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Cape Town - Those politicians in South Africa who are economically illiterate should take note of what is happening in Venezuela as that is the end result of populism, cautioned Dr Martyn Davies, managing director of emerging markets and Africa at Deloitte.
Davies referred to a recent statement by Minister of Finance Pravin Gordhan that South Africa is not the same as Venezuela.
"Venezuela's current average wage in dollar terms is $10 (about R156 per month). At the peak of the country's gross domestic product the average wage was $12 000 (about R187 000) per year," said Davies at a state of the nation breakfast hosted by Deloitte.
"Yet, when Malema went to visit Venezuela in 2010, he praised Venezuelan President Hugo Chavez for ushering in an era where resources like oil have returned to the people as a whole. The only good story about SA is that it is doing better than Venezuela and Angola. Part of SA's problem is that about 60% of our exports are still commodities based."
Davies said research shows three things destroy wealth in a country, namely conflict, ideology and corruption.
"Having one of these present is bad, having two is really bad and if you have all three it’s all over," he said.
"At the same time it is said one should never waste a good crisis. If there is a crisis you must fix it. SA must spend less, for instance. We cannot have a rising public debt in a slow growth economy."
For Davies the real question for SA should not be how it can temporarily stave off a downgrade to junk status - which is currently estimated at a 50-50 chance - but how long term economic stability can be established.
"We have a structural crisis in SA. Structural reform means 'politically difficult to do' - like labour reforms and parastatal privatisation, for instance," said Davies. He also warned that it takes about 8.2 years for a country to turn its economy around after it had been downgraded to junk status.
"Yes, SA can blame the external environment, but at the same time we score many own goals as well and together these factors create a double whammy for SA's economy," explained Davies.
"But if SA is internally so divided, how can it ever be internationally competitive?"
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