the first half of this year there have been strikes in the Western Cape agricultural sector, mines, post offices, schools, bus companies, the motor industry, construction firms, the textile sector, South African Breweries, and power stations under construction, and by technicians at South African Airways. Stefanutti Stocks estimated that it suffered losses of about R90m in the six months to August — and that’s just one company.

Some strikes are what is quaintly called “unprotected”, meaning they haven’t complied with the employer-unfriendly Labour Relations Act. Last year nearly half of strikes were “unprotected”. I do not mind at all that National Union of Metalworkers of SA general secretary Irvin Jim is involved in a deeply divisive internal power struggle, one that is prompting speculation about a potential implosion within the Congress of South African Trade Unions. Jim is personally responsible for much of the damage the economy has sustained this year. He is an entirely unnecessary apparatchik who needs to account for his actions.

From Russia with love, or money

IN MARCH this year, and coinciding with a Brics heads-of-state summit in Durban, Russian state nuclear energy corporation Rosatom announced it had opened an office in Johannesburg. Directors attended the Brics Business Forum. Two months later, President Jacob Zuma repaid Russian President Vladimir Putin’s visit to South Africa with a working visit to see him and Russian ministers in Sochi.

It was the third meeting between the two men in less than a year.

Last month, Business Day carried a story (South Africa plans to grow Russian nuclear ties, October 10) in which it was suggested South Africa and Russia could soon sign a nuclear co-operation deal which might give Russia a head-start in securing contracts to build nuclear power plants here. A draft agreement was seen by Business Day, although Department of Energy officials stressed it wasn’t final.

In Moscow this week Rosatom declined to provide a copy of a co-operation agreement between Rosatom and the Nuclear Energy Corporation of South Africa, initialled in South Africa on Monday, which it is thought might contain a provision allowing for the award of South African nuclear reactor construction projects without competitive tendering or bidding.

Approached by Business Day correspondent John Helmer, Rosatom spokesman Andrei Ivanov said: “There is still no agreement yet. It will be concluded by February 15. It is impossible to comment on … what doesn’t exist … the tender for the construction of nuclear power plants in SA is not a question for us but for the government of SA.

“At the same time I draw your attention (to the fact) that nuclear power plants in the world are built through two procedures: tenders and intergovernmental agreements. The choice is always by the party who is the customer.”

Meanwhile, Energy Minister Ben Martins, in Russia a fortnight ago, may be doing his best to backtrack. He told the SABC on Wednesday that because he had been on a study tour of nuclear facilities, it didn’t mean Russia will get the contract.

Ho, hum.

November 28 2013, 05:34

THAT dreadful statistic of gross domestic product (GDP) growth of 0.7% for the third quarter means growth over the nine months was just 1.9%. Macroeconomic consultancy Econometrix says the fourth quarter will need to deliver 3.3% growth if the economy is to have grown of 2% this year.

Given the clearly visible slowdown in the economy, that’s unlikely. Most economists I spoke to concur that the GDP number for this year is likely to be about 1.7% or 1.8%.

Efficient Group chief economist Dawie Roodt says that means population growth is faster than that of the economy, so for the first time in five years South Africa’s GDP per capita will actually decline.

ETM Analytics economist Jana le Roux agrees that structural issues are those doing most damage.

Roodt says the economy will grow faster if labour legislation and regulations are relaxed and the inefficiencies of the state are addressed. There’s no chance that either of these will occur, which points the country at another year of far below acceptable economic growth.

Econometrix says the main cause of the decline in GDP was the sharp contraction in manufacturing — negative 6.6%, due mainly to strike activity. If manufacturing is excluded, GDP for the third quarter would be 1.7% — still horrible. And Roodt reminded me that next year is the last of the two-year agreement with the public service unions about remuneration. So what is the likely outcome in an election year when the ruling party finds it necessary to marshal every available vote?

The public service is where the unions are most powerful, and they will use their bargaining position to secure a favourable outcome for members. That will probably be inflation plus 3%-4%, so we’re looking at about 10%.

If that is what transpires, it will be very bad news. Addressing a Parliamentary Institute of SA symposium last month, Business Leadership SA vice-president Michael Spicer said: “This administration has lost control of the public sector wage bill.” It currently consumes a big 35% of the state’s budget. That is apparently a cool 50% more than the budgets of the country’s peers (Business Day, October 22).

And that leads to the space occupied by the unions. By and large it is probably fair to observe that union leaders devote most of their energy to looking after the interests of their unions, in other words, themselves, rather than those of their members. Nor have they calculated quite where they are in the national discourse, straddling as they do the divide between politics, power and patronage, and the real economy.

The UK unions suffered the same hubris, to the extent where their leaders thought they had every right to dictate the terms on which they would permit the government to govern. At least they were brought down to earth. The South African versions haven’t yet absorbed the radically new concept of the world which the confrontation in the UK imposed. The country is drowning in strikes. In the first half of this year there have been strikes in the Western Cape agricultural sector, mines, post offices, schools, bus companies, the motor industry, construction firms, the textile sector, South African Breweries, and power stations under construction, and by technicians at South African Airways. Stefanutti Stocks estimated that it suffered losses of about R90m in the six months to August — and that’s just one company.

Some strikes are what is quaintly called “unprotected”, meaning they haven’t complied with the employer-unfriendly Labour Relations Act. Last year nearly half of strikes were “unprotected”. I do not mind at all that National Union of Metalworkers of SA general secretary Irvin Jim is involved in a deeply divisive internal power struggle, one that is prompting speculation about a potential implosion within the Congress of South African Trade Unions. Jim is personally responsible for much of the damage the economy has sustained this year. He is an entirely unnecessary apparatchik who needs to account for his actions.