SA needs to restructure the economy to resolve inequality and unemployment

JOHANNESBURG – Moody’s investors Services on their November 2019 report highlighted: “Socio-economic features in South Africa including structurally high unemployment and income and wealth inequality are longstanding and deeply-entrenched constraints on the country’s growth potential. Deep inequalities – South Africa’s income inequality is among the highest globally, as measured by the Gini index – and resistance to reforms from key stakeholders limit the government’s room to adopt and implement structural reforms.”

While on the other hand, S&P Global Ratings cut its outlook on South African debt to negative on Friday 22 November 2019, citing low economic growth and rising fiscal deficits. 

Rating agencies assess the financial strength of companies and government entities, especially their ability to meet principal and interest payments on their debts. 

The questions we must begin to ask ourselves are: Which stakeholders are unwilling to deal with the pre and post-apartheid socio-economic features? Does the ruling party have the vision to lead South Africa moving forward? What implications would be disastrous when South Africa welcomes to proceed with socioeconomic imbalances? Who will win when poverty, inequality and youth unemployment is left unattended? By which means of mechanisms will the current government fail to lead in the future? And lastly, What society needs to do when the promised transformation is not happening?

In the last seven years, it has become increasingly apparent that changing the economic structure, Developing a precise economic development strategic plan, adopting an economic system that will expand the economy and purpose of existence by the ruling party and the expanded battleground for leadership, lower commitment to serve the poor South African are among the shortcomings making South African government fails create sustainable jobs, redressing the impurities of the past such as entrenched inequality, high unemployment of women and youth and poverty in communities which is still characterized by race, 25 years after democracy. 

The government’s ability to implement recommended reforms for the past 10 years (and the whole term of democracy) that would durably lift economic growth is perfectly characterized perfectly by the embedded infiltration of the African National Congress making them not to have board principles and identity, that can make them have a sense of purpose and existence as a political party having won a tender to rule South Africa for the past 25 years.

The ruling party has a wide range of stakeholders or they have exposed themselves too much to different stakeholders which some are obsessed with leading the nation, some are business people who are blacks, some are the poor who needs to assist the ANC to push so they can be out of poverty, some are kids that grew up in families that loved the movement, some are the middle class who are having ambitions to lead the nation, some are all people who need protection from political parties, predominantly business people but the good ones are those who grew up in the structures of the ANC and understand the purpose of the organization and the dangerous Stakeholders making the country not to move forward are the business people’s who are unethical and large corporates that have captured the African National Congress and the later are the ones that must be detached from the voices that contribute to the resolutions and cancellation or discarding transformational positions that can transform the economy.

The challenge South Africa also faces unconsciously is the fact that we haven’t created a best economic development plan that’s able to address challenges of democratic South Africa, which also reflects on redressing the hash unethical systems that affected human rights for centuries, we thank God that we are alive and willing to experience “The dream South Africa” that will make us partake in swimming, stunning African dances, Argentinian Tango and Cuban Salsa. Developing a precise economic development plan must encompass design thinking processes and systems thinking to deeply diagnose and produce propositions that are clear and easy to implement.

Moody’s Investors Services gave enough chance to South Africa to present a plan that will deal with the socio-economic challenges the nation faces and we failed to convince them. The three departments that can bring change in South Africa when we get good ministers are the Department of Trade and Industry, Department of Communications and Telecommunications and Department of Public Enterprises. These departments are at the centre to transform the economy and make South Africa move to transition to innovation or Sophistication and Innovation factor based on the World Economic Forum competitiveness assessments. 

South Africa has been quite inconsistent in the way it paid attention to measuring performance on job creation, especially at the macroeconomic level. The economic times where South Africa introduced industrial development zones, The Gauteng BlueIQ projects such as The Gautrain and The Cradle of humankind was an era of hope and growth for South African, while it worth noting that the jobless growth presented new scenarios that demanded to be tweaked but still maintain the style of leadership productivity of Thabo Mbeki and Kgalema Motlanthe as President and General Secretary of the ANC respectively, 18 December 1997 to December 2007. This team also failed to transform South Africa but a small cloud showed even though at the size of the bread. Employment targeting economic development policy formulation and implementation will assist South Africa to deal with unemployment at a multi-year high of 29.1% with youth unemployment at 60%, which is predicted to worsen when a clear vision is not created. 

Reducing poverty and inequality must be the core objectives of the South African government and the ruling political party. The 2030 Agenda for Sustainable Development aims to ‘end poverty in all its forms everywhere’ (SDG 1) and to ‘reduce inequality within and among countries’ (SDG 10), in reality, contrasting to the South African NDP vision 2030, we will not create the 5 million jobs, that can possible assist in reducing inequality and deal partly with poverty. The significance of the issues of poverty and inequality is also manifested in the implementation principle of the 2030 Agenda ‘Leave no one behind’ (LNOB), with ten years remaining, South Africa will need to quickly develop a New Economic Plan that will focus on Agriculture, Mining, Technology, Media and Telecommunications, Manufacturing and expanding the Commercial Banking market to be equitable. 

Momentum for measuring progress and achievements has frequently risen and fallen as a result of a noncommittal attitude underpinned by start-stop policy positions on economic policies and job creation. Gross fixed capital formation has been contracting on a year-on-year basis since the second quarter of 2018, as private companies see limited prospects of an improvement in the business environment. South Africa needs to have an employment target that will assist in keeping unemployment below five percent in the next 30 years or by 2050. 

