Resilient: the term so often used by commentators on the economy that has, over the past decade, just barely managed to keep its head above water in the wake of an energy shortage, ever-spreading corruption and a two-year battle against a pandemic.
Those who have remained resilient against this depressing backdrop have been the consumer and, in the main, middle-class people who have retained their jobs. Their disposable income levels have remained depressed since the 2008 global recession, yet domestic consumption is the biggest component of our economy. Their spending, whether it be in the shopping lines at Woolworths or at Shoprite — given the wide definition of middle class — is critical to keeping the wheels in our creaking economy greased.
But the grease is running thin as an “inflationary dragon” runs riot in our corner of Africa and globally. In just one month, the price of a Woolworths chicken has risen by more than 10%, from R49.99 to R54.99/kg. Purses are being squeezed.
A blip of inflationary pressures as we opened up after lockdowns and supply chains creaked back into life is seemingly a much longer-lasting state for the world. Locally, our most direct pressure point is the price of fuel — felt by all segments of society — thanks to a country designed for vehicles. Now above R25 and nearing the R30-a-litre mark as the European war drags on, the high fuel prices are feeding into the cost of food and other goods. Although our inflation levels have yet to breach the 6% mark set by the Reserve Bank, we are on the cusp of that breach, with some forecasting double-digit inflation by early next year.
Double-digit inflation, with the highest unemployment figures in the industrialised world and lacklustre to no growth, fits the textbook definition of stagflation — persistent high inflation combined with unemployment and stagnant demand.
In what shape will we emerge from this cycle, understanding that forecasting its length is a fool’s pursuit?
We know that the Reserve Bank will stubbornly follow its mandate of raising interest rates. The treasury will be hard pressed to continue saving us from the full effect of high fuel prices as its sources of funding come under pressure because consumers are cutting back on spending.
If these are the only policy options before us, we are set for a long, bitter winter. Our economic cluster — led by the finance minister, the Reserve Bank governor and the vanishing minister of trade and industry in Ebrahim Patel — often escapes scrutiny in times of economic crisis and we choose to rather focus on Number 1, President Cyril Ramaphosa.
This cluster needs to steer a course through turbulent waters for an as yet inconceivable time and perhaps consider extraordinary rather than tried-and-tested policy solutions. But, ever fearful of market sentiment, this is but a fool’s hope despite all evidence that resilience is crumbling.