Economic reform is critical for economy’s sustainable growth path
Johannesburg – Gross Domestic Product (GDP) figures released by Statistics South Africa today, show that the South African economy grew by 1.2% in fourth quarter of 2021 and 4.9% for the full year. In 2020, the economy contracted by 6.4% as a result of the economic disruption associated with the covid-19 pandemic. The manufacturing sector grew by 6.62% on the back of a 12.3% contraction in 2020. The metals and engineering sector constitutes 30.9% of the manufacturing sector.
SEIFSA’S Chief Operating Officer Mr Tafadzwa Chibanguza said, “The outcome of the economy’s performance in 2021 should be read in the context of the base effect that will influence the readings. That is, the covid induced lower readings of 2020 will naturally exaggerate the 2021 outcomes, when the two years are compared on a year-on-year basis”.
However, on the metrics of measuring the economy’s performance over the last two years, what is evident is that the economy has not clawed back the ground lost due to the covid-19 pandemic. Chibanguza said, “This is a worrying outcome considering the reasons.
Firstly, although supply chain disruption did impact global trade since the onslaught of the pandemic, generally the global economic environment was supportive toward recovery. However, the economy experienced a substantial contraction of 1.7% in quarter three of the year due to the civil unrest in July 2021, which naturally eroded from the gains.
The unrests were akin to an economic own goal, highlighting the urgent need to urgently address the security situation in the country. A second reason has been the generally lackluster approach to implementing the economic reform programs that are necessary to turn the economy around”, he said.
Gross fixed capital formation for the year 2021 increased by a disappointing 2.03%.The metals and engineering sectors fortunes are linked to higher levels of economic activity which is driven by greater investment into the economy, particularly fixed investment. The GDP outcomes for two key markets of the mentals and engineering sector output, namely, the mining and construction sectors experienced varied outcomes, of 11.8% and -1.9% respectively.
The economic growth rate for 2022 is projected to be 2.1 percent, and it is expected to average 1.8 percent over the next three years. SEIFSA has previously highlighted that this economic performance is too weak to provide a platform for higher demand for M&E sector products such as steel. Mr Chibanguza concluded that, “An aggressive reform agenda, focused on implementation, in the energy, transport, water, security and greater fixed investment into the economy is therefore urgently required if the South African economy and the metals and engineering sector are to grow”.