SANISHA PACKIRISAMY: Why South Africans are too gloomy

The optimism paradox, as the World Economic Forum (WEF) describes it, is the gap between private hope and public despair.

Behavioural economics explains why we believe our own personal future will be rosier than our past, even though this is met with public pessimism about the outlook for our country. 

And South Africans in particular suffer acutely from this sort of global declinist view, says the WEF. Out of 28 countries, South African respondents gave the least accurate (and gloomiest) predictions of global and national development rankings.

It’s a dangerous misconception, since our personal prejudice can guide us into believing South Africa is swiftly descending into failure, and shut our eyes to anything positive happening in the country. 

Nor do the facts support an irretrievably declinist view. 

The reality is that while South Africa emerged from the pandemic on a weaker socioeconomic footing, the realised growth of 4.9% for last year was more than 2½ times higher than the most optimistic prediction made in the Reuters economic consensus survey, when the country entered lockdown.

Similarly, growth for this year is expected to average 1.9%, which exceeds the highest forecast made in March 2020.

In part, this bounce in growth was driven by an unexpectedly quick recovery in total household earnings. And, with global demand roaring back after lockdowns eased, higher commodity prices also benefited our miners.

Not only did this strengthen South Africa’s post-pandemic rebound, it also allayed fears of a looming debt crisis.

In June 2020, such a debt crisis seemed inevitable. At that point, the National Treasury announced a supplementary budget in which it estimated gross debt to spiral to 86% of GDP by 2022/2023.

Instead, higher commodity prices helped curb South Africa’s projected budget deficit by R133bn for the current fiscal year, leaving the expected debt ratio at a less hard-to-swallow 71.4%. 

This unexpected commodity windfall also bolstered prices at which we sold exports, relative to prices paid for imports, leaving the country in a less vulnerable external position. It means our fiscal deficit has fallen from a risky 7.3% of GDP in 2019 to an expected 3.7% of GDP this year.

In other words, it’s a huge sigh of relief all round.

Which isn’t to say we must think everything is entirely rosy. We still face struggles as a country — notably, Eskom. But the reality is that South Africa is still seen as an investable destination. 

Despite the country’s malfunctioning freight rail, the World Bank ranked South Africa as 36th out of 160 countries in 2018 on the quality of our trade-  and transport-related infrastructure such as roads, ports, railways and information technology.

We’ve also improved our position in the European House’s global attractiveness index to 80th out of 148 countries this year, from 90th last year. 

Among similarly rated countries, this was actually the most discernible improvement, demonstrating the country’s ability to provide something of a pro-business environment. 

Even at home, the metrics show South Africa still boasts a relatively competitive domestic economy. In 2021, the country emerged as the top-ranked emerging market for global business offshore services in the GBS world competitiveness index. This sector grew twice as fast as the global average in 2019, promoting South Africa’s value proposition to targeted markets. 

Now, nobody is suggesting corruption is somehow under control. While this has undermined the democratic order, it is also true that there has been a notable step-change in addressing wrongdoing by instilling a culture of accountability.

The department of justice & constitutional development says the efficacy of South Africa’s crime-fighting institutions has improved. The Specialised Commercial Crime Unit finalised 380 cases with a 90.5% conviction rate, while the number of government officials convicted of corruption rose from 86 to 119. And private sector prosecution for corruption rose from 147 to 205 individuals. 

Nonetheless, it would be remiss of me to not contextualise these gains against the backdrop of the mounting risks we do face.

Even in the best of times, our labour market has been marred by structurally high unemployment which now sits at 33.9%, a shortage of skilled workers and low levels of self-activity.

And there’s no disguising that South Africa’s socioeconomic and fiscal stability has been weakened by poverty, a string of political scandals and alarming legislative developments that don’t reassure investors (think expropriation without compensation).

In other words, balance is needed. While an overly upbeat view won’t help you avoid certain pitfalls, we ought to avoid the trap of declinism and acknowledge areas of improvement.

Under this cloud of uncertainty there is, indeed, an opportunity to build the economy back in a better and more inclusive way. There are still plenty of ways in which South Africans can benefit from measures to enhance our macroeconomic stability, cut red tape, keep to the rule of law and capitalise on co-operation between business and government. 

The point is, don’t write off South Africa just yet. The prospect is still real that we can bridge the gap between our less-than-desirable present and our initial constitutional dream. 

* Packirisamy is an economist at Momentum Investments