expert views« Back to Expert Views Listings
Chief Economist, Economists.co.za
“So much style without substance
So much stuff without style
It’s hard to recognise the real thing
It comes along once in a while
Like a rare and precious metal beneath a ton of rock
It takes some time and trouble to separate from the stock
You sometimes have to listen to a lot of useless talk” – Neil Peart in Grand Designs.
It is not only South Africa’s sport that is on a slippery downward slope in world rankings; the Springboks lost to Japan in the World Cup, Bafana is 75th in the world and our netball has slipped to fifth in the world.
Similarly, our economic rankings are also heading in the wrong direction, from the ease of doing business to our position on the World Economic Forum’s competitiveness rankings.
Even our highly-rated universities are slipping on international quality rankings. In fact, over the last two decades, we have fallen from the top 30th positions on international rankings to between 40th and 50th, and in other instances… even lower. Gone are the days when South Africa was in the top quarter or even the top third. Those days are now the heydays.
But the real number that should get the attention is that which shows how South Africa is getting poorer. Not in absolute terms, but relatively speaking. In 1990 the average per capita income was ranked 50th in the world, but this has slipped to 77thin 2013.
Last year was a disaster and SA dropped nine places to 86th place. Today the average Chinese citizen and the average person from Azerbaijan; Turkmenistan; Belarus and Bulgaria are all richer than the average South African.
In fact, South Africans are now in the bottom half of the world in terms of income. On a per capita basis, the average South African earns only 63% of the average world citizen.
New data from the World Bank shows Chinese income overtaking our income, both in purchase power parity and market income terms. It is also evident that if South Africa cannot improve efficiency levels and commodity prices continue to fall, we may find ourselves on the wrong side of the 100th position in 2020.
In 1994 South Africa was the 25th biggest economy in the world. By 2014 we had slipped to the 33rd position and there is a good possibility that we will soon be surpassed by Denmark; Malaysia; and Singapore. If our current weak growth performance and the slide in the exchange rate of the rand worsens, it is also very likely that South Africa will no longer be in the top 40.
Falling out of the top 40 largest economies is serious as many big companies only look at the top few markets to invest and sell in.
Generally these declines are not sudden, but this does not go unnoticed. South Africa’s attractiveness as an investment destination will slowly start to disappear while we also lose our relevance on the political radar.
This makes it all the more difficult to turn around the downward trajectory of economic growth. It not only becomes more difficult to retain sport talent, but also to retain our top scientists and entrepreneurs. Academics also look for greener pastures, and our top students follow suit.
Foreign investment then dries up. South Africa will become much less of an investment priority and when the Department of Health bullies another pharmaceutical company who wants to do business, they are likely to go elsewhere.
They will run even further in the opposite direction when our politicians and protesters continue to praise countries and rulers who have economically enslaved their people.
The reality is that South Africa’s economic cupboard of ideas is empty. One top firm after another is chasing opportunity elsewhere. Our top 60 companies now earn 70% of their turnover outside of SA borders. In effect, they have left and South Africa is just another market.
By most standards South Africa is not sitting at the main table anymore. We are actually fighting for the crumbs.
Remember it took 15 years of growth at 11% plus for Ethiopia to rise from the poorest country in the world to become only the eighth poorest. Zimbabwe fell 20 places in the same time.
It is so much easier to become poorer than richer.
But spare a thought for Zimbabwe, which could be seen as a benchmark South Africa needs to stay away from.
At independence Zimabawe was in the 67th position and firmly in the top half of the international rankings. The country is currently in the bottom 22 and is the worst performing country in the history of the modern world.
Today the average Zimbabwean dies earlier and is hungrier than in 1980!
It is indeed much easier to get poor than to get rich.
About Mike Schüssler
Mike is an economist with over two decades of expierence, and has been voted economist of the year twice. He is also the founder and owner of Economists.co.za. In addition to being named economist of the year, he has also won awards from the Greater Johannesburg Chamber of Commerce as well as other awards from other chambers and business organisations. As the inventor as well as maintaner of six provincial barometers as well as two provincial investment monitors, Mike has a proven track record in building business cycle indices. His firm Economists.co.ca is also developing the Bankserve Economic Transaction Index (BETI), which shows the trends in the South African economy via the number and size of the Transactions.
Other Expert Views:
Q&A with Piet Barnard and Dr. Andrew Bailey, Piet Barnard, Director, Research Contracts and Intellectual Property Services, UCT and Dr. Andrew Bailey, Intellectual Property Manager, Research Contracts and Intellectual Property Services, UCT