Growth figures were a surprising 4.8% for the first quarter but most South Africans would be forgiven for wondering where exactly this growth is coming from and what we should be celebrating.
Most consumers are still struggling a year after the recession supposedly passed. Despite interest rates being at the lowest in decades, electricity and petrol price hikes are biting. People are still battling to pay debts and small businesses are teetering. Unemployment figures remain stubbornly at 25% as the economy struggles to re-absorb those jobs lost during the recession.
The problem with statistics is that they don’t tell the human story — what is happening to individuals. It is usually the anecdotes that tell the real story.
The head of a private school said that the first term of this year was the worst in its history in terms of the non-payment of school fees. She sits on the boards of other schools that are sharing the same experience.
An owner of a printing company says that this year has been better than 2010, but she is seeing no long-term commitment from companies and is worried about the rest of the year. A friend who is involved in the advertising side of retail told me that his business this year, although improving, had been extremely irregular in what he described as a stop-start environment with the money taps switching on and off.
“Retailers are very nervous about spending money on advertising and when they do they want it immediately and to see the results immediately, not in six months’ time.”
This confirms the figures we have seen from retail sales, which have waxed and waned. There have also been disappointing figures from retailers such as Pick n Pay. One month it seems the economy is back on track, the next the figures are disappointing. Credit extension figures also paint a picture of a consumer still on the back foot and debt levels remain stubbornly high at 77% of disposable income.
The first quarter’s strong GDP figures have come from manufacturing, which is positive for future employment rates, but it is clear that this has not yet translated into a more robust consumer. What is concerning is that corporates themselves are not yet convinced that we are in a sustainable recovery. This is demonstrated by the high levels of savings by corporates, which are not committing to spending on expansion, and the persistently low employment rates.
If we needed any convincing of corporate ambivalence, last month Wayne Hook, chief executive of Spar, said that “CEOs are probably cautiously optimistic about the rest of 2011” — a fence-sitting statement if ever there was one.
This picture of an economic recovery struggling to gain traction, with false starts followed by disappointment, could be well described as a corrugated bottomed U-shaped recovery — a description used by scenario planner Clem Sunter in 2009, referring to the global markets. He said then that the world was not entering a typical V-shaped recovery. It is an equally apt description of what we are experiencing in South Africa now.
Sunter argued that we were going into an economic period that would resemble the global economy from 1969 to 1976, which was marked by many false recoveries. It is also important to note that during that time the world experienced stagflation — rising inflation and muted growth.
The high-frequency economic data of the next few months will provide a clearer picture, but the story from the real economy is not a pretty one and it is unlikely that we will see any real improvement as we head into a period of increasing interest rates.