On March 9, the Ministry of Finance issued a media release on the Finance Minister’s response to the debate on the 2022 fiscal framework and revenue proposals. There are a few issues that the Minister raised, which you might want to contextualise.

The media release stated: “Much has been made of the $750-million loan that we took from the World Bank. Let me repeat what we said before: the World Bank loan has no conditionalities attached. It does not in any way threaten the sovereignty of our country.” The instalment of this column published on February 11, titled ‘I owe, I owe’, will provide the background to the loan. It will also remind you of the International Monetary Fund’s (IMF’s) July 2020 $4.3-billion, or R64.81-billion, financial ‘lifeline’. An added element is that the World Bank and the IMF are family – they constitute two-thirds of the Bretton Woods institutions, established in July 1944. To contextualise, the $750-million equates to R11.32-billion, which is a sizable amount. It might be considered a small amount, compared with government’s annual payment or transfer to the other four Southern African Customs Union (Sacu) member countries. The transfer was R63.4-billion for 2020/21, R50.3-billion for 2019/20, and R48.3-billion for 2018/19. This begs the question: Can South Africa still afford the luxury of being a Sacu member? Quite simply, most of the revenue share is generated by South Africa but transferred to the member countries. It is also important to remember that the World Bank loan will attract an interest payment of 1% to 2%.

The media release further stated: “On the domestic outlook, we projected real economic growth of 4.8% in 2021 and 2.1% in 2022. We said we expect real gross domestic product (GDP) growth to moderate at 1.7% in 2024.” On March 9, Statistics South Africa (Stats SA) stated that GDP growth for 2021 was, in fact, 4.9%. This might seem to be a significant growth rate, but it should be contextualised by considering that, in 2020, the economy contracted by 6.4%. So, it is growth from a very low base. The World Bank’s ‘Global Economic Prospects: Sub-Saharan Africa, January 2022’ also projected 2.1% growth, stating: “Growth in South Africa is forecast to moderate to its prepandemic trend, being held back by structural impediments and elevated levels of public debt.”

To its credit, Stats SA stated: “Despite these positive figures, real GDP has yet to recover to the level recorded in the second quarter of 2021, before civil unrest and stricter lockdown restrictions shook the economy in the third quarter. Real GDP continues to lag prepandemic levels too, with economic activity on a par with the third quarter of 2017. The economy is 1.8% smaller than it was in the first quarter of 2020.”

The great concern regarding South Africa’s GDP growth drivers is that there has not been structural change in the South African economy. For all the incentives offered, and the numerous policy papers published, the economy remains structurally unchanged. Consider this: “Exports increased . . . driven mainly by precious metals and stones (gold, platinum and diamonds); base metals; and motor vehicles, parts and accessories. Imports . . . increased demand for machinery and equipment; motor vehicles, parts and accessories; and base metals.”

The big unknown in South Africa’s GDP growth is the impact the Russia-Ukraine war will have on the South African economy. It could see an increase in commodity prices, but this could well be a double-edged sword. A major restraint for the South African economy remains the economy’s failure to reduce unemployment and, in turn, poverty. Even though the economy grew by 4.8%, unemployment in the third quarter of 2021 was up to 46.6%. This is by no means inclusive growth. So, who exactly benefited from South Africa’s economic growth? This should be called out.