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South Africa will face a precipitous economic and political collapse by 2030 unless it changes its economic model and implements pro-growth policies, according to Eunomix Business & Economics Ltd.
Using a variety of measures, the Johannesburg-based political and economic risk consultancy forecasts that the country will rank near the bottom of a table of more than 180 countries in terms of security, similar to Nigeria and Ukraine, and have similar prosperity. to Bangladesh or Ivory. Coast.
That’s a significant decline from its current position, although it should do better on governance and welfare measures.
“Barring a significant change in trajectory, South Africa will be a failed state by 2030,” Eunomix said in a report.
The consultancy blames a white minority structure created during the apartheid era that was designed to exclude the black majority, creating one of the most unequal societies in the world. Since the advent of democracy in 1994, the ruling African National Congress has perpetuated that situation by rejecting job-intensive growth policies and instead raising wages and subsidizing the poor through welfare, Eunomix said.
While less than a quarter of the population is working, South Africa’s wage bill as a percentage of gross domestic product significantly exceeds that of countries such as India, Thailand and the Philippines.
‘Double via’
Eunomix’s recommendation to the South African government is to adopt a “two-track” strategy to develop and maintain high levels of social support and pay for it by adopting an aggressive special economic zone policy, which boosts growth and employment, albeit with higher wages. low.
The ANC’s strategy is “a dichotomy born of apartheid, resistance and crystallized by ideological puritanism and entrenched interests,” said the consultancy. “The country should not choose between imagined opposites. It should take a two-way approach that reconciles them. “
President Cyril Ramaphosa is “very clear” about the need for inclusive growth that addresses inequality, unemployment and poverty, his spokesman Tyrone Seale said by phone Wednesday.
“The government, companies, workers and communities are currently working on an economic recovery plan,” he said. “As South Africa, we are clear about our plan to restart the economy and the need to involve all South Africans.”
Former President Jacob Zuma ushered in a decade of low growth when he focused on increasing the role of the state, rather than supporting a private-sector-led recovery after the 2008 global economic crisis, Eunomix said. Prolonged political uncertainty in areas ranging from mining to telecommunications compounded the slowdown.
The economic impact of recurring power outages, rising unemployment, and the loss of South Africa’s latest investment grade debt rating have only been exacerbated by the coronavirus outbreak.
“The pandemic is the final nail in the coffin of the strategic fiasco,” Eunomix said. “The economy is unsustainably narrow and shallow. It is based on a small, declining workforce burdened by high debt and taxes. “
Read: Explaining 51% of South Africa’s GDP, and a ‘swoosh’ recovery
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