We survived Zuma, but can we survive the prophets of doom?

Over the past couple of weeks it has been impossible to escape dire assessments of the South African economy. I’ve read that it is ‘collapsing’, ‘tanking’, and even ‘dying’.

A number of commentators seem to have made it their goal to imagine a worst-case scenario for South Africa, and then argue for its inevitability. Some have gone as far as equating the country to Venezuela and Zimbabwe.

While no one can be unaware of the serious challenges facing South Africa, I fear that we have become so frantic at every piece of additional bad news that we are losing context.

This graph shows South Africa’s GDP since 1960:

This does not look to me like an economy that is collapsing. On the contrary, it looks like an economy that has been quite resilient given how much has been thrown at it. This is an economy that has survived the mismanagement of the Zuma years to be more or less double the size it was 20 years ago.

Despite all the bad news we have been hearing, I am also unaware of any credible economist predicting that South Africa’s economy will not grow this year. GDP growth will be low, but it will be positive.

South Africa is not Venezuela

Many commentators seem to have equated low growth with decline. They are not the same thing. This is what a declining economy looks like:

This shows Venezuela’s quarterly GDP growth figures since the last quarter of 2015 to the latest figures released by the country’s central bank – which were for the third quarter of 2018. Over this period the country experienced 12 straight quarters of negative growth of more than 10%.

It is true that South Africa’s economy shrunk by 3.2% in the first quarter of this year, but despite that, the country’s GDP was still larger than it was at the end of March 2018. On an annual basis, the economy is still moving forwards.

Of course this is not good enough. Just because the country’s GDP is not shrinking is not cause for celebration. It is however reason to be a little more circumspect about how we describe our economic predicament.

As Cannon Asset Managers stated last week in a note to clients:

“In South Africa there is no shortage of talking heads on TV and prophets of doom on social media predicting the imminent implosion of Eskom, the flight of foreign capital and even an IMF bailout. Might these events occur? Yes. But it is pertinent to ask, too, if our fears are driving our willingness to accept certain narratives, and what the ultimate cost of believing those narratives could be: namely, that they become self-fulfilling prophecies.”

Recency bias

We should certainly be aware of the risks that South Africa faces, and nobody should feel any reservations about pointing them out. They should, however, separate short term bad news from the longer term picture.

The most recent analysis from the Economist Intelligence Unit, published late last year, forecasts that real GDP growth in South Africa between 2018 and 2030 will average 3.4% per year. That is the kind of longer term outlook we have not heard at all in the past few weeks.

Unfortunately the commentary we have been receiving suffers from an enormous dose of recency bias – taking the bad news we are currently hearing and extrapolating it into the future. It is a very human mistake to make, but that doesn’t make it any less of a mistake.

The kinds of dire scenarios being painted are, of course, all absolutely possible. South Africa could enter a debt spiral. The country may be unable to attain sustainable growth. The government may end up calling on the IMF for a bailout.

That doesn’t, however, mean that these things are inevitable.

At the moment, government is probably not doing enough to be certain of avoiding them. That is fair criticism to make. But it doesn’t mean we should assume that nothing can be done. That is falling into the trap of making these predictions self-fulfilling prophecies, because if we resign ourselves to negative outcomes, then we will do nothing to prevent them.

Therein lies the danger of this kind of thinking: it is disempowering.


The graph below from the Organisation for Economic Co-operation and Development (OECD) shows its composite leading indicator – or general outlook for economic activity – for South Africa up to the end of June.

Again, this is again a long-term picture, and again it does not suggest an economy in decline. While the current level is below its long term average, it is higher than it was 10 years ago, and well above its lows over this period. The indicator also appears to be bottoming, rather than falling further.

The issue this illustrates is, once again, one of perspective. It is easy to be caught up in the current cascade of bad news, but we can only make a genuine assessment of our situation if we view it properly in context.

In just the last month, two of the world’s largest companies have expressed their long term view of South Africa not in words, but in actions. PepsiCo’s offer for Pioneer Foods and Goldman Sachs’s decision to expand its South African business are significant votes of confidence.

There is a reality apparent in these decisions to which many commentators seem oblivious. These companies are making long term investments, and they certainly would not do so if they thought the country’s economy was in terminal decline.

I think commentators should take a dose of that reality. Let’s be honest about our problems, but let’s also be honest about putting them into perspective. Most of all, let’s be honest about what needs to be done to fix them, and acknowledge that those solutions are well within our ability to achieve.

This article was originally published by MoneyWeb.

More stories in Issue 118

The politics of the BLF has descended into a race spectacle

Andile Mngxitama and I used to drink beer in Melville in the mid-2000s. But how he has turned out over the past few years makes me regret those few occasions. There is no political leader today, including the likes of that other rabid African nationalist, Julius Malema, leader of the Economic Freedom Fighters (EFF), who […]

The final whistle: what transformation really takes

The Springboks became champions with a team that will always be remembered for having achieved a significant ‘first’ and, perhaps, a couple of ‘seconds’ – for, at its helm was Siya Kolisi, who grew up dirt poor in the township of Zwide, in the Nelson Mandela Bay Metro, and who remembered a childhood in which […]

Family ties as the road to nation building

Harroon Aziz South Africa in its twenty-five years of democracy is carrying 106 years of pain that dates back to the 1913 Land Act. To force male peasants from their settled family life and drive them into deep-level gold mines apartheid expropriated 87% of their land without compensation and legally compelled them to pay poll […]

We survived Zuma, but can we survive the prophets of doom?

A number of commentators seem to have made it their goal to imagine a worst-case scenario for South Africa, and then argue for its inevitability. Some have gone as far as equating the country to Venezuela and Zimbabwe. While no one can be unaware of the serious challenges facing South Africa, I fear that we […]

Deadly diabetes: a global epidemic taking hold in SA

Staff Writer Luleka Mzuzu only found out about her type 2 diagnosis when she woke up in the hospital in 2015 after fainting on her way home from work. Luleka had no major warning until then – she thought she was simply a little stressed and overworked. The unexpected news of the serious diagnosis left […]

Demanding a rightful share on South Africa’s rural mining frontier

Michelle Galloway According to Mnwana, the benefits of mining for local communities on the platinum belt and the rural poor are minimal and often those who are customary land rights holders have no say over mining and other developments due to political structures that are still largely based on colonial and apartheid rule. His research, […]

Mandela, the bokke and Etzebeth’s stubborn ‘hotnot’

Neil Cole The bok team that won the 2019 Rugby World Cup was a decidedly different team to the one that lifted the trophy in 1995, and also in 2007. The 2019 team has a black captain and the tries by two black players won the final for South Africa. This was a moment that […]

From Primary Health Care to Universal Health Coverage

After all the pressure from the vested interest lobby the 2019 NHI Bill sees the NHI as a system of financing which will not do away with the private healthcare system. Supporters of NHI in its current form feel that at least the NHI makes inroads into medical apartheid by making healthcare free at the […]


Subscribe to our newsletter and get notified of new issues.