Ramaphosa worse than Zuma for economic growth

The South African economy has experienced its worst period of economic growth under President Cyril Ramaphosa, while the Thabo Mbeki era was the best.

A Daily Investor analysis of economic growth under each South African President since democratic elections in 1994 revealed this.

It is important to examine the events before the democratic elections in 1994 to understand the ups and downs of the South African economy.

At the time, the country faced increasingly strict international trade embargoes and boycotts, was battling civil unrest, and had a stagnating economy.

South Africa’s economic growth averaged 0.2% between 1990 and the 1994 general election. Its currency was weakening, and its debt was spiralling out of control.

In the first fourteen years after the 1994 elections, the ruling ANC did a good job of stabilising the economy and ensuring debt was brought under control.

Dr Frans Cronje, head of the Social Research Foundation, said South Africans and economists underestimate how well the ANC ran the country’s economy after Apartheid.

“The ANC in its first decade in power does much better at restoring economic stability and raising living standards than it was ever given credit for,” Cronje said.

To achieve prosperity, former Presidents Nelson Mandela and Thabo Mbeki implemented a policy framework to cut government debt and grow the economy.

This was done by gradually reducing government spending to cut its deficit and stabilise the currency and the broader economy.

The effect of the economy-friendly policies was seen in South Africa’s economic growth numbers during their presidencies.

Under Nelson Mandela, South Africa achieved an average growth rate of 2.6%, with quarterly growth peaking at 5.3%.

Considering that this growth came from a stagnant economy that only grew at 0.2%, it was a noteworthy achievement.

The Mbeki administration continued this good work and achieved an average economic growth rate of 4.2%.

Mbeki’s administration saw the country run consistent budget surpluses, reducing government debt and enhancing its credit rating.

Things collapsed under President Jacob Zuma. Pravin Gordhan took over from Trevor Manuel as Finance Minister, and government spending skyrocketed while growth declined.

The country kissed budget surpluses goodbye. The last time the country posted a budget surplus was the 2007/2008 financial year.

This trend has accelerated under President Ramaphosa despite his promises to limit government spending, tackle debt, and reinvigorate the economy.

The South African government has run 16 years of budget deficits, which is why its debt has increased so much.

In 2008/09, South Africa’s gross loan debt amounted to R627 billion, or 26% of gross domestic product (GDP). Net loan debt was R526 billion, or 21.8% of GDP.

Over the next fifteen years, under Zuma and Ramaphosa, the government’s gross loan debt ballooned to R5.21 trillion, or 73.9% of GDP.

However, this is not the full story. Efficient Group chief economist Dawie Roodt said the South African government’s true debt-to-GDP ratio is around 90%.

Roodt said the government’s debt could not be considered in isolation and should be seen in combination with state-owned enterprises.

The combined debt of Eskom, Transnet, and other state-owned enterprises amounts to around R600 billion.

He added that around 75% of municipalities are not financially viable. They owe Eskom around R80 billion, which increases every month.

He said combining the state’s official debt and those of state-owned enterprises comes to around 90% of GDP.

The only sustainable way for South Africa to improve its financial situation is to achieve much higher economic growth and cut spending.

Cutting spending, especially on social grants, is politically unpalatable. Therefore, economic growth is the only viable alternative.

However, business-unfriendly policies, political uncertainty, widespread corruption and institutional collapse, and infrastructure deterioration hinder growth.

Many South Africans hoped Ramaphosa would get the country back on track, but that did not happen.

South Africa’s average annual economic growth under Ramaphosa was only 0.6%, much lower than all democratically elected Presidents.

President	Average Real GDP Growth Rate
Nelson Mandela	2.6%
Thabo Mbeki	4.2%
Jacob Zuma	1.7%
Cyril Ramaphosa	0.6%

Rand depreciation per president

The South African rand has lost tremendous ground against the US dollar over the last thirty years.

When Mandela started his term as president, R3.63 would buy you one UD Dollar. When his term ended, the rand had weakened to R6.02, losing 40% of its value.

When Mbeki started his term as president, R6.02 would buy you one US Dollar. When his term ended, it cost R9.78 to buy one dollar. The rand lost 39% of its value over his term.

When Zuma started his term as president, R7.94 bought you one dollar. When he left office, the rand weakened by 33% to R11.79 against the greenback.

When Ramaphosa started his term as president, the rand traded at R11.79 to the US Dollar. The local currency has lost 35% of its value over Ramaphosa’s term thus far.

President	Rand depreciated
Nelson Mandela	-39.66%
Thabo Mbeki	-38.50%
Jacob Zuma	-32.65%
Cyril Ramaphosa	-35.00%