Next week, finance minister Tito Mboweni will present the national Budget amid the grimmest economy in a long time.
Judging from recent data, there is a very slim chance that the economy actually grew in the last quarter of 2019, which means that South Africa was in recession in the last half of the year.
And 2020 is off to an unpromising start, with load shedding and the coronavirus extinguishing any hope of stronger growth.
Things are very scary right now in the economy, says Mike Schüssler of Economists.co.za.
Here are some of the biggest concerns:
Government is spending R25 billion more a month than it is getting in
According to a report by Schüssler, the government’s monthly tax revenue minus its total expenditure has now reached a deficit of R25 billion a month. (This is a smoothed, average rate over 12 months.) State coffers are being drained by constant bailouts of state-owned enterprises like Eskom and SAA, and the weak economy has choked the government’s tax income.
Gross government debt has now reached 61% of the GDP – from only 24% a couple of years ago. Including the loan guarantees it has provided for debt-stricken SOEs, government debt has now reached 72% – a new record.
This means that the government has no money to stimulate the economy and that higher taxes will probably be announced in next week’s Budget – with a further detrimental impact on the economy.
Manufacturing is faltering
Last year, South African factories manufactured less than in 2018 – and things got worse towards the end of the year, data from Statistics SA shows. Manufacturing production in December was almost 6% lower than a year before, with factory output in the vehicle industry down 25% from the previous year.
Eskom’s ability to generate electricity is at its weakest level in 17 years.
According to a graph compiled by Schüssler, using data from Statistics SA, electricity production has reached its weakest levels in years.
While independent producers are picking up some of the slack, Mineral Resources and Energy Minister Gwede Mantashe has warned that load shedding will remain on the cards for at least the next two years.
Load shedding costs the economy from R1 billion to R5 billion a day, according to various estimates.
The construction industry is severely depressed
The sharp downturn in building plans shows that there is very little property development happening in South Africa.
A new report by the South African Property Owners’ Association (Sapoa) shows that office developments have slowed to the weakest rate since 2006 – it has halved in the last 18 months, with only 247,000 square meters under construction.
… and the number of unemployed South Africans is now double the entire population of New Zealand
If the number of unemployed people in South Africa was a country, they would be the 88th largest country in the world (out of 235 countries), says independent analyst Johann Biermann.
And the unemployment crisis looks set to get even worse after companies like Telkom, Glencore, Aspen, Samancor, Dion Wired, and Sibanye-Stillwater announced deep job cuts in recent weeks.
The coronavirus could hit South Africa hard
According to research by Bloomberg Economics, South Africa will be one of the top ten worst-affected countries by the coronavirus. China is South Africa’s biggest export market, with almost R180 billion in South African goods exported there last year. Nedbank has calculated that a 10% decline in exports from South Africa to China could hit GDP growth by 38 basis points.
But that’s not all: the South Africa tourism sector could also be at risk of losing R200 million in foreign currency spending – and 1,000 jobs, due to the impact of the coronavirus on Chinese tourism, according to a new estimate from PricewaterhouseCoopers.