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Trade union Solidarity today expressed renewed concern about South Africa’s weak economic growth rate. This comes after Statistics South Africa (Stats SA) yesterday announced figures for the gross domestic product (GDP) for the fourth quarter of 2016.
According to Stats SA’s report, South Africa’s economy contracted by 0,3% on a quarter-to-quarter basis. This follows an adjusted figure of 0,4% in the third quarter of 2016.
On an annualised basis the economy grew by only 0,3% in 2016 compared to 2015, performing below the expectation of both the National Treasury and the Reserve Bank. Solidarity is also concerned about the stronger possibility of a downgrade of the South African government’s credit rating given that the major credit rating agencies had already indicated that economic growth was of key concern.
Along with the overall weak growth rate, the figures furthermore indicate that gross fixed capital investment in the private sector has now weakened for the fifth consecutive quarter, contracting to 1,7% in the fourth quarter of 2016.
According to Gerhard van Onselen, economics researcher at the Solidarity Research Institute (SRI), it is a cause for concern that gross fixed capital investment in the private sector has contracted further.
“We have previously expressed concern about the weak growth of private fixed investments, and clearly, those factors that are hampering investment in the private sector, such as unfavourable and uncertain policies, have not yet been addressed,” Van Onselen said.
For an economy to achieve sustainable growth, regular and sufficient private investment is essential. Not only must private investment maintain existing infrastructure, machinery and equipment that forms part of the capital structure, but private investment should also be sufficient to expand the private capital structure. Currently, private capital investment is insufficient to support an extension of the private capital structure.
The overall rate of gross fixed capital formation did actually stand firmer on a quarterly basis, but this was mainly due to government spending. Government spending can never be a substitute for investment in the private sector, Van Onselen warned.
“At the moment the private sector is extremely reluctant to invest in fixed capital, an indication that the local business environment does not respond to sweet words uttered by politicians; they react to the grassroots realities of a harmful and uncertain policy environment,” Van Onselen added.
Solidarity maintains that a policy of economic interference that is at odds with freedom, should be revised and reduced significantly. Serious attention should be given to the necessity of free market reforms and to repeal laws that interfere with free enterprise and entrepreneurship. This would allow incentives for renewed capital investment and a stronger, more productive economy.
According to Stats SA’s report, South Africa’s economy contracted by 0,3% on a quarter-to-quarter basis. This follows an adjusted figure of 0,4% in the third quarter of 2016.
On an annualised basis the economy grew by only 0,3% in 2016 compared to 2015, performing below the expectation of both the National Treasury and the Reserve Bank. Solidarity is also concerned about the stronger possibility of a downgrade of the South African government’s credit rating given that the major credit rating agencies had already indicated that economic growth was of key concern.
Along with the overall weak growth rate, the figures furthermore indicate that gross fixed capital investment in the private sector has now weakened for the fifth consecutive quarter, contracting to 1,7% in the fourth quarter of 2016.
According to Gerhard van Onselen, economics researcher at the Solidarity Research Institute (SRI), it is a cause for concern that gross fixed capital investment in the private sector has contracted further.
“We have previously expressed concern about the weak growth of private fixed investments, and clearly, those factors that are hampering investment in the private sector, such as unfavourable and uncertain policies, have not yet been addressed,” Van Onselen said.
For an economy to achieve sustainable growth, regular and sufficient private investment is essential. Not only must private investment maintain existing infrastructure, machinery and equipment that forms part of the capital structure, but private investment should also be sufficient to expand the private capital structure. Currently, private capital investment is insufficient to support an extension of the private capital structure.
The overall rate of gross fixed capital formation did actually stand firmer on a quarterly basis, but this was mainly due to government spending. Government spending can never be a substitute for investment in the private sector, Van Onselen warned.
“At the moment the private sector is extremely reluctant to invest in fixed capital, an indication that the local business environment does not respond to sweet words uttered by politicians; they react to the grassroots realities of a harmful and uncertain policy environment,” Van Onselen added.
Solidarity maintains that a policy of economic interference that is at odds with freedom, should be revised and reduced significantly. Serious attention should be given to the necessity of free market reforms and to repeal laws that interfere with free enterprise and entrepreneurship. This would allow incentives for renewed capital investment and a stronger, more productive economy.