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Ferial Haffajee: The new normal – SA’s economy is becoming 3rd world

Aug 08 2019 20:11
Ferial Haffajee, Fin24

Last week's images of running battles between the police and hawkers in downtown Johannesburg caught headlines because the images were so violent and shocking.

Beneath the rubber bullets and bricks, is a story of the economy that is changing character. Jeppe Street, where the running battles and subsequent raids took place, is a shopper's haven. On Monday, when I was last there, it was a bit of a war zone after last week's clashes and by mid-week, it was a policing zone after the cops swooped to find guns by the hundreds.

You can find anything downtown where a largely untracked economy thrives. Probably guns too, although I've never shopped for those.

I love going there. You can find bales of wonderful African fabrics, great denims and styles that aren't at Woolworths, my staples store. Hair products are cheaper and street hairstylists turn the pavements into creative genius as they braid and weave for a stream of fashionable clients.

At what used to be the medical centre of the city, Lister Building, you can walk floor to floor where Ethiopian traders pile bales of denim amidst Ethiopian cloth and dresses. There is a lot else to see too. When tired, stop for a traditional coffee at cafés on the top floor. There are 'fong kong' shops selling counterfeits that are near perfect. They do a roaring trade, in fact, so roaring that the real brands instigated the police raids that resulted in last week's running battles. They claim retail sales losses of hundreds of millions of rands and have enlisted the support of law enforcement to regularly impound goods. It's a pretty useless endeavour as that part of town is like an inland port, as researchers have noted, and goods come in so fast that stopping the trade is a fool's game.

And why would you want to? A disaggregation of tourism statistics will show that a significant export earner (tourism is counted as an export) is the intra-African trade done there. Traders from across the region and further afield flock into Johannesburg by bus, train, car and even on foot some time to get a foothold into what must surely be a multi-billion rand sector by now.

It is largely, but not completely, untracked in the national statistics. People work in that economy but don't find themselves in the labour market tracking systems in any accurate measure, suggesting that unemployment is not as high as suggested in the official surveys, the latest of which was released last week.

As you head into the city, the mix between cars and taxis on the roads gives way almost completely to taxis. The entire taxi industry is untracked, either for corporate or income tax or in the employment statistics (because drivers are largely not registered employees) yet it is a huge driver of car sales and a significant economic input. Of course, the industry contributes to the fiscus through VAT or a fuel tax, but its contribution to GDP is likely to be significantly undercounted.

While Johannesburg's is the largest informal or untracked economy, there are similar nodes across the country in cities and towns. In this way, the economy is coming to more closely resemble a Pan-African economy where the informal and untracked is much bigger than the formal and tracked economy.

In time, this will become the new normal. Already, the ballooning national debt (likely to come in at between 68% to 69% of GDP) plus the plummet down the investment-grade rankings and official employment statistics, all show that South Africa is rapidly joining the rump of the third or developing world.

This group lies outside the pack of what are called emerging market countries or even leading emerging market economies, where we have always been placed.

We are falling out of that pack more quickly than Caster Semenya out of the starting blocks. This gives the South African business sector existential angst, but the ineluctable plunge is now the new normal. And a visit to Jeppe Street (once the raids have died down and the trade's back to normal) will show that while one economy may be dying, another is full of vibrant and colourful life.

There's a twist in the tale. The problem with this exciting new growing economy is that it can never support the national solidarity system of grants, free education and health that most South Africans are dependent on. If you want to support the solidarity economy, then you have to keep the formal and tracked economy growing and at current trajectories, across various measures, that is not happening. 

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