Economists at the 2022 Tax Indaba weighed in on South Africa’s economic prospects, as growth flatlines. (Photo by GUILLEM SARTORIO / AFP)
South Africa’s economy is heading towards collapse, as unemployment rises, the tax base stagnates and more people have to rely on the state for survival.
This was the warning that came out of a panel discussion on the first day of the 2022 Tax Indaba, during which economists expressed their doubts that the economy was on the path to meaningful growth, given its unsustainable structure.
Eunomix chief executive Claude Baissac noted that, relative to the size of the economy, the country had a very fast-growing population. Meanwhile, employment had remained flat and the number of people needing social grants had trended upwards.
The economy, Baissac said, was in an unsustainable position.
This was made worse by the fact that the tax base was not growing at a pace that matched population growth. Although there was taxable activity happening, FNB economist Siphamandla Mkhwanazi said, it was not being reported.
Mamiky Leolo, a senior official at the South African Revenue Service, said growth in the number of registered individual taxpayers had slowed over the past five years. “We are growing but not as vigorously as we were in the past.”
There was not enough economic activity to support the tax burden, chief economist of the Efficient Group, Dawie Roodt, said.
Statistics South Africa is set to release second-quarter GDP data on Tuesday. Most analysts are expecting the economy to have contracted, as it absorbs the impact of the KwaZulu-Natal floods and persistent load-shedding.
In the decade that followed the 2008 global financial crisis, South Africa’s GDP growth slowed to just 1.7% per year. The economy would probably remain trapped in this state of low growth, Roodt said. “We are not going to get out of that.”
South Africa’s economy had flatlined, Baissac said. “It is likely to continue to flatline. And if we continue to have the population growth rate that we have, and the GDP growth rate that we have, it will be an economy that is going to be shrinking.”
This is how revolutions start, Baissac warned, adding that last July’s riots were just a rehearsal for what could come. “We are about to face a revolution. Things can’t stay the same.”
Baissac noted that in about 2000, South Africa’s GDP per capita was on par with other upper middle-income countries. Today, South Africa is a middle-income economy and, if we continue on the current GDP growth path, the country would be a lower middle-income country by 2030.
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