Only economic growth will solve inflation – Dawie Roodt

The only way for African countries, including South Africa, to sustainably solve the problem of inflation is for them to grow economically and become wealthy enough to absorb additional costs. 

This is the view of Efficient Group chief economist Dawie Roodt, who spoke to Newzroom Afrika about the potential impacts of the expiration of the Russia-Ukraine grain export deal. 

Roodt has supported the South African Reserve Bank’s efforts to tackle inflation with interest rate increases and monetary tightening. 

However, this is only a short-term solution to the problem of rising prices which are unsustainable over the long term. 

The best solution is economic growth, enabling the country and its citizens to absorb the rising costs of goods, particularly foodstuffs. 

“If you have strong economic growth, you can produce surpluses, and you can exchange that for whatever you want,” Roodt said. 

African countries have to put measures in place to ensure their economies will grow and become wealthy. This will allow them to buy commodities globally without having a large negative effect on the living standards of their citizens. 

“Unfortunately, the kind of policies put in place in African countries are simply not good enough to get their economies to grow.”

South Africa does not fare any better than its African counterparts. “The policies we have in South Africa are not good for economic growth. South Africans suffer from hunger because of poverty, not because of a lack of food,” Roodt said.

Africa’s most developed economy has produced negligible growth for the last decade due to poor macroeconomic policies from the government. 

‘Most sustainable solution’

ANC secretary-general Fikile Mbalula said the party’s National Executive Committee (NEC) is concerned about the country’s inflation and its effect on the cost of living. 

He said persistent load-shedding and the disruption to global food supplies due to the Russia-Ukraine war have put pressure on domestic inflation, thereby accelerating rising living costs.

In the medium to long term, the NEC plans to curb the rising cost of living by focusing on economic growth based on expanded domestic production and ending load-shedding.

This is the most sustainable way of responding to rising living costs and should stabilise productivity in South Africa, reduce running costs for businesses and, therefore, decelerate inflation.

“Similarly, the opening of global food supply chains as negotiated by the Africa heads of state mission in Russia and Ukraine will help bring global inflation under control by the fourth quarter of 2023,” he said.