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GIVEN the current pessimism around the state of South Africa’s economy, I thought I would point out a few facts to put things in perspective as hearsay and rumour should not be used to form an opinion.
For the naysayers, I used South African sources but compared the figures to international sources such as the World Bank, the United Nations Commodity Trade Statistics Database and the International Monetary Fund (IMF).
So, there can be no disputing the facts presented below.
South Africa’s inflation rate is currently 5.9%, and therefore below the upper 6% limit as set by the Reserve Bank.
Given the prevailing economic turmoil, I think the Reserve Bank has done remarkably well at keeping inflation stable: following the onset of the 2008 global economic crisis, consumer price index (CPI) jumped to an annual average of 11.5% in 2008, and dropped off sharply to just 7.2% in 2009.
In the ensuing years, CPI remained below the 6% level and continues to do so today. Moreover, the IMF predicts that our CPI will decrease this year and the next, and will level out at 4.7% in 2016.
This bodes well for future interest rates and will help the numerous indebted South Africans cope.
It is true that the petrol price hikes will filter through to food and consumer goods, but consider the following: despite a global economic crisis and worsening trade balance, South Africa has managed to maintain positive figures in real gross domestic growth (GDP) per capita throughout.
In layman’s terms, this means there has been growth in income per person, after taking the effects of inflation into account.
Therefore, despite the rising fuel and food costs, South Africans in general are better off today than they were 10 years ago - or even last year.
In fact, in real terms, GDP per capita has grown by 1.7% per annum since 1993. Higher income per capita results in higher consumption per capita and, ultimately, in a higher standard of living.
It is true though that inequality is not improving sufficiently to see real changes in terms of poverty reduction within the country, but it is also not worsening.
Praise where it's due
This aspect of the economy is currently being targeted by government and if things in the country are so bad, why do we continue to grow under stable inflation?
Furthermore, real investment (gross fixed capital formation) has increased by 205% since 1993, an average of nearly 11% per annum.
The ratio of real investment to GDP has remained relatively stable, fluctuating around an average of 17.2% for the 1990-2012 period.
Evidently as the economy grows, government, public and private corporations put more money into the economy.
To sum up, there is economic growth which occurs in a stable financial environment.
With this growth comes an increase in investment and an improved standard of living.
The various government departments should, therefore, be lauded for what they have achieved rather than shunned for what they are yet to achieve.
- Fin24
*Geoffrey Chapman is a guest columnist and trade policy expert at the SABS. Views expressed are his own.
For the naysayers, I used South African sources but compared the figures to international sources such as the World Bank, the United Nations Commodity Trade Statistics Database and the International Monetary Fund (IMF).
So, there can be no disputing the facts presented below.
South Africa’s inflation rate is currently 5.9%, and therefore below the upper 6% limit as set by the Reserve Bank.
Given the prevailing economic turmoil, I think the Reserve Bank has done remarkably well at keeping inflation stable: following the onset of the 2008 global economic crisis, consumer price index (CPI) jumped to an annual average of 11.5% in 2008, and dropped off sharply to just 7.2% in 2009.
In the ensuing years, CPI remained below the 6% level and continues to do so today. Moreover, the IMF predicts that our CPI will decrease this year and the next, and will level out at 4.7% in 2016.
This bodes well for future interest rates and will help the numerous indebted South Africans cope.
It is true that the petrol price hikes will filter through to food and consumer goods, but consider the following: despite a global economic crisis and worsening trade balance, South Africa has managed to maintain positive figures in real gross domestic growth (GDP) per capita throughout.
In layman’s terms, this means there has been growth in income per person, after taking the effects of inflation into account.
Therefore, despite the rising fuel and food costs, South Africans in general are better off today than they were 10 years ago - or even last year.
In fact, in real terms, GDP per capita has grown by 1.7% per annum since 1993. Higher income per capita results in higher consumption per capita and, ultimately, in a higher standard of living.
It is true though that inequality is not improving sufficiently to see real changes in terms of poverty reduction within the country, but it is also not worsening.
Praise where it's due
This aspect of the economy is currently being targeted by government and if things in the country are so bad, why do we continue to grow under stable inflation?
Furthermore, real investment (gross fixed capital formation) has increased by 205% since 1993, an average of nearly 11% per annum.
The ratio of real investment to GDP has remained relatively stable, fluctuating around an average of 17.2% for the 1990-2012 period.
Evidently as the economy grows, government, public and private corporations put more money into the economy.
To sum up, there is economic growth which occurs in a stable financial environment.
With this growth comes an increase in investment and an improved standard of living.
The various government departments should, therefore, be lauded for what they have achieved rather than shunned for what they are yet to achieve.
- Fin24
*Geoffrey Chapman is a guest columnist and trade policy expert at the SABS. Views expressed are his own.