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Miyelani Mkhabela says the challenge we face is the fact that we haven’t created the best economic development plan that’s able to address challenges of democratic SA. Photo: Supplied

Monetary policy solutions such as quantitative easing (QE) can be used as an extraordinary monetary strategy by the South African Reserve Bank to quickly increase the domestic money supply and spur economic activity. Inequality in post-apartheid South Africa has caused poor economic activity, as those who have the economic power to spend are folding hands, causing dependency in seven people. Quantitative easing can be introduced to restore the cripples of the past centuries and level the playing grounds. The purpose of this type of expansionary monetary policy is to lower interest rates and spur economic development and growth.

The positive outcomes of transformation must include a sizable economic expansion to cater the population as a whole and additional listings at the Johannesburg Stock Exchange by black-owned companies, to help in having the Black Industrialists businesses regulated for governance and accountability, attract investors and sustainability, while still with the registration requirements that they use currently. Corporates they don’t transform communities alone but the ruling political party must have a great economic plan that will change rural communities to be self-sufficient and reduce crowding in Johannesburg, and also give the communities of Alexander and Gugulethu, clear meaning of democracy. Reflected Land reform strategy and the R44 trillion worth of mineral resources can be used to transform this economy to reach a desired level of competitiveness.

Now that we are at sub-sovereign investment grading speculative or Junk Ratings, we need to have a common purpose as to what it means to live in post-apartheid South Africa. Whether 300 years can’t be compared with 25 years, our primary focus must be on those poor people who are forcing to go to work, while there is Coronavirus pandemic. South Africa is affected by situations differently from the rest of the world when there is a victory, the rural communities are not involved in celebrations and when there is health crisis such as coronavirus outbreaks, communities are not aware or they are struggling to apply “opportunity cost” principles between health and poverty that will be a big cloud above them.

On the revenue side, Moody’s expected the tax collection performance to improve over the medium term as the South African Revenue Service’s efforts to improve tax compliance yield some results. High economic activity paired with high employment statistics is a balance to boost national revenue. SARS collected an amount of R1 287.6 billion, against the 2019 Budget estimate of R1 302.2 billion resulting in a deficit of R14. 6 billion (-1.1%). Pay-A-You-Earn (PAYE) collections for the year grew by 7.0% to R477.4bn, despite significant job losses, moderation in wage settlements and contraction in bonus pay-outs The PAYE unit could collect an additional estimate of R170 billion directly, that can also impact on the collection by Value Added Tax of an estimated R15 billion. The reasons of mainstreaming more people in economic activity will boost the South African economy and the businesses at large will benefit from additional profits expected.

Moody’s said “Social considerations are material for South Africa’s credit profile and their implications for the economy and public finances are a driver of the negative outlook. Deep socio-economic inequalities complicate the implementation of reforms which would otherwise unlock the economy’s potential, and contribute to tensions that fuel latent political risk” and what are we saying as South Africans with the economic structure, not having industries in municipalities, have all JSE listed companies executives crossed the bridge to Alexandra? Why pension funds are invested mainly in listed companies that are not creating more jobs for sustainability, our tourism is still linked with apartheid developments and why we don’t change this structure that’s backward. 

Citing Moody’s on their November 2019 report saying “South Africa’s ratings would likely be downgraded were Moody’s to conclude that those conditions will not be met and that South Africa’s fiscal and/or economic strength will continue to erode.”  Furthermore, immediately, a decision to downgrade the rating would reflect growing clarity that the government will not be able to further develop and implement its fiscal and economic strategy to halt and ultimately reverse the debt trajectory. The 2020 budget, in particular, will be a key indicator in Moody’s view of whether or not the government is committed to the fiscal consolidation recommended by the MTBPS. The budget Speech 2020 main weakness was committing a R211 billion to economic development, which gave a rich picture that economic development and expansion that will result in job creation and gross national happiness to improve, will not happen.

We thank everyone who participated in the development of South African democracy and implementing the resolutions of the ruling party, the patience of South African people predominantly poor and all our members of parliament and business leaders, regardless of their performance, we appreciate your efforts.

Where are we going with South Africa that’s experiencing high youth unemployment, poverty and inequality? Our reflections in this 21-day lockdown must produce propositions that will swallow poverty and unemployment. It is Time To Think for the south African politicians, policymakers, youth in their different segments of competence, the Black Business Council, professionals in the middle, different organizations that have an interest in restructuring and reforming South Africa to unite and produce a mission statement and objectives that will pull the economy from the challenges we face. We have faith that South African will emerge and satisfy the expectations of all rating agencies and the global institutional investors, while it also starts to use a unique economic development expansion strategy and appoint reflective leaders in state-owned companies and government. 

The value of resources must be used to improve the competitiveness of the entire economy and that will make the global fraternity realise that we are capable of running the economy, far better than the past 25 years of democracy. We are moving forward and we just have to change the way we do things, to start seeing positive results in the future.


  • Improving political discipline by all people as part of managing political susceptibility.
  • Improving the elements of democracy and shared growth 
  • Developing a clear economic strategy that will reduce unemployment to below 5 percent.
  • Change the economic structure 
  • Introduce Quantitative easing as an intervention to redress and respond to current Coronavirus and recession challenges.
  • Development of rural communities that are self sufficient
  • Continuous investment in education 

Miyelani Mkhabela is an Economic Strategist and Director for Antswisa Transaction Advisory Services, Contactable at : | +27 61 4433 199 | Twitter:@miyelani_hei


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