Cyril Ramaphosa shared deceiving information about South African GDP growth

President Cyril Ramaphosa’s claim that the South African economy has tripled since 1994 is deceiving and gives a false impression of real GDP growth.

In his State of the Nation Address in February 2024, Ramaphosa claimed that South Africa’s economy had tripled since 1994.

He repeated this claim in various campaign speeches and his Freedom Day address on 27 April 2024, using this growth as an example of strong economic progress.

However, South Africa’s economy has significantly underperformed its peer countries and has been a laggard in the region.

Ramaphosa conveniently used nominal gross domestic product (GDP) figures instead of real GDP growth data.

GDP is a good aggregate measure of the total amount of goods and services produced within an economy in a year.

By making 1994 the base year of measurement, South Africa’s real GDP increased from R545 billion to R1.06 trillion in 2023.

This is how much the economy truly increased since 1994 when stripping out the effect of inflation on GDP.

An important factor affecting inflation is South Africa’s money supply. When a country increases the money supply, it drives up inflation.

Over the last thirty years, South Africa’s M3 money supply increased from R244 billion to R5.1 trillion.

The M3 money supply measures the total amount of money in circulation, including cash, bank deposits, and other financial instruments.

When the GDP growth is broken down, it shows that R5.97 trillion of the total R6.49 trillion increase in nominal GDP was due to inflation.

It further revealed that of the R5.97 trillion inflation, R4.8 trillion can be explained by increased money supply.

Put differently, 81% of the inflation South Africa experienced since 1994 was due to increased money supply.

So, when Ramaphosa makes claims about South Africa’s GDP growth, it should be met with scepticism.

Most of the growth he attributes to the government’s performance is actually linked to inflation, which in turn is driven by the Reserve Bank printing money.

The chart below shows South Africa’s real GDP, nominal GDP, and its money supply.